ASB grabs bull by horns

ASB Bank is planning a financial services portal that will be based around its new online share trading Web site, www.asbsecurities.co.nz.

The bank has set up its own share brokerage, ASB Securities, to support the site and has head hunted Tim Preston, formerly an analyst with JB Weir, for the position of managing director. ASB Securities will offer online trading on the Australian and New Zealand stock exchanges, discount telephone trading and a full advisory service.

Preston says online trading is a natural extension to online banking.

"In a lot of respects the industry is converging through technology. When you look at the components of a deposit or withdrawal, they are similar in many areas and require the same technology as buying or selling a share. Selling a share is really a prolonged withdrawal."

Preston says online trading brings share trading within reach of everyone and makes it more visible.

"The whole broking industry has changed and online trading has enabled lots of traditional services to be unbundled. In the past, people often paid for research they never read and services they didn't need. Now they pay for what they use. It's taken the power away from the brokers and put it back in the hands of the investors.

"Within the next six to 12 months online traders may be a dime a dozen. The real story is what we wrap around that and what other services we offer, all through one seamless portal."

ASB Bank is the second bank to offer online share trading. BNZ went live with its system - On-Line Securities Trading - in December, allowing customers to trade shares, monitor share investments and view information on the NZSE.

Both banks intend to offer access to US and UK share markets later in the year.

Unlike ASB Bank, BNZ uses a third party, Access Brokerage, as the broker behind the service and Web Broker is the Web sites services company.

The move by the banks adds to the number of online trading services in New Zealand. Share broker DF Mainland has been offering online trading on its Web site www.dfm trade.co.nz since October, (see Web site of the week, page 27), and Henley Communications has been offering its online service Global Investor since May last year.

Last year law firm Hesketh Henry surveyed stock brokers and 80% of respondents indicated that they planned to accept orders via a Web site at some time in the future.

Senior investment analyst with traditional share brokers Ord Minnett Jardine Fleming, Arthur Lim, believes the advent of banks offering online share trading will add depth to the market.

"Ultimately I feel it's got to be good for the market. Unlike other countries, New Zealanders tend to shy away from equity investments as part of their portfolio. In the US grandparents buy shares for their grandchildren's education for example."

Asked whether he thinks the banks' entrance into share trading will see day trading - whereby shares are bought and sold very quickly - take off in New Zealand, Lim says the market is already seeing such an activity to some extent.

He says the advent of IT stocks (such as Advantage, IT Capital and Spectrum) on the New Zealand stock exchange has increased the volume of trading and the volatility of the market, both of which are needed to facilitate day trading.

"In recent times the volume going through on some of the IT stocks are higher than some of the Fletcher stocks. We're getting a very high level of activity of IT stocks compared to conventional stocks.

"You also need a very low brokerage charge whereby you can buy in and out in five minutes. The danger with day trading is you might get caught and not be able to exit. I don't think we will have the kind of day traders they do in the US where they are particularly aggressive."

Lim doesn't see the banks as a threat saying traditional brokers are able to offer additional services such as extensive research on New Zealand and overseas markets, and access to new IPOs. He also says the bulk of investment in the local market is by off-shore institutions who on a daily basis constitute 50% to 75% of trades.