Tuesday, January 16, 2018 Stamford, CT USA — A surge in equity market valuations and a rebound in trading activity provided a major boost to Asia’s brokers in 2017. However, optimism about these favorable business conditions is tempered by worry about the looming impact of MiFID II, which could make 2018 a messy year.
As the combination of soaring stock markets and stepped-up volume increased broker trading revenues, Morgan Stanley and Bank of America Merrill Lynch deadlocked at the top of the market in terms of institutional equity trading share in Asia last year, followed by Citi and Credit Suisse, which were also statistically tied in market share, and yet another tie between CLSA Asia-Pacific Markets and UBS. These firms are the 2017 Greenwich Share Leaders in Asian (ex-Japan/Australia) Equity Trading.
“The feeling among these firms is mixed,” says Greenwich Associates Managing Director John Feng. “On the one hand, they’ve had a good year with much needed growth after a weak 2016. On the other hand, they have no way of knowing what 2018 will bring.”
The MiFID II Wildcard
Although the MiFID II rules governing investor payments for research officially apply only in the EU, the regulations will have a ripple effect around the world, as many investors with exposure to multiple markets say they are unlikely to operate separate frameworks for Europe and other markets like Asia and North America, given the cost and complexity. The uncertainty around research payment grew further as a string of large asset managers announced in late 2017 that they would no longer pass research cost onto clients under MiFID II and, instead, pay for research directly out of their P&L. “As the number of asset managers planning to absorb research costs internally grows, so does the downside risk for their external research spend and for firms that have historically depended on it for a significant portion of their revenues,” says Greenwich Associates consultant Parijat Banerjee.
Morgan Stanley currently leads in Asian (ex-Japan/Australia) equity research/advisory impact, as measured by the firm’s share of APAC institutional investors’ research vote. Credit Suisse and Bank of America Merrill Lynch are tied for second place, followed by Citi, and a tie between CLSA Asia-Pacific Markets and UBS. These firms are the 2017 Greenwich Share Leaders in Asian (ex-Japan/Australia) Equity Research/Advisory.
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