Broker who stands intact in the subprime crisis

The subprime crisis in the US has dealt a heavy blow on the investment banks that used to be the pet of Wall Street. It has also alarmed investors that a brokerage's investment projects and operations can affect the security of the funds in their accounts. Therefore, to select a quality brokerage firm is the first yet the most important homework for the investors.

After the US housing bubble burst in 2007, the subprime crisis has snowballed into a global credit crunch since the latter half of the same year, not only worsening the already-troubled credit market in the US, but also affecting the credit markets in China and Europe to different extent. The turbulent global economy in the past year and the falling stock markets have caused the US economy to fall into a recession and made investors suffer respectable losses.

To save the economy from deteriorating, the US government offered tax rebate and up to US$200 billion emergency loans to banks and financial institutions. At the same time, the Fed once again cut the interest rates, hoping to boost exports and production by lower borrowing costs, stimulate the economy, and raise the liquidity of the credit markets to prevent the real estate market from further worsening. Since September 2007, the Fed has slashed the interest rates six times from 5.25% to 2.25% at the end of March 2008. However, the bold rate cuts resulted in rapidly depreciating US dollar, making the exchange rate of the US dollar to major currencies hit record low in nearly a decade. What with the depreciating US dollar, the long-term bonds seem less attractive, inflation is looming at the door, and the raising prices of imported goods have made Americans, who traditionally stimulate their economy by heavy expending, cut their budgets. The double-edged sword of interest rate cutting has not boosted the US economy as effectively as expected, while new problems have started to emerge.

Banks and the real estate sector are the biggest losers in the sub-prime crisis. A period of substantial credit expansion in the past few years finally resulted in huge losses. Many large investment banks like Citigroup and Merrill Lynch announced huge asset write-downs or even relied on the rescue of foreign capitals for losses stemming from mortgage related assets. Bear Stearns, an 85-year-old investment bank, ended up being purchased by JP Morgan Chase at a rock-bottom price. In regard of the securities sector, many brokerage firms engaging in mortgage business did not fare well, either. E*Trade reported several billion dollars of loss in the crisis and only escaped bankruptcy or sellout thanks to an infusion of US$2.5 billion from Citadel Investment Group, one of its biggest shareholders. Another brokerage firm, the Schwab YieldPlus Fund's assets have fallen to just US$2.5 billion in March 2008 from more than US$13 billion in May 2007, as the value of its short-term fixed-income investments plummeted.

Therefore, big money and high reputation of brokerage firms and investment banks are no absolute guarantee of investment security. Only those highly focused firms with sound operation model and priority on quality service can ensure investors' asset safety. With the domestic market saturated, some US brokerages begin to court foreign investors in face of economic recession. At this stage, discretion and prudence are especially required for overseas investors in their choice.

Among the large online brokers in the US, Charles Schwab is the first one setting foot in the Chinese market. In the mid-1980s, Charles Schwab opened a branch in Hong Kong, and then E*Trade followed suit. Because of their relatively early involvements in the Asia-Pacific market, these two companies enjoyed higher recognition. However, in recent years Scottrade has emerged as a new force in the US. With its competitive $7 per trade fee and high quality customer services, Scottrade is gradually becoming a leading brand name among American online brokerage firms. In the year of 2003, Scottrade set up Asia-Pacific Service Center (website: chinese.scottrade.com) to tap the Chinese market -- the first ever non-English speaking market explored by the company. The company operates prudently with concentration on discount brokerage business and has never engaged in any subprime or other high-risk businesses. Thanks to its high quality customer services, Scottrade has been ranked seven times "Highest in Investor Satisfaction with Online Trading Services" by JD Power & Associates, an American consumer research organization. In the year of 2008, Scottrade was named to Fortune's "100 Best Companies to Work For" List.

As other investment banks and brokerage companies wrote down assets and slashed work force one after another, Scottrade, sticking to its non-public-listing policy, is still expanding its business scopes. By April 2008, Scottrade has had approximate 350 branches around the US with its staff number constantly on the rise. Scottrade's Asia-Pacific Service Center is committed to serving Chinese people around the world. Recently, it launched Chinese language customer services 24 hours a day, 5 days a week, to overcome the time difference problem faced by overseas customers. Residents from the Chinese mainland, Taiwan and Hong Kong may make international calls free of charge to communicate with its Chinese-speaking representatives. Though Scottrade has no branch in Asia yet, it has kept enlarging its market share in the Asia-Pacific region. According to a market survey conducted by Taiwan OMO Group, one in four Taiwan residents who have US stock accounts chose Scottrade (26%) as their brokerage service provider, followed by TD Ameritrade (14%), Fidelity (14%), E*Trade (11%) and Charles Schwab (8%). Scottrade has gained vast recognition among Chinese customers with its quality service and sound reputation and has risen as a leading US Stock brokerage in overseas Chinese market.

Conventional wisdom tells us: focus leads to success. The fact that master of investment Warren Buffett prefers companies with simplified and focused business models is a clear proof of it.

To learn more about how to open a US brokerage account, please visit:

https://chinese.scottrade.com/index.asp?supbid=81422