Tokyo, Aug 8: Goldman Sachs (Japan) Ltd said on Tuesday it would launch a new product allowing individuals to invest in stocks for a small outlay."Pokekabu", or pocket stocks, will be sold from August 21 with a minimum purchase of 5,000 yen.The move aims to attract business from smaller investors who cannot afford to buy high-priced stocks under Japan's minimum trading unit system."It is a type of investment trust which invests only in one stock," said Masatsugu Doi, equity vice president at Goldman Sachs (Japan) Ltd, at a news conference, adding the cost was lower than buying stock directly and the risk smaller than buying an option on an individual stock.
Goldman Sachs will start selling a type of warrant on the shares of 64 Japanese firms such as Sony Corp, Seven-Eleven Japan Co Ltd and NTT DoCoMo Inc through four online brokers. A warrant is a certificate of an option allowing the investor to buy ordinary shares at a fixed price over a period of time. In Japan, stock market investors have to trade a minimum 100 shares in Sony and 1,000 in Seven-Eleven.
At Tuesday's closing price, an investor would have needed 1.01 million yen to buy a minimum lot of Sony stock and 7.24 million yen to buy Seven-Eleven shares. NTT DoCoMo's minimum trading unit is one, but it ended Tuesday at 2.8 million yen.
Investors only need 27,990 yen for a minimum 1,000 covered warrant certificates - each representing 0.00001 yen of the 2.8 million yen share price - for DoCoMo, excluding the dividend. They can trade the certificate anytime within 18 months.
Suppose NTT DoCoMo jumps to four million yen when the warrant mature, investors get the difference between the exercise price of one yen and market price, which would be 39,999 yen. Thus the return on the underlying stock and the warrant are both 42.9 percent, Goldman Sachs said.
Transactions can only be made with Goldman Sachs.
By using online brokers as sales agents, the investor is able to access real time price information, deal outside normal trading hours and enjoy lower transaction fees than those of conventional brokerages. Goldman Sachs is counting on 300 billion yen in sales for the year ending August 2002 as it gradually increases the number of underlying stocks to 200. The brokerages are Donaldson Lufkin & Jenrette Inc's DLJ direct SFG Securities Inc, Sanwa Bank Ltd's eWing Securities Co Ltd, Nikko Securities Co Ltd's online unit Nikko Beans Inc and Japan Online Securities Inc.
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