[Market Close-up] Korean brokerages in race to lure sleepless US stock traders

South Korea’s securities brokerage houses are in a heated race to attract retail stock investors with an interest in the US stock market, providing more cost-competitive services and enhancing those services with technology.

Their services sweeten the deal for day traders here, who are increasingly fond of US stocks such as Tesla, Apple, Amazon.com, Alphabet, Nvidia and Microsoft, as the brokerages even buy and sell stocks overnight. With the start of daylight saving time in the US, regular trading hours for Koreans start at 10:30 p.m. and end at 5 a.m. the next day.

To spare retail clients time to sleep, Korean firms are racing to allow customers here to take part in premarket and after-hours stock trading sessions. Of the nine securities brokerage houses surveyed by The Korea Herald -- Mirae, NH, KB, Samsung, Korea, Shinhan, Daishin, Kiwoom and Yuanta -- all allowed stock traders to buy or sell US stocks outside of regular trading hours.

As of end-April, NH Investment & Securities, Samsung Securities and Korea Investment & Securities were offering the longest trading hours -- as many as 14 hours a day, including market hours.

The companies are also choosing to waive commission fees for services they offer, such as allowing them to trade US stocks without buying US dollars. Some are assisting consumers in complying with Korea’s tax code by helping them file taxes on stock investment income in excess of 2.5 million won ($2,200) at no extra cost.

And real-time stock quotes, once a service exclusive to paying subscribers, are now becoming the default option since consumer interest can drop off if quotes are delayed by even 15 minutes to half an hour.

This trend has a very short history. Since Mirae Asset Securities became the first company to fully unlock the service for free in November 2020, competitors have begun moving in tandem. Of the nine companies surveyed, Shinhan Investment and Yuanta Securities Korea currently offer a real-time quote service for US stocks either under certain conditions or for a limited time. 

According to data from the Korea Securities Depository, Korea-domiciled investors’ net capital inflow into the US stock market came to $12.3 billion during the first four months of 2021. The figure over the cited period jumped 3.3 times from the previous year and 24.8 times from two years before.

Korean investors either bought or sold US-listed shares worth a combined $144.2 billion during the cited period. The combined value of those transactions rose more than fourfold on-year.

Experts say this stems from a desire to jockey for the upper hand in the lucrative market.

“Commissions charged on foreign stock trading are about seven times higher than those on domestic stocks, so large brokerages are bearing the cost in order to gain an upper edge in the coveted market,” said Kiwoom Securities analyst Yoo Keun-tak. “The brokerages are already seeing an intense level of competition in the domestic stock brokerage services market, so they are looking for an alternative source of income.”

Securities brokerage houses are now upping the ante by taking advantage of partnerships and technologies. Therefore, sweeteners come in a greater variety.

Some of the companies surveyed were striving to differentiate themselves by giving consumers access to research reports translated into Korean, or by using artificial intelligence to interpret market trends and recommend suitable investment destinations.

For example, NH Investment & Securities and Mirae Asset Securities use AI technology to translate real-time market information provided by Thomson Reuters. Korea Investment & Securities has employed machine learning to generate its own daily foreign stock analysis reports.

Kiwoom Securities, the nation’s largest online-only securities firm, partnered with Morningstar to have the Chicago-based firm’s stock analysis reports translated and give customers open access at no cost starting in February. KB Securities teamed up with Missouri-based Stifel Financial to offer the service.

Technology has evolved to the degree that it can help brokerages recommend which stocks to target. Yuanta Securities Korea, the Korean arm of Taiwan-based Yuanta Financial Group, runs its own AI engine to recommend US exchange-traded funds, while Mirae Asset Securities partnered with local financial technology startup QARASoft last year to provide AI-informed market forecasts.

Moreover, under the spotlight are services that sometimes resemble those offered to traders on the US trading app Robinhood.

Shinhan Investment’s clients have been able to trade fractional US-listed shares up two decimal places since 2018. This means that its clients can pay just half of the trading price to exercise half of a share’s ownership. Korea Investment followed suit in 2020, allowing trading up to six decimal places.

Some of the services are meant to improve retail clients’ cash flow.

NH Investment offers retail clients a chance to get quarterly dividend income every month by assembling a portfolio of S&P 500 constituents with alternate distribution months.

By Son Ji-hyoung and Jie Ye-eun (consnow@heraldcorp.com) (yeeun@heraldcorp.com)