Tue, Jan 24, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Greenwich Associates names 2011 leaders in Asian fixed income trading, research and sales

Tuesday, December 27, 2011
Opalesque Industry Update - According to Greenwich Associates 2011 Asian Fixed-Income Investors Study, three banks dominate the Asian fixed-income trading business. Their year end report says: “The rapid development of local-currency fixed-income markets in countries across Asia is giving institutional investors throughout the region a strong incentive to do business with dealers such as HSBC, Deutsche Bank and Citi — the only banks that can truly claim to have fixed-income platforms that span all important Asian country markets and to offer robust capabilities within each.”

The Greenwich study shows that the combined market share of these three dealers in Asian fixed-income trading increased to 30% in 2010–2011 from 26% the prior year. “This growth has cemented the position of HSBC, Deutsche Bank and Citi in the top rank of the Asian institutional fixed-income market. These three banks are joined by Barclays Capital — which also expanded its market share over the past 12 months — and Standard Chartered Bank as the 2011 Greenwich Share Leaders in Asian Fixed-Income Trading” the report says.

Despite other dealers like Bank of America, The Royal Bank of Scotland and BNP Paribas adding market share in Asian fixed-income trading last year, Greenwich finds that there are signs that a shift in strategy among many sell-side competitors could further strengthen the position of the three market leaders. “Sell-side firms and investors report that risk appetite among “second-tier” dealers is shrinking as banks abandon efforts to build pan-Asian platforms in favor of more targeted strategies” the report says.

Covering the entire Asian market is an expensive proposition from the banks’ perspective. ““Asia” encompasses a huge number of countries, each with its own currency, products, regulatory regime and even language, all dispersed over tens of thousands of miles. While dealers can cover major markets from a handful of central locations, providing service in the many local currency markets requires dealers to maintain an expansive network including offices and salespeople located throughout countries large and small.”

The report found that rather than take on those daunting expenses, some dealers are instead narrowing their sights and focusing their resources on selected product, regional or client segments. “These banks are not retrenching — many of these dealers have been quite successful in Asia and their businesses here are profitable. But after a period of rapid expansion, these banks are now assessing how to maximize the profitability of their Asia operations and, in many cases, the answers they are arriving at involve consolidation”.

The rise of local currency markets is a big driver in this process. Some of the world’s biggest banks are building out their local currency capabilities, but the high costs associated with this effort argue in favor of a selective approach targeting only certain Asian countries. “For the past 10–15 years, global banks have taken on clients in a range of Asian products and countries as they worked to build their presence here,” says Greenwich Associates consultant Abhi Shroff. “But now that they’ve established these businesses, many dealers are wrestling with the questions: ‘What do I really want to be in Asia? What products do I want to cover, and for whom?”

The report found that fixed-income trading volume in Asia ex-Japan increased approximately 5% from 2010 to 2011 — a rate of growth that outpaced the performance of larger markets, such as the United States and Europe.

Fixed-income assets under management by Asian institutions increased by more than 50% over the same period to more than $2 trillion according to the report. “As Asia’s fixed-income markets expanded last year, bonds denominated in local currencies accounted for approximately 40% of overall regional trading volumes. That 40% share actually understates the role of local currency products in Asia. The reason: Interest-rate derivatives make up approximately a third of overall Asian fixed-income trading volume, and many of these products are denominated in domestic Asian currencies”.

“Although the composition of Asian fixed-income trading volume has fluctuated to some extent over the past several years in terms of local currency products versus products denominated in G7 and G3 currencies, there is no doubt that the rapid development of these local markets represents a sea of change over the past decade,” says Greenwich Associates consultant Tim Sangston.

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - This hedge fund made 37% betting on banks in 2016 and remains bullish after the Trump rally, Hedge fund legend David Einhorn is making a big bet on GM, After impressive 85% return in 2016, hedge fund looks to Canadian gold producer, small banks[more]

    This hedge fund made 37% betting on banks in 2016 and remains bullish after the Trump rally From Forbes.com: Can bank stocks continue to rise after a 28% surge in the KBW Bank Index in 2016, fueled by a post-election rally as stock pickers returned to the beaten down sector? Forget the s

  2. SWFs - China sovereign wealth fund CIC plans more U.S. investments[more]

    From Reuters.com: China Investment Corporation (CIC), the country's sovereign wealth fund, is looking to raise alternative investments in the United States due to low returns in public markets, its chairman said on Monday. CIC will boost its investments in private equity and hedge funds as wel

  3. Some hedge funds strong start in 2017 nice contrast to 2016[more]

    With the 2016 HSBC Hedge Weekly performance rankings in the books - a year in which the same leader-board entries pretty much dominated unchallenged throughout the year - comes a new leader board that is a hard-scrabble mix of hedge fund styles and categories. What is clear after but a few short wee

  4. Macro hedge funds and CTAs outperform in December on strong dollar[more]

    Komfie Manalo, Opalesque Asia: The last month of 2016 saw risk assets climbing higher, as part of expectations that the new U.S. administration will remove barriers to growth and investment, Lyxor Asset Management said. December also saw the Fed hik

  5. Opalesque Exclusive: Roxbury credit events UCITS gathers more assets[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: The Roxbury Credit Events Fund, launched in September 2015, was up 4.24% in 2016, having returned seven positive months during the year. The managers raised