Wednesday, November 20, 2019 Stamford, CT USA — In a global market where it’s increasingly tough for banks to make money in fixed income, Asia stands out as a welcome exception. Both investors and dealers are pouring resources into Asian fixed income for a number of reasons, the primary one being that there’s money to be made in the region.
Almost all the world’s major banks are continuing to invest in the region, including Citi and HSBC, which top the list of 2019 Greenwich Share Leaders in Overall Asian (ex-JANZ) Fixed Income, and J.P. Morgan, which ranks third on the list. Rounding out the top five are Bank of America and Standard Chartered Bank, which are statistically tied in the No. 4 spot.
Citi earns the first place title in Overall Asian (ex-Japan) Fixed Income, followed by HSBC in second and the trio of J.P. Morgan, Deutsche Bank and UBS statistically tied for third.
Potential for Returns Drives Investments from Buy Side and Sell Side
As always, China is at the center of the Asian fixed-income story. China’s $13 trillion bond market is the third largest in the world. However, most benchmark bond indexes only started including yuan-denominated Chinese onshore bonds this year. In April, the Bloomberg Barclays Global Aggregate Index kicked off a 20-month “inclusion” process that will ultimately bring Chinese bonds to just over 6% of the index.
Fixed-income dealers estimate this move will bring in some $120 billion to Chinese bonds from investors around the world, and other indexes are following suit.
“Chinese bonds already account for a sizable portion of Asian fixed-income trading volume, and that share should increase steadily as the inclusion process draws major institutional investors from foreign markets into Chinese fixed income, many for the first time,” says Greenwich Associates Managing Director James Borger.
But China is hardly the only element to the Asian fixed-income story in 2019. On the contrary, investors around the world are targeting a broad range of Asian fixed-income products as part of their steadily expanding emerging markets portfolios and through other investments intended to generate yield at a time of low and, in cases, negative interest rates.
That’s great news for the sell side, which is seeing renewed investor interest in less liquid, higher margin products, such as distressed debt, high-yield loans, and even structured credit and structured notes, both of which have seen higher investor activity than in the last couple of years.
“Given the focus on profitability on the sell side, a number of dealers are focusing on the relatively less liquid spectrum of products, and investor interest in these products is providing a boost,” says Greenwich Associates Principal Parijat Banerjee.
Most Helpful Traders and Analysts
Every year, Greenwich Associates asks the institutional traders and portfolio managers participating in our global fixed income study to name the industry’s most helpful sell-side traders and analysts. The resulting awards are a popular feature on both sides of the business, and in markets around the world. However, this list can have extra importance in Asia. Relative to the markets of North America and Europe, the Asian fixed-income community remains rather small and concentrated.
As a result, the hiring of one key trader or analyst can result in gain in market share large enough to materially impact the competitive positioning of a bank. On the flip side, the loss of a single particularly popular and successful professional can deliver a real blow to a franchise. With those stakes in mind, we present our 2019 list of the Most Helpful Traders and Analysts in Asian Fixed Income.
Click here for the list of 2019 Greenwich Leaders in Asian Fixed Income.