If you were looking for a job as a bond trader in Singapore or Hong Kong as recently as 2013, your ideal employer would no doubt be one of the large global banks. But now the job market in Asian fixed income is more nuanced, thanks to the growing clout of banks from the Asian region, according to a new study from data provider Greenwich Associates.
The Greenwich report refers to ‘regional banks’ in Asia as a whole, and doesn’t provide a firm-by-firm breakdown of how they are performing in fixed income on an individual basis. The report does, however, begin with an overall market capitalisation table, which includes Chinese behemoths ICBC, China Construction Bank, Agricultural Bank of China, and Bank of China. Singapore’s DBS, OCBC and UOB are also on the list, as is Maybank and three Korean firms. It’s therefore safe to say that these institutions would count among the regional-bank collective that Greenwich has analysed.
Global dealers (i.e. mainly Western banks) continue to dominate in G3-denominated Asian bonds (sales of bonds in US dollars, euros and yen). In 2018, they had a 90% share of both corporate and sovereign bonds, according to Greenwich. Similarly, only one Asian firm, Bank of China, features in Bloomberg’s 2018 league table for Asia ex-Japan issuer G3 currency bonds. HSBC and Citi finished first and second, respectively.
However, Greenwich points out that regional banks have actually tripled their G3 market share in both corporates and sovereigns, from just over 3% in 2013 to more than 10% in 2018. Working for a regional bank in G3 trading, therefore, is no longer the career dead-end that it used to be.
More significantly, in domestic currencies, regional banks have overtaken the global players and have now captured more than half of the market. Across Asia, regional banks’ overall local-currency market share rose from 47% to 66% between 2013 and 2018. In corporates, it went from 60% to 82%, while in sovereigns it increased from 42% to 60% over the same period.
“These trends can vary significantly in individual countries, but across the region the trend is clear: regional dealers are a powerful force in local markets,” the Greenwich report states. Regional banks are “very large in their own right”, and they have the “large balance sheets necessary for maintaining bond inventories”, as well as “very useful local knowledge and relationships”.
Bloomberg’s 2018 league table for domestic Asia bonds reflects the same trends. If you want to work for a dominant bank in this sector, the top-four firms by market share are all Chinese: Bank of China, CITIC, China Securities and ICBC. Although execution problems can hamper domestic-currency deals, issuance in local currencies dwarfs the debt issued in G3 currencies in Asia. In 2017, Asia printed notes worth $412bn in G3 currencies, compared to $1.5trn in the region’s local currencies, according to a report posted by HSBC last year.
You might not want to get too comfortable as a fixed income trader at an Asian bank, because it’s likely that much of their hiring in the near future will focus on technologists. Their “aggressive use of e-trading” is one of the main reasons that they have overtaken global banks in local-currency markets. “Increasingly, Asian banks are looking to electronic platforms to help them build regional scale,” the Greenwich report states.
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