Hong Kong’s Bright Smart bets on online trading, eyes mainland clients (2024)

Hong Kong-listed brokerage Bright Smart Securities hopes to capitalise on growing interest in the city’s stock market among mainland Chinese investors, and said online trading would be key to its success.

“Securities firms have to use online trading to grow their businesses,” Peter Yip Mow-lum, Bright Smart’s chairman and founder, said in an interview. “This way, securities firms can use a little bit of capital to do a huge amount of business. Trading volumes can increase from 10 to a hundred times with the help of technology.”

The company’s profit for the financial year ending in March rose 7.3 per cent to HK$473 million (US$61 million), it’s second-highest on record. Order volumes touched 5.6 million for the first five months of the year, up about 40 per cent from the same period last year, Yip said.

Bright Smart’s success stands in sharp contrast with the city’s smaller brokers, 35 of which have closed shop in the 12 months to the end of March, the fastest rate since records began in 2003, according to data from the Hong Kong stock exchange.

“Securities firms will need to provide mobile trading and other online platforms, if they want to attract new clients. If firms don’t provide online trading, they may slowly lose their clients,” said Gordon Tsui Luen-on, chairman of the Hong Kong Securities Association.

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The launch of new online trading applications BS Securities, called Baobao on the mainland, and BS Futures, called Doudou in China, in February 2019 has helped the company increase its total number of client accounts by about 20 per cent. The applications have helped Bright Smart reach more mainland clients, who have shown an increasing appetite for Hong Kong stocks and futures, as well as initial public offerings, Yip said.

The company reported about a fourfold increase in the number of mainland clients opening trading accounts over the past financial year. These clients made up about 9 per cent of Bright Smart’s more than 300,000 client accounts as of March 31, up from 5 per cent in the previous financial year.

Yip said he expected the brokerage’s turnover from mainland clients to double in the coming year and rise exponentially in the future. “After two or three years, the turnover from mainland China could overtake that from Hong Kong, as there are 1.4 billion people there,” he said.

While the company plans to spend HK$50 million on optimising its hardware and software, and developing its presence in the mainland Chinese market through promotional campaigns, it has no plans of opening physical branches.

“Online trading is much more cost effective than opening branches,” Yip said. “There are also many risks with opening a physical branch in the mainland. We had opened one branch, but decided to close it down, as we couldn’t control what happened there. We won’t know if employees cheat clients. That would ruin our brand image.

“After thinking about the risks, we decided not to open any branches in China, and instead have mainland clients find us through our online platforms. Once they know our website, they can download our applications and open a trading account online,” he said.

Yip said the company had no plans of downsizing despite the outbreak of the coronavirus pandemic, and that it would continue to hire staff in line with the growth of business. Bright Smart currently employs about 300 people across 15 branches in Hong Kong.

It has not been all smooth sailing for the company. Before the minimum stock brokerage commission of 0.25 per cent was scrapped in 2003, it had made a loss for 11 straight years, a total of more than HK$40 million, Yip said.

And after the rule was scrapped, the brokerage decided to take a risk and lower its commission to 0.005 per cent. “Many naysayers expected us to close down within six months after we cut our commission rate. But we were fortunate that our business began to grow, as more clients started to take notice,” he said. “We have witnessed the growth of Hong Kong’s securities industry.”

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The Hong Kong stock market owed much to its current chief executive, Charles Li Xiaojia, Yip said. The exchange’s market capitalisation has more than doubled since Li took over in January 2010, and Hong Kong has seized the crown of the world’s largest IPO market in seven of the past 11 years.

Li announced in May that he would step down in October next year. “It will be hard to find another person with the same boldness. Charles Li has put his heart into Hong Kong and raised the prestige of the stock exchange as well as its volume. Without him, it will be very difficult for the stock exchange to relive its former glory,” Yip said.