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Sara French

The number of online brokerages in Hong Kong is about soar, unleashing a competitive scramble in which surviving players must transform into one-stop personal-finance centres, says the SAR's pioneering online broker.

The market for such products in the SAR could become the most competitive in the world.

The increase is set to take place before the end of the year, when the stock exchange launches its Internet-enabled order-matching system. AMS/3, the third-generation automatic matching system, will make it possible for every brokerage to be an online broker.

Hong Kong has 13 online brokers. But the day AMS/3 goes live, that number could jump to 450.

'This will be the most competitive marketplace in the world for these kinds of services,' said Mark Duff, managing director and chief executive of Boom Securities (Hong Kong) which initiated online trading in locally listed shares in March 1998.

'There is no comparison. The United States has just over 100 [online brokerages], and they have 260 million people. Hong Kong has 450 brokers coming online, and we have 6.8 million people.'

To make the competitive situation even tougher, most of Hong Kong's brokers will be selling the same product: shares in the approximately 650 companies listed.

'What if we were a bookstore? What if all those other brokers were bookstores?' Mr Duff said.  'Every one of those 450 brokers would be selling the same books. Next door to each other. At the same price.'

A brokerage could hope to survive the inevitable shake-out by broadening its inventory, he said. This would involve adding shares listed on other exchanges, other securities aside from shares and other financial products aside from securities.

Boom is well down this road. In addition to Hong Kong-listed shares, its customers have access to some mutual funds and the shares of another 12,500 companies listed on several North American exchanges. Mr Duff said Boom expected to be able to add Australian, Indonesian, Philippine, Singaporean and Thai shares - altogether another 12,000 companies - to its inventory next month.

But Boom is not alone in its bid to become a one-stop shop.

The stock exchange is pursuing the same strategy. The most dramatic evidence of this was the March merger of the stock and futures exchanges into a single entity, Hong Kong Exchanges and Clearing.

The exchanges have a strategic plan for attracting capital flows into, out of and throughout the region, thereby building Hong Kong into the region's pre-eminent international financial centre and 'the Manhattan of China'.

AMS/3 is part of this endeavour, as was the November launch of the Growth Enterprise Market, which added young, high-growth companies to Hong Kong's inventory of stock offerings. Also on the list is the development of a lively and liquid market in fixed-income securities, or bonds.

Already, bonds worth an average of US$2.64 billion are traded each day in the SAR, and during the past three months, the value of local bond trades was roughly double turnover on the stock market, dealers said.



Survival of fastest as HK braces for online explosion