Wednesday, January 26, 2011 Stamford, CT USA — 2010 was a challenging year for equity brokers building out their presence in Asian markets — many of which are counting on continued growth in the region's institutional stock markets as well as their own ability to win trading business and relationships away from the region's established leaders.
The results of Greenwich Associates' 2010 Asian Equity Investors Study show that the pool of commissions paid by institutional investors to brokers on trades of Asian equities was flat to just slightly higher from 2009 to 2010 — despite strong stock market performance that drove the MSCI Asia Pacific Index to a two-and-a-half year high in Q4 2010. On a per capita basis commission payments actually declined year-over-year — a drop that was offset by the arrival of new institutional market participants.
The fact that many institutions actually reduced the amount of commissions paid on Asian equity trades over the past year represents a challenge for brokers large and small that have continued to make investments in the region. Specifically for up-and-coming brokers, the contraction in commission payments on the part of many individual institutions has left some potential new clients "under-budget" in terms of the commission payments available to pay for research-related services and limited in their ability to allocate trading business beyond their list of current brokerage relationships.
Brokers can take some solace in the fact that the growth trends in Asia remain very positive when viewed over a longer period. "The Asian equity commission pool has more than doubled over the past five years, making it one of the fastest growing markets in the world," says Greenwich Associates consultant John Feng. "It illustrates Asia's appeal to firms with global or region-wide ambitions, though the year-to-year volatility also underscores the need for a long term commitment to the region for those who have made Asia a center piece of their growth strategy."
Brokers looking to win market share in institutions' Asian equity research and trading business will have to capture it from a group of established market leaders led this year by CLSA Asia-Pacific Markets. CLSA Asia-Pacific Markets and Credit Suisse lead the market with a 9.5% share in Asian equity trading with institutions in Asia Pacific, followed by Morgan Stanley and Deutsche Bank (who are essentially tied with markets shares of 8.6-8.9%), and then by Deutsche Bank, Goldman Sachs, J.P. Morgan and UBS (who are essential tied with market shares in a band between 7.8% and 8.3%). These firms are the 2010 Greenwich Share Leaders in Asian Equity Trading.
CLSA also leads the market in Asian Equity Research/Advisory Services with an institutional voting share of 10.3%, followed by Credit Suisse, Deutsche Bank, and Morgan Stanley, which are all essentially tied with shares between 8.8% and 9.3%. These firms, along with Bank of America Merrill Lynch, Goldman Sachs and UBS are the 2010 Greenwich Share Leaders in Asian Equity Research/Advisory.
CLSA is the 2010 Greenwich Quality Leader in Asian Equity Research/Analyst Service Quality and Asian Equity Sales Quality. CLSA is also a Greenwich Quality Leader in Asian Equity Trading Quality, along with Deutsche Bank and Morgan Stanley.
Deutsche Bank tops the list of 2010 Greenwich Share and Quality Leaders in Asian Flow Equity Derivatives. Deutsche Bank is joined as a Greenwich Share Leader by Goldman Sachs, Morgan Stanley, Credit Suisse and UBS.
In 2010, Greenwich Associates interviewed 259 Asian equity fund managers and analysts, 107 buyside trading desks and 84 users of equity derivatives products at institutions based in Asia. Greenwich Share Leaders are identified based on reported votes for Asian equity research/advisory services, trading commissions and derivatives market penetration for individual brokers by these institutions. Greenwich Quality Leaders are firms that have distinguished themselves by receiving quality ratings from institutional clients that exceed those awarded to competitors by a statistically significant margin.