Investor Presentaiton
How do they trade?
Retail investors shifted from trading mostly through brokers to mostly through banks.
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Over the past decade, the main intermediary used by retail investors for trading
stocks has changed from brokerage firms to banks. In 2003, 53% of stock
investors traded through banks only, up from 27% in 1992, and 31% traded
through brokerage firms only, down from 69% in 1992. Two main underlying
reasons can be suggested. Firstly, there has probably been a gradual loss of
confidence of stock investors in brokerage firms after a number of brokerage
failures; also in case of the demise of individual brokers, clients would have
difficulty regaining ownership of shares they put in the demised brokers'
custody. Secondly, banks have been actively competing in the stock broking
business during the past decade by offering full services to their clients at
reasonable cost.
According to survey findings in both 2001 and 2003¹¹, fees and charges are not
the most important factor in retail investors' choice of intermediary. The
financial soundness of the intermediary has a growing influence over investors'
choice. Similarly, retail investors consider that strengthening internal control,
financial backing and transparency are important means to enhance brokerage
competitiveness. This reflects the increasing emphasis retail investors place on
the integrity of the brokerage industry.
Online trading is still not very popular but investors, if trading online, tend to use it
often.
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The contribution of online trading grew gradually over the years to 8.5% of
retail investor trading in stocks in 2002/03 12. However, the proportion is not
high compared to some overseas markets such as Korea and even Mainland
China. In addition, less than 30% of stock investors are found to be online
traders, i.e. having traded stocks online in a year (27% in 2002 and 21% in
2003). Nevertheless, there is a growing proportion (over 80% in 2003) of
online stock traders who trade online all of the time or most of the time.
In the derivatives market, the contribution of online trading grew to 16% of
retail investor trading in 2002/03¹4. However, as in the case of stock investors,
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HKEX RIS 2001 and SFC-RIS 2003.
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HKEX CMTS 2002/03.
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Online trading currently constitute over 50% of market trading in Korea (source: Korea Securities
Dealers Association), and it constituted 15% of total equity and fund trading value in the year 2003 and
20% in April 2004 for Mainland China (source: China Securities Regulatory Commission).
HKEX DMTS 2002/03.View entire presentation