Broker team-ups urged to meet Internet trade growth

Stockbrokers will need to merge or form alliances to offer Internet trading and round-the-clock services, according to an industry group.

Hong Kong Stockbrokers Association chairman Paul Fan Chor-ho said brokers risked being left behind if they did not offer such services.

'Not all customers will trade via the Internet immediately,' Mr Fan said.

'However, brokers should consider that they may be outdated if they don't offer the most up-to-date trading methods.' Mr Fan said that mergers or alliances would also enable small brokerages to increase their capital as well as develop Internet trading services.

'We have seen a lot of mergers and alliances in the banking, airline and telecommunications sectors,' he said.

'We are expecting to see the same happen in the local brokerage community.' A recent Securities and Futures Commission survey forecast an eightfold increase in Internet share trading this year.

Eight per cent of the investors surveyed said they would use the Internet to trade stocks in the next 12 months.

Only 1 per cent of respondents said they traded on-line at present.

Among the handful of brokers providing Internet broking services are Celestial Securities, Instinet Hong Kong and Mansion House Securities.

Jardine Fleming plans to introduce on-line share trading this year.

Mr Fan said more brokers would follow suit as Internet usage increased.

The listing of Nasdaq companies in Hong Kong beginning in February is also expected to increase overseas investors' interest in the market.

Brokers would need to offer Internet trading to meet this demand, Mr Fan said.

They should also consider extending their trading hours to serve better overseas clients.

'Globalisation, electronic trading and round-the-clock trading are the worldwide trend,' he said.

'Local stockbrokers should recognise this trend and seek ways to catch up with this development.' Mr Fan said that he expected competition in the broking industry to become more fierce in the next few years.

This would also force brokers to consider mergers and alliances, he said.

In addition, more banks were using their extensive branch networks to offer securities trading services, further threatening small brokers.

Brokers also face a threat from the promised opening of exchange trading rights to newcomers two years after the merger of the stock and futures exchanges.

The opening of trading rights would make it easier for big foreign companies or new domestic businesses to enter the market.

'If local brokers do not seek ways to strengthen their competitiveness before the new exchange opens up its trading rights in two years, it will be very difficult for them to compete with the newcomers,' Mr Fan said.