Hartcourt Companies (fka HRCT)

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SCMP Article:Important Read
E*Trade Pushing Hard To Expand Asian Services:
http://biz.scmp.com/ZZZ7PYXSNVC.html

Monday, January 7, 2002

BROKING
Deregulation puts online giant on growth path


BIEN PEREZ

Online broking giant E*Trade is shifting its Asian expansion plans into a higher gear as financial services deregulation reshapes the Hong Kong and mainland markets. The California-based company plans to start offering United States securities to Hong Kong customers in the first quarter. It would also consider new acquisitions in the next 12 to 18 months, and provide more sophisticated investor tools, including wireless access and advanced business intelligence functions, said Jarrett Lilien, E*Trade's chief brokerage officer and managing director for the Asia-Pacific and Latin America. Mr Lilien said E*Trade would be a "very active industry consolidator" as deregulation thinned the ranks of its online trading rivals in Hong Kong. E*Trade last month acquired for an undisclosed sum the customer accounts of 2Cube, a joint venture between JPMorgan Chase and Pacific Century CyberWorks. "We are advancing our presence and product offerings to meet the needs of our retail and institutional customers around the world, while many of our competitors are scaling back and exiting markets," Mr Lilien said. So far, the company has been offering equities and warrants trading on the Hong Kong Stock Exchange to SAR customers. It was one of Hong Kong's first online financial services players to offer flat-fee pricing on equity trades to individual investors. Mr Lilien said E*Trade had closed about 30 acquisitions worldwide since he joined in 1999 and the company expected more opportunities to arise as markets consolidated. Consolidation in the SAR is being driven by the removal of minimum brokerage commission rates for stock and futures transactions in April. Removing the commission floor, along with a reduction in stamp duty that took effect last September, was expected to lower trading costs and enhance market competition - especially in online trading. Research firm International Data Corp (IDC) forecasts that 40 per cent of Hong Kong's securities trading volume will be performed online by next year. The economic downturn has prompted early signs of consolidation. Charles Schwab and TD Waterhouse, E*Trade's main global online trading rivals, have started refocusing their priorities in Asia. Asia's first online broker, Boom Securities, and bond trading platform Asiabondportal.com both laid off about half of their employees last week. The 2Cube deal provided E*Trade with 4,600 active accounts, an expanded base that boosts the company's aim to cross-sell and up-sell both US dollar-denominated and Hong Kong dollar-denominated products and services in the SAR. John Lord, E*Trade Asia-Pacific vice-president, said the company was also keen on becoming an outsourcing provider to other financial services providers. "We intend to offer the use of our back-office platform as a cost-efficient solution to third parties," he said. "Increased competition in the next several months will mean that a number of companies will need to focus more on their marketing and product development efforts, while leaving heavy lifting involved in back-office functions to companies like E*Trade." He said E*Trade would push its wireless access and business intelligence tools for its online offerings "as appetite for these value-added services increase" in Hong Kong. E*Trade's SAR operations began with the company's September 1999 acquisition of TIR Securities, an institutional broker with seats on multiple global exchanges. In addition to its main US market, E*Trade serves online customers in Australia, Canada, Denmark, Germany, Israel, Japan, South Korea, Norway, Sweden and Britain. In the mainland, E*Trade was in talks with several parties to draw up an entry strategy, Mr Lilien said. The country has committed to deregulate key industries, such as financial services and telecommunications, in line with its admission to the World Trade Organisation. Mr Lilien said the company was studying options on how to establish its mainland presence and which products and services it should offer first. He said E*Trade was flexible enough to plan for a swift entry that would take just a few months, but stressed that an entry programme over the next 12 to 24 months was more realistic. Recent industry estimates show that the combined mainland and Hong Kong securities markets represented market capitalisation of US$1.2 trillion, making China the fifth-largest market in the world. IDC also forecast the number of online securities trading accounts in the Asia-Pacific region, excluding Japan, would grow six-fold by 2005, with the bulk of that growth from China. E*Trade's foray into the mainland may include the setting up of an Internet banking operation. E*Trade's bank subsidiary is the largest branchless bank in the US and the country's 13th-largest savings bank based on asset size. As of the third quarter of last year, E*Trade Bank had more than US$13 billion in assets and US$8 billion in deposits. Mr Lilien said E*Trade was confident that its expansion strategy would prevail over the stiff competition expected within the next two years in Hong Kong, China and other financial markets across the Asia-Pacific. He said E*Trade's regional operations had grown 200 per cent on average every year to help swell the company's total revenue "despite the challenging business, economic and market environment".