HSBC Leads Asian Fixed-income Market

Stamford - 14 December 2015

Greenwich Associates Announces 2015 Share and Quality Leaders

Dealers and Investors Face Declines in Trading Activity and Market Liquidity

Asian fixed-income trading volumes declined from 2014 to 2015, driven mainly by a 9% reduction of trading activity in Asian credit products.

Amid this fast-changing marketplace, a new report, In Challenging Markets, Buy Side Extends Their Counterparty Lists but Concentrates Volumes with Top-Tier, from Greenwich Associates shows that HSBC has established itself as the clear leader in Asian fixed-income trading (including derivatives) with an impressive 11.8% market share.

Citi is number two at 8.9%, followed by Standard Chartered at 7.1%, Bank of America Merrill Lynch at 6.3%, and the trio of J.P. Morgan, Nomura Securities and Deutsche Bank, which are statistically tied with market shares of 5.1%-5.3%. These firms are the 2015 Greenwich Share Leaders in Overall Asian Fixed Income.

HSBC claims the title of 2015 Greenwich Quality Leader in Asian Fixed-Income Sales and Asian Fixed-Income Trading. In Asian Fixed-Income Research, Nomura Securities and Citi join HSBC as 2015 Greenwich Quality Leaders.

Reductions in Trading Volume and Market Liquidity
“Deep reductions in sell-side inventory levels and the exit of some dealers from the market altogether have made it harder for investors to execute trades, and are contributing to the overall slowdown in institutional Asian fixed- income trading volume,” says Greenwich Associates consultant Abhi Shroff.

As part of their search for reliable sources of inventory and liquidity, institutions are forming relationships with new counterparties. To date, however, institutions are not shifting trading volume to these new relationships. In fact, in what seems at first like a contradictory finding, they are moving in precisely the opposite direction.

“The market’s biggest dealers are generally the ones still offering liquidity, so the reality is that many institutions feel they have no choice but to consolidate their trading business with their top counterparties in order to become important clients deemed worthy of consistent coverage and capital commitment,” says Greenwich Associates consultant Jim Borger.

Fierce Competition in G3-Demoninated Asian Bonds
With less balance sheet to wield, sell-side firms are narrowing their focus and concentrating on products in which they think they have some competitive advantage. Certain dealers are pulling back from products like swaps and local currency Asian bonds and focusing on products in which they can take better advantage of their relationships with customers in Europe and the U.S. looking to invest in emerging markets debt. These strategic shifts are making the Asian G3-denominated bond market a highly competitive business.

HSBC and Bank of America Merrill Lynch are deadlocked atop this market with statistically identical market shares of 12.9%-13.6%. With a market share of 11.7% Citi is third, followed by Morgan Stanley and Nomura Securities, which are tied at 7.4%-8.3%. These firms are the 2015 Greenwich Share Leaders in G3 Asian Credit. 

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