Online advisers bullish despite Etrade Asia exit
Online investing will continue to thrive in Asia despite the withdrawal of US share-trading platform Etrade, say market observers in Hong Kong, amid suggestions that the firm could have done a better job of maintaining its business in the region.
Etrade said last Friday that it was pulling out of Hong Kong – where it had brokered local and US stocks – with account closure effective from February 12, 2016. Local branch and customer service operations will shut down on March 10, and it is also closing its Singapore platform. These were the firm's only remaining operations outside of North America
Etrade operated in Hong Kong from 2000, following the acquisition of institutional brokerage TIR Holdings. But the losses sustained on structured products during the global financial crisis blew a large hole in the group's balance sheet, resulting in the gradual sell-off of its operations outside the US. Since 2008, the firm had wound down all of its activities apart from the Hong Kong and Singapore platforms.
Jessica Cutrera, managing director of Hong Kong-based advisory firm EXS Capital, told AsianInvestor: “I don’t think Etrade ever really committed seriously to this market. They didn’t make their platform available to advisers the way Interactive Brokers does, which I think was a big mistake, and they never did the level of marketing that Interactive Brokers and [Charles] Schwab both did. It never seemed they were getting good advice on the local market.”
Etrade was unavailable for comment by press time.
Along with Schwab, Etrade was one of the execution-only dealers whose business mushroomed during the early days of the dotcom boom in the US and Europe in the late 1990s, before spreading to Asia at the turn of the millennium. Globally, Etrade handles investor assets of some $150 billion, but most of that is in North America.
Hong Kong-based online trading platform provider 8 Securities is closer than most to Etrade. Several of 8 Securities' key personnel – co-founder Mathias Helleu, chief executive Mikaal Abdulla and chief financial officer Annie Lok – were with Etrade in Asia before setting up their brokerage and robo-advisory business in 2011.
Abdulla, former senior vice-president of Etrade in Asia, said he could not speak to the precise motivation for E-Trade exiting Hong Kong. But he suggested it was “probably a strategic rather than financial decision” and that the firm’s focus was very much on its domestic US business.
Abdulla, who launched Etrade’s original business in Hong Kong in 2000 with Helleu, added: “Between 1998 and 2008, Etrade was unique, as it was the only US broker to expand internationally."
Mathias Helleu had been head of Etrade's international business across Canada, Europe, the Middle East and Asia. Speaking to AsianInvestor earlier this year, he said the firm had led a “revolution” in brokerage, with the international operation accounting for more than 10% of global transactions.
Despite the Etrade closure, Abdulla argues that the popularity of US equity investing will continue to grow. “It continues to be the largest, most liquid and transparent stock market in the world,” he said.
“Because individuals have an appetite to invest in global companies such as Google, Apple, Starbucks, Alibaba and Facebook, I feel as strongly today as I did 15 years ago that Hong Kong is uniquely positioned as a gateway for Greater China’s global investing."