Asian experts at the Trading Asia meeting ahead of the FIA opening in Chicago were wary of making generalizations about the Asian markets.
Except for really, really broad generalizations. Asia is 4 billion people, a third of the earth’s land and the markets are very fragmented said Lynette Lim, CEO of Phillip Futures USA. She said Asia offers two types of trading in equities -- directional and arbitrage across markets.
But to be successful in Asia, you should understand your markets and your countries, she told her standing room only audience. In Thailand you should not leave rice on your plate, because the country is very agricultural and rice is valued. In Singapore and Malaysia, it is insulting to clean all the rice off your plate because it implies your hosts have left you hungry.
Know your countries, know your markets.
Ryoichi Seki, senior vice president at TOCOM, noted that Japan is the world’s third largest economy and that its exports are doing well now that Abenomics has reduced the Yen from 80 to the USD to 98. The country is looking forward to the 2020 Olympics in Tokyo. Cash equities are booming and he thinks that the equities market has also benefitted the commodities exchange which trades precious metals, agricultural products and rubber, which is a special commodity for the exchange.
Most of the exchanges talked up their technology. TOCOM runs on a platform from NASDAQ OMX and is housed in a KVH data center that has room for colocation.
Gold is the most traded commodity and TOCOM offers the most liquid gold market in Asia, he added.
Thailand’s exchange rep couldn’t make it to Chicago, but Teyu Che Chern, CEO of PhillipCapital in Singapore, filled in for him, saying that money has flowed into the Thai market since 2009 with year-on-year growth of 47 percent, above the 43 percent for the cash markets.
“Investors can use the futures index as an exposure rather than doing individual stocks,” he said. Thailand has a good gold contract, denominated in Thai Baht, and each contract is about a quarter the value of competing contracts.
John Lothain, the newsletter publisher who moderated the panel, asked how people connect to their markets. Tokyo has major connections from Chicago and KVH links between Tokyo and Osaka. For Thailand, you need an ISV who has a connection to the exchange. Another challenge for trading in Asia is currency conversion, especially for arbitrage. You need a broker who can handle the currency conversion for you, said Chern, the PhillipCapital broker, helpfully.
Singapore, through Wilson Koh promoted itself as the Asian gateway. Fifty-four percent of the exchange’s revenue comes from international participants, he said and SGX has a wide sweep of indexes covering Asia. Volume has been up more than 31 percent this year and last year SGX crossed 100 million traded contracts. It is attracting business from asset managers, funds, banks, retail and prop traders, he said. It plans to launch new indexes for several other countries in the year ahead and offers exposure to China through its SGX FTSE China A50 Index Futures.
“SGX tries to be a one-stop shop for access into Asian markets.”
SGX offers co-location and attracts business not just from high frequency trading firms but also from firms that just want a good, well-run data center to operate in.
Despite SGX’s offer to be the one-step shop for Asia, Hong Kong’s Tae Yoo did not just get up and go home -- he seemed to think Hong Kong has a valuable role to play as well. Raised in America, he moved to Asia in 2008 and cautioned his audience that living in Asia is very different from visiting.
“Each market is unique, each client segment is very different and the trading styles are different as they emerge. It is moving fast, a very exciting space. “If your clients are involved with international trades in China, 70 to 80 percent of the trades go through Hong Kong,” he said. Despite, or perhaps because of, the unconvertible Chinese currency, the HK CNH has been developing fast, he added.
“Asian exchanges are improving their technology and you will continue to see new data center development and trading platform upgrades,” he added.
“If you want to gain access to China, Hong Kong is a market you cannot ignore.”
Sorry about that, Singapore.
Dubai’s DGCX has installed a new Cinnober platform that goes from exchange to clearing on one platform, said Ian Wright, chief business officer at the Mideast exchange.
“We own our clearing house and have the right controls in place.” The exchange is working with US regulators on accessing the American markets. Growth has been north of 100 percent over the last two years, he added, as the exchange makes a concerted marketing effort to expand beyond throughout the Middle East and attract business from Europe and North America. The exchange works four product groups -- hydrocarbons, commodities, equities and currencies and will launch a MSCI India index.
Bura Malaysia has an easy answer to the issue of access, said Sree Kumar, its senior executive vice president. If you are on Globex, you are on Bura Malaysia. The CME has a 25 percent interest in the exchange. Crude palm oil is the biggest product on the exchange with daily liquidity of 32,000 contracts, he added.
Crude palm is the cheapest and most produced edible oil in the world and Malaysia is its biggest exporter, said Kumar. Indonesia is the largest producer, but much of its oil is consumed at home. Gold is also a key product on the exchange.
“Malaysia has Chinese, Indians and Malays, and we all understand gold.”