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Treasury & Capital Markets
Who are the go-to banks in Asian local currency bonds?
It has been another year of jostling for position, poaching talent and deciding which investors merit the tightest pricing. Today, we release the 2016 bank rankings in eleven secondary markets for Asian currency bonds. We also reveal investors’ assessment of the best arrangers in the primary market.
Asset Benchmark Research 18 Oct 2016
It has been another year of jostling for position, poaching talent and deciding which investors merit the tightest pricing. Today, we release the 2016 bank rankings in eleven secondary markets for Asian currency bonds. We also reveal investors’ assessment of the best arrangers in the primary market.
They are markets worth prizing and investor relationships worth cultivating. Not surprisingly, therefore, competition for market share in the Asian local currency bonds has increased in recent years along with the dramatic growth in trading volumes. But as foreign banks contend with the ever increasing cost of regulatory capital, they are forced to slash the inventories they hold. Local banks have been quick to take advantage, often hiring individuals with the best investor relationships from their foreign rivals to fast track their growth.
Thailand is an excellent case in point. According to the Asian Development Bank[i], in the past 15 years secondary market trading volumes have ballooned 19-fold to the equivalent of US$154 billion in the third quarter of 2016 (from the same period in 2001), during which the domestic banks have extended their market share. According to the annual Asian Currency Bond Benchmark Review, TISCO, CIMB Bank Thai and KGI Securities are now the top three counterparties in corporate bonds among domestic institutional investors, while Kasikornbank and Bangkok Bank are first and third respectively in government bonds.  As a portfolio manager with a major local asset management house explained: “KBank most often has the government bonds I am looking for.” Local banks are also likely to have knowledge of the issuers and trading colour as the portfolio manager of an insurance fund put it: “Kasikorn has the best pricing and knows the local conditions better than the international banks.”Kasikorn was also cited as the best arranger for new issues in both government and corporate bonds.
A similar dominance by local counterparties is seen in Malaysia, the Philippines and Taiwan. “CIMB and Maybank are our top counterparties for government and corporate bonds,” reported a major Malaysian asset manager. “The international banks have been less active.” Another prominent institutional investor said: “The local banks have better pricing and a bigger inventory due to the depth of their DCM activities.” Likewise a fund manager with a bank in the Philippines pointed out: “Both my tier 1 counterparties in corporate and government bonds, Security Bank and FMIC, have a wide range of inventory and in terms of their salespeople, the client sales relationship is not bad.”
In India, there is a greater mix. While ICICI Securities Primary Dealership is ranked first in investors’ feedback in government bonds, Standard Chartered Bank and HSBC still hold second and third place respectively. In corporate bonds, Axis Bank, ICICI Securities Primary Dealership and Yes Bank are the three top-ranking in the secondary market and Axis is rated as the top arranger for new corporate issues. “HSBC has improved the most in the past year in the Indian rupee bond space. They are quoting very well in the OIS (Overnight Index Swap) space and are also present in research and are good in trade ideas. They have a good view in government primary auctions also. They have improved in their understanding of government primary auctions,” commented one leading asset manager.
However, the international banks control the largest market share in Hong Kong dollar and CNH bonds as well as government bonds in Indonesia rupiah and Singapore dollar. They are also dominant – as could be expected – with offshore investors. According to data published by the Asian Development Bank, foreign investor holdings in Indonesia stood at 39.1% with Malaysia at 34.5% and Thailand 14.5% in June 2016. Singapore also has a significant share of foreign investment in its bond market, although many funds are domiciled there and are therefore classified as being local.
Given the growing importance of offshore investor flows as institutions search for yield, in this year’s survey Asset Benchmark Research has segregated the results of these funds from those of the onshore entities. Viewed across all local currency bond markets open to foreign investors, Citi, Deutsche Bank, HSBC, Standard Chartered Bank, (in no particular order) are the leading counterparties with ANZ, Barclays, BNP Paribas, BofAML, J.P.Morgan and Mizuho Securities also valued highly in selective currency products.
BNP Paribas and J.P.Morgan, for example, were ranked first and third among offshore investors in renminbi government bonds, while HSBC, Standard Chartered and Mizuho Securities were the top three for CNH.  “Mizuho Securities has moved up from tier 2 to tier 1 for CNH bonds this year,” explained an asset manager. “Their pricing has been more aggressive. Mizuho Securities has also improved the most in the last year. The trader Hiroyuki Wakimoto is always eager to improve the pricing that he offers.” Another Hong Kong-based bank investor commented: “We’ve started trading with BNP Paribas and Barclays this year for CNH bonds. They are in tier 2; they provide more information to me so that’s why I’ve started trading with them. BNP Paribas has improved the most in the past year.”
To view the rankings of the top banks in the secondary market and top bank arrangers by investors' choice for 2016 please click here.


[i] AsianBondsOnline, Asian Development Bank 

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