What influences the top individuals in Asian G3 bonds?

Asset Benchmark Research asked the best individuals in research, sales and trading the question: ‘What has been the biggest influence on what you do today?’


7 Oct 2016


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Top analysts

Annisa Lee, Nomura

Fundamental analysis is still key though the market has rallied not based on this but on fund flows and expectations of a Fed rate hike. It is important to also keep an eye on the onshore bond market in China and whether there is more easing among central banks.

Top Analysts

Soo Chong Lim, J.P.Morgan

Understanding the technical dynamics i.e. supply and demand. Negative interest rates in developed markets (DM) are diverting funds into emerging market (EM) fixed income funds. At the same time, we are seeing entry of Chinese local investors that are skewing our valuation parameters.

William Mak*, Nomura

Expectation of a Fed rate hike.

Henry Ng, Citic Securities

The major central banks’ dovish policy has led everyone to pile into carry trades. A massive outperformance of Asia credit has been seen. We will watch out for a mean reversion as the stretched valuation is largely supported by strong EM bond inflows. In addition, China's high GDP has been fuelled by credit growth. The property market shows signs of overheating and the bad debt problem cannot be neglected. To address these issues, China needs structural reforms including a banking sector reform. Tail risks are building but our base case is a managed slowdown. This volatile environment could lead to out-of-favor opportunities and bargain purchases. We believe credits with sound fundamentals, proven track record and sound sponsorship will stand out.

Pei Wang, Morgan Stanley

The China property market has rallied over the past one year due to the structural shift as a result of the opening up of domestic bond market and devaluation of CNY. The whole space is trading at historically tight levels, which already deviates from what is going on in the physical market. I stay cautious over most of the lower quality single B names printing at historical tights and think they will be the most vulnerable to any technical shift. In terms of positioning, I would rather park money in higher quality BB Shimao curve or short-dated callable paper. On the other hand, KAISAG complex has been a clear focus for me for the year, which got lucky to ride on the whole market compression trade. Meanwhile, as property risks drop significantly in the China high yield (HY) space, I am spending more time on the emerging new sectors such as local government financing vehicles (LGFVs).

Manjesh Verma, Citi

The emergence of local Asia investor base has been a big influence. This cash-rich investor base from China, Japan and Taiwan has led to the Asian bonds being held in more stable hands and less subject to global volatilities. This has also changed the pricing dynamics in our markets and how we look at valuations.

Glenn Ko, HSBC

Risk appetite, results of monetary policies and economic outlook.

Top economists and strategists

Kelvin Pang, Morgan Stanley

The change in technicals has been the biggest influence to Asia credit this year and has been the key downside risk to my under-weight call on Asia credit. Our base case is for net supply to be lower than last year but we see upside risk in supply. On the demand side, demand had been really strong into Asia credit.

Owen Gallimore, ANZ

The investors. The Asia credit investor base has changed radically over the past 10 to15 years, with added impetus from China's secular high growth in demand for dollar fixed income. Regional stable holdings have been a positive in reducing the excessive and generic volatility that Asia credit produced in previous market crises. Asia credit does however remain esoteric, with limited success in standardizing, and the broadening and deepening of the bond universe provides new challenges amidst these post-credit crisis highs in default rates.

Shankar Narayanaswamy, Standard Chartered

In my role as a credit strategist, QE and its impact on credit markets is probably the biggest influence on what I do today. Gauging the impact of global central banks’ easing bias and the resulting increase in inflows to EM credit markets is important to deciphering market moves.

Top economists and strategists

The growing local bid for Chinese USD bonds is another big factor influencing what I do today. USD bonds from Chinese issuers constitute more than 50% of total Asia ex-Japan USD bond issuance, and a big portion of these bonds is bought by local investors. Thus, understanding the dynamics of the local bid for new issuers from China is very important for gauging the secondary performance of these bonds.

Kaushik Rudra, Standard Chartered

Around 70% of global fixed income is trading at yields of 2% or lower. More importantly, around a quarter of all fixed income instruments are trading with negative yields. This is having a profound impact on higher-yielding segments of fixed income, such as emerging markets. Low rates globally are forcing investors – particularly those from jurisdictions facing negative bond yields – to look at higher-yielding bond markets. EM debt has been a clear beneficiary of these flows; while most of them have been directed at EM hard-currency debt over the past couple of years, EM local-currency debt has also seen a sharp pick-up in flows this year. Given the absence of inflationary pressure in most parts of the world, and with global growth remaining anemic, I expect major central banks around the world to maintain their accommodative monetary stance. This is likely to anchor both policy and long-end rates in the G10 world. These low rates are likely to continue to fuel the search for yield, channelling more flows into EM. While these flows should support the EM asset class over the short to medium term, they are likely to represent a challenge for the market segment in the long run. The EM asset class remains a small asset class in the global fixed income context. The amount of cash chasing a relatively small pool of assets is arguably too large. This is clearly creating distortions and dislocations in some pockets of the market. Given relatively thin market liquidity, a shock could result in a disorderly withdrawal from the space, causing exaggerated market disturbances. As the market becomes increasingly technical, it is becoming extremely difficult for market participants like us to navigate the EM bond landscape. This challenge is compounded by the very low yields on offer across the fixed income space.

Avanti Save, Barclays

Growing supply from the China complex; the demand technical for Asia credit including demand from China investors; global central bank policy.

Top salespeople

Christina Park, Morgan Stanley

Top salespeople

To answer this open question I could rattle on about the regulatory changes redefining the landscape of this industry, or delve into Yellen and her Shakespearean "to hike or not to hike" pickle, or even borrow the clichéd "innate passion for financial markets" Wall Street interview classic.  But I want to take a personal spin on this, and for my answer, look to the experiences that have shaped me during my somewhat nomadic life.  A shy, Korean introvert by birth, I spent my childhood years in New Zealand saying "yis" instead of "yes", frolicking with (you guess correctly) sheep and horses, and walking around everywhere barefoot like a hobbit.  It's amazing to see kids these days navigating around iPads with finesse – I was literally eating dirt outside when I was their age.  A poll conducted by the national paper a few years ago showed that Kiwis are most often described as being down-to-earth, good natured and friendly, and I'm lucky for having been influenced by such wonderfully open and naturally chatty people over the years –how else could I have made cold calls to clients on day 1?  It's not uncommon for strangers in New Zealand to greet each other on the road, sometimes even stopping for a proper chat.  A few years later when I got to the US for college, I unknowingly did the same while nonchalantly strolling down the slightly sketchy streets of New Haven, only to receive concerned looks questioning if I'm the Ramsay Bolton version of an Asian female with an odd accent.  At Yale, even though I majored in economics, I took advantage of its liberal arts program and my biggest takeaway was perhaps training how to connect the dots.  I wrote about the literary influence of Tupac, explored the American psyche post 9/11 that led to the box office success of Spider-Man, and even drew parallels between the Japanese tea ceremony and ninjas (you would be surprised).  Meanwhile, mind-drilling seminars taught me beyond the content in textbooks; it got me questioning how and why, and to proverbially "think outside the box".  While all this smells suspiciously like a college application essay, when I fast forward to present day in Hong Kong as I mull on the answer to this question, I really do think it is this collection of experiences that has been the greatest influence on what I do today.  Like a personal Instagram filter, it tints how I perceive and interpret markets, how I iron out the slightly trickier situations at work, and most importantly, how I interact with clients daily.  Market conditions change, industry cycles come and go, and people move, but it’s our roots that keep us grounded and help us navigate through an ever-changing landscape.

Anthony Neo, Citi

Wallet gap with priority accounts, having a sustainable trading and sales platform for the next 24 months and training up the junior sales and traders.

Yili Dong, Citi

With industry-wide regulations and continuous government involvement in markets, I find it ever more challenging for both the sell-side and our clients to navigate the ebbs and flows in the Asian credit market. The two aspects of our sales mandate have become equally important: providing clients with strong trade ideas and discreet execution, and protecting our trading desk inside the narrow bid-offers amidst technical and dislocated market flows. In this environment, I am a strong believer that good salesmanship and smart market-making and risk-taking will continue to thrive.

Gregory Camous, BNP Paribas

Asian G3 bonds – just as the credit asset class globally – evolves into an augmented reality populated by eccentric animals (QE, ZIRP, NIRP, LTRO…) created by central bankers. Our markets are brutally dominated by central banks: Valuations are completely disconnected from fundamentals, leaving both the buy-side and sell-side with an uneasy feeling. In the global race to 0% rates, the hunt for yield is in full force: this has been bullish for Asian credit. Expected returns have been revised lower but most investors keep hunting bonds as relentlessly as the graduate in our team hunts for Pokemon. In this environment of low earnings-growth versus credit investors with high cash levels, I am bearish on equities and HY and bullish on Asian high grade (HG) Credit.

Henry Tang Wong, Citi

As a fixed income sales, it has been a tremendous experience to witness the growth of Asian bond market from its pre-crisis days. In less than ten years’ time, we have already developed our investor culture, product, and business model. With the economic rise and opening up of China, I expect the growth of Asian credit to continue and it will be an integral part of global credit business.

Aileen Ngui, Deutsche Bank

I read this question as “what motivates me on a daily basis and what do I do to sustain my enthusiasm”…

The fact is, I am in that rare and privileged position where I love what I do.  This is a blessing for which I am very grateful.  What gets me going every day are my clients and my traders, both of whose needs I try to fulfill to the best of my ability.  I love interacting with my clients on a daily basis, sharing my views on market happenings, and helping them facilitate transactions that meet the needs of their investment community.  I also enjoy working alongside my traders and assisting them in the clearing of their axes.  At the fundamental level, it is all about building long-term relationships, and gaining trust to work in partnership.  Last but not least, my faith and my family are the two other cornerstones of my life, and make the long hours/days all worthwhile.    

Top traders

Mathieu Leng, Bank of America Merrill Lynch

My boss.

Top traders

Kelvin Zhao, Goldman Sachs

The continuous demand for USD assets from onshore China accounts.

Dean Wang, Morgan Stanley

Passion. I simply enjoy what I am doing. The dynamic environment and client relationship that never fails to induce a strong aptitude to learn.

Zhirong Chen, ANZ

It is important to recognize that the demographics of ownership around Asian credit have changed dramatically and rapidly over the last couple of years and will continue to evolve towards higher regional ownership. I do believe the Asia credit market will grow increasingly domestic through time and we have to adapt with the changes.

Rohan Thakrar, Jefferies

With the recent expansion in the Asian credit markets, coupled with the growing presence of regional investors, the market has become more dynamic to trade. Understanding the investment behavior of these investors and staying close to them has been critical to becoming a more effective market maker. As Jefferies is a global investment bank, our reach to international investors is broad and deep, thus enabling us to source and distribute risk more efficiently and provide better liquidity to our clients. We have broken down the silos of trading, sales and research into 1 team, thus making us more dynamic and responsive to our client’s needs.

Amanda Wu, Goldman Sachs

QE- low or negative interest rate.

Wentao Yan, Nomura

The change of client base - Chinese wealth going global. Also the change of global monetary policy.

Ankit Bafna, BNP Paribas

I love the challenge of trading  the high yield market which has its own peculiar characteristics – presenting something new every day in the form of events, headlines, volatility and stories. Apart from the dynamic nature of this market, the key driver for me this year has been the drive to establish BNP Paribas as a strong HY franchise in Asia. I truly believe that, despite the changing regulatory framework for both banks and investors, there is tremendous opportunity for market makers to drive the HY business in this period of consolidation and that will motivate my growth in the near future.

Klemens Loeffler, HSBC

My clients. As their requirements have grown over the past years, we have adopted our market-making style towards their needs.

*William Mak transitioned from being an analyst to a trader in September 2016.

Editor’s Note: These award winning individuals are presented in rank order. Their responses were gathered in September 2016. 


7 Oct 2016


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