Majority of South Korean brokerages are rushing to offer fractional stock trades as demand for US heavyweight stocks like Tesla grows among younger generation investors amid the continued rise US stocks.
According to several sources in the financial investment industry on Thursday, 20 local brokerage houses, including Mirae Asset Securities, Samsung Securities and NH Investment & Securities, have submitted an application to the financial authority for permission to open a trading facility. fractional stock that will allow investors to buy part of a stock – mostly foreign stocks. Online brokerage houses including Toss Securities from financial technology firm Viva Republica and Kakao Pay Securities from messaging app giant Kakao Corp. have also sought approval of their own services.
The financial authority should approve their request as it encourages innovative investments. If approved, brokerage firms could begin offering fractional equity investments as early as late November.
With the fractional stock trading service, an investor could purchase 0.01 shares of Alphabet Inc. at $ 30 if Alphabet’s price is $ 3,000. It would also be possible to buy 0.01 shares of Tesla, which is currently priced above $ 1,000, at around $ 10.
The move comes at a time when the S&P 500 hit its 57th all-time high on Tuesday and Tesla shares have surpassed $ 1,000 apiece. The continued uptrend in US stocks has prompted Korean retail investors to look to offshore stocks.
An anonymous industry official said that almost all major brokerage firms in Korea are keen to open a fractional trading service to retain existing clients and attract aggressive young investors.
Especially young investors in their twenties and thirties with little starting capital are keen to invest in fractions of foreign stocks. They are also more comfortable with home trading systems (HTS) or the mobile trading system (MTS) of brokerage houses, which are the main investment tools for foreign stock trading in Korea that can be done. Usually at night on Seoul time due to the time difference.
Younger investors in Korea are also more interested in investing in offshore stocks in installments given that they have knowledge of investing in large-cap tech stocks like Google, Apple, Microsoft, Amazon and Tesla, but lack the funding.
Fractional trading of Korean or foreign stocks was not previously allowed, but with the increase in the number of expensive large-cap stocks exceeding 1 million won ($ 856) per share, the Korean financial authority has cleared Korea Investment & Securities and Shinhan Investment to provide fractional investment services for overseas listed stocks.
Shinhan Investment was the first brokerage in Korea to offer a split investment service on US stocks in October 2018. Its cumulative trades reached $ 270 million at the end of June.
Korea Investment & Securities launched in August last year an exclusive fractional investment service app for U.S. equities and offers the service on 540 exchange-traded funds in the U.S. In just one year of its launch, the app reached 1 million downloads and its cumulative transaction reached $ 750 million at the end of June. The brokerage said that 75% of the users of its apps are between 20 and 30 years old.
By Moon Ji-woong and Lee Eun-joo
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