Upheavals in the Asian G3 bond market

UBS, Jefferies, Wells Fargo see largest gains in market share in Asian G3 bond market

COMPETITION in the secondary market for Asian G3 bonds has intensified with both generalist and specialist banks vying for a larger share of fixed income trades. No fewer than 12 banks gained market share, according to the latest Asian G3 Bond Benchmark Review.

UBS, active in a wide range of bonds, gained the greatest increase in market share over the 12-month period prior to the review, an increase of 1.4%. Part of UBS’ success was in hiring the traders Conor Yuan from Citi and Kelvin Zhao from Goldman Sachs. “It’s the new team that provides better liquidity and pricing,” says one fund manager in Hong Kong.

Jefferies, previously known for its investment grade capability, also improved its position with a market share gain of 1.2%. “In the past couple of years Jefferies has ramped up their trading and sales force and therefore are providing better liquidity. They have improved the most in the past year. It started off in high grade but they’ve added a high yield trader, Kevin Aepli,” says a Singapore-based portfolio manager.

Likewise, Wells Fargo gained a market share increase of 0.9%. “Wells Fargo has improved the most over the past 12 months in the Asian G3 space. Their trading set capability has been strengthened a lot,” says a CIO, also in Singapore.

In the category of sovereign bonds, Standard Chartered Bank takes the largest market share, although UBS and Barclays made major gains. A fixed income manager is vocal about Standard Chartered’s capability. “Antonio Gomez in trading at Standard Chartered does a good job. He is focused on Asian G3 sovereign bonds. That has always been Standard Chartered’s focus area.”

Several banks also gained market share with the valuable China bid, consisting of 102 mainland-linked institutions: UBS, Nomura and Barclays were among those to improve their position.

A Hong Kong-based fixed income head explains how Barclays is beefing up their position in this key space. “Their high yield side was very weak, but then they hired Zhirong Chen from ANZ who will build that up. They also hired a junior financials trader from BNP Paribas named Kate Ge. They are trying to upgrade their sales desk and expand their Chinese sales team.”

Among Astute Investors, UBS gained seven places to be ranked third, and Morgan Stanley jumped four places to rank fourth. In credit default swaps, BNP Paribas retains its decisive lead, although Barclays is the most improved. iTraxx Asia ex-Japan is the most frequently traded CDS index among respondents.

More than half of respondents (54%) say their firm engages in electronic trading up from 48% in 2016. The most popular platform is Bloomberg, however MarketAxess has made significant gains from 12 months prior.

Methodology
The Asian G3 Bond Benchmark Review was conducted in the third quarter of 2017. A total of 429 Asian G3 bond investors including asset managers, hedge funds, private banks, insurance funds and commercial banks from Hong Kong, Singapore, the rest of Asia, UK/Europe and the US took part.

Data sets include market penetration, market share/wallet share, buying criteria/client satisfaction, research content and the top individuals. Follow-up interviews are conducted with a selection of respondents in each market to provide qualitative data. To learn more about the Asian G3 Bond Benchmark Review please click here.