Net sparks revolution in South Korean stock market

South Korea has been plunged into a vortex of change as panic stricken stock brokerage houses scramble to catch up with

groundbreakers in the deep-discount

online share trading market.

The change was sparked by EMirae Asset Securities Co., which pioneered Internet stock trading here, riding an explosion in Internet usage, cyber banking and personal computers.

“The change here seems faster than in any other country,” said EMirae’s Choi Ki-Hoon. “From now on, the country’s stock brokerage industry will see a dramatic shake-up.”

For the first time for a local brokerage, EMirae last week offered a drastic price cut for some trading services - from 0.5 per cent to 0.29 per cent for off-line services and from 0.1 percent to 0.029 per cent for Internet linked “cyber trading.”

Other local players immediately followed suit, signalling the advent of standard deep-discount transactions in a nation where cyber trading has jumped from near zero two years ago to 44 per cent of total trading value by January.

“So far brokerage firms have kept their balance sheets mainly on improperly high trading fees by forming a cartel in pricing.

But this will no longer be the case as the system shifts fast toward cyber trading,”

Choi said.

“The proportion of cyber trading will increase further,” he said. Online trading will eliminate human intervention, helping firms to reduce personnel expenses.

Academics predict a “big bang” in the securities industry here where brokers once made around 70 per cent of their total revenue through classic trading commissions.

“Many players will inevitably be doomed due to the competition, a rapid

rise in online trading and deep-discount transactions,” Korea University Professor Lee Phil-Sang said.

But he urged security houses to compete to diversify resources and to offer value-added services, saying that cheap prices alsome would not attract customers.

“An upsurge in cyber trading is spawning a big bang in the sector which has been distorted by irresponsible trading, with brokers abusing the money of clients to boost company profits.”

His warning appears to be well founded. Daeshin Securities, a major local player, for example saw cyber stock trading jump to 72.2 per cent of its total transactions in January, from 10.9 per cent in April last year.

Overall online stock trading accounted for 44.6 per cent of South Korea’s total stock trade value in January, according to the Korea Securities Dealers’

Association. ■