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Online Stock Trading Promises No Optimism
As reported by Economic Daily, despite the various advantages of online stock trading such as lower trading costs, higher service quality and prompt information, and the strong support by the government and active investment by different securities trader with an early start, China's online stock trading failed to develop as people wished for.
So far there have been only 400,000 shareholders opened their online accounts. The online business volume merely accounts for about 3 percent of the total stock trade volume. It seems to be overoptimistic as expected that "the online trading will dominate the stock trading in a timeframe of two to three years".
Online stock trading sounds very pleasing: people no longer have to rush to the crowded business hall and all the procedures of speculation including real quotations on the market, analysis on the securities, stock consultation and deals making can be fulfilled simply through a PC and a telephone line. However, why were the shareholders not willing to use the online trading?
The reason lies first in the quality of the shareholders. Most of the medium and small investors in China are salaried persons, retired staffs and even laid-off workers who have little money to spare for buying the PCs for online trading. Also the investigation shows, about 70 percent of the shareholders know nearly nothing about the computer. A majority of them even have no idea about the Internet, let alone the online securities trading.
Secondly, the cost. Since China Securities Regulatory Commission (CSRC) allows no discount for online trading commission, the partners cannot save cost by it, yet on the contrary, they have to pay for such extra charge as telephone and internet fee. Calculated on the basis 2 yuan per hour for the surfing and 4 yuan per hour for telephone charge, a day's trading for 4 hours will cost 24 yuan and another 12 yuan is needed for an extra two-hour information search or analysis after the closing. The total cost of online trading per day will come to 36 yuan with the monthly cost high around 1000 yuan.
Thirdly, the safety. So far China hasn't set up any certificate authentication system which is geared up with international systems. Besides, it has various Internet security administrations including Ministry of Information Industry, Ministry of Public Security, Ministry of State Security and National Commercial Cipher Management Office, etc. "All the organs have the rights to supervise but none of them can do it well". Experts concerned pointed out that there are at least three risks in China's online trading for the moment. They include: A> the authorized technological system may be attacked, invaded or damaged which will lead to a failure of the online commission of business; B>, the commission instruction, clients information and capital data may be stolen or corrupted which will entail capital loss; and C> false information may be published which will lead the investors astray and manipulate the market.
Fourthly, the service. Currently, most broker business concerning online trading centered on technology rather than the services. Some traders invested heavily in technological construction of the online trading websites, yet paid very little attention to the improvement of services. Technological support and services are even disconnected in some websites. They are short of reliable information and are imbued with rumors. They failed to provide personalized services to the shareholders and to meet the demands of the investors either.
Irrespective of the above restrictive factors, we must say that the online stock trading is surely a business to develop and a trend to be. However, there is one point we must make it clear that the online stock trading means to utilize the Internet technology to benefit the shareholders. "The essential at the core is a revolution in the stock industry".
"Whoever can grasp the opportunity in the industrial transformation and provide services of unique value to its users earlier than others will be able to win over the market," said Jing Hong, president of Yestock.Com. Started from 1996, the Yestock had won a certain reputation in the securities circle, developed many financial software of fine quality and accumulated rich professional business experiences. After Yestock had more than 500 securities institutions as its clients or partners, which include Shenyin & Wanguo Securities Co. Ltd. and Guotai Junan Securities Co. Ltd., success in marching towards electronic securities business is a thing close at hand. In one year only, Yestock had become one of the most excellent financial websites in China. We've seen a multi-channel securities e-commerce platform originated by the Yestock opened in more than 120 securities business departments of over 20 cities across the country; and the mobile e-commerce concept stemmed from the platform brought about broader market for the Yestock. The short message services for mobile phones alone have covered more than 19 million users in 20 regions across China. Those who know nothing about computers can do their business through a new channel, their mobile phones.
By engaging in e-commerce, Yestock has become a 2-in-1 platform, for trading and for services as well. While enlarging its business, it also makes direct contacts with its ultimate users (investors), offering them value-added services. Jing Hong said that e-commerce is absolutely a service economy instead of a technological one; To be precise, it is a personalized, specialized, and a supermarket-typed service economy which takes the demands of clients as its orientation.
Experts pointed out that 10 percent and 30 percent are the two critical points for online stock trading. When the trading volume exceeds 10 percent of the gross-total, the advantages of the Internet costs will be brought to the full and when the trading volume exceeds 30 percent, it will naturally become a hot cake for securities traders. For China to promote online stock trading, all practitioners admit that how to win over the users is a hard nut to crack. Since there is no discount allowed, the online traders should shift their attention onto value-added services and work hard to provide high-quality, prompt and reliable information and data to their users. Only by having more users, can the online stock trading find a way out.
By PD Online staff member Du Minghua
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