Despite rising political tension, demand for Hong Kong and mainland stocks from Japanese retail investors is showing no signs of abating, as financial institutions on both sides race to capitalise on the opportunity. United World Securities (UWS), one of Japan's largest online brokers, has announced it is teaming up with ABC Multiactive, a local trading-system provider, to offer brokerage services to Japanese looking to invest in Hong Kong-listed stocks. UWS managing director Kazuto Hayashi last week said recent changes in Japan's financial regulations, widespread use of the internet and the growth potential of mainland companies had made Hong Kong and mainland stocks increasingly attractive to investors in the largest stock market in Asia. In February, the number of Hong Kong stock accounts at UWS nearly doubled to 60,000, with client assets worth more than $3 billion. Mr Hayashi said that figure should easily top 200,000 in two years. 'We are also looking at the mainland's own stock markets and will move in once the regulations allow us to do so,' he said. His comments came as a number of Hong Kong brokers last week unveiled plans to form alliances with Tokyo financial institutions to tap the Japanese retail market. 'We are working with three Japanese partners to get their clients to invest in Hong Kong-listed stocks at the moment,' said William Lee Yiu-wing, executive officer and chief operating officer of Tai Fook Securities. 'The unique thing about these Japanese investors is that, while the average transaction size is much smaller than those of Hong Kong investors, the number of trades they make is very high.' He said the group derived about 3 per cent of its business from Japan and expected that figure to keep growing. Sun Hung Kai Financial, one of Tai Fook's fiercest competitors, has adopted a similar strategy . Earlier, financial services group Kingsway announced that it was working with E*trade's Japanese operation to allow the latter's customers to trade a limited range of Hong Kong stocks. Besides the relaxation of regulation, Mr Hayashi said there were other, more inherent factors that had attracted Japanese investors to Hong Kong and mainland stocks. 'Take Sony as an example. If you want to invest in its stock, you'll have to put in at least 4.3 million yen [$311,245] of minimum capital,' said Mr Hayashi, adding that the lack of time difference was the major reason Japanese investors preferred trading stocks in the region to those in the United States and Europe. 'A lot of our clients are working people with day jobs and they don't like to stay up all night watching market movements in the US and Europe.' Most UWS clients come from alliances with big Japanese banks and brokerage houses, such as minority shareholders Mitsui Sumitomo Banking Corp and SMBC Capital Investment. Last year, Nikko Asset Management launched two investment funds targeting mainland A shares, taking advantage of its recently awarded qualified foreign institutional investors licence.