Banks' Push into Asian Fixed Income is Promising for Traders, Researchers and IT

Banks looking to push into Asian fixed income could be doing some substantial hiring in the next year, since the sector is one of the few debt markets showing positive growth even as global banks face a growing challenge from ambitious local dealers.

A recent survey by research firm Greenwich Associates found that while fixed-income trading activity in Europe and the U.S. slowed in 2010, in Asia trading volumes were generally stronger than in 2009. At the same time, markets like Chinese, Indian and South Korean fixed income are becoming the province of local dealers. From 2009 to 2010, local dealers' market share of trading in domestic currency products rose to 44.4 percent, up from 40.4 percent in the 2008-2009 period.

So expect a wave of strategic hiring from those global banks that want a piece of the Asian fixed income action. They've only a limited window to bolster their presence, researchers say. Among the firms expected to ramp up are HSBC, Standard Chartered Bank, Citigroup and Deutsche Bank - all of whom have substantial Asian presences.

Citi, for example, in September made a slew of hires to strengthen its Asian-Pacific fixed income unit, including Jeff Zhang, who'd run JPMorgan's Chinese fixed income investor sales, and Stephenni Xie and Dehua Shen, both from Nomura's Chinese fixed income operations.

A Window of Opportunity

Greenwich analyst Abhi Shroff says the next few years are critical for global banks to make inroads into Asian fixed-income. "Domestic dealers - who are already the most competitive in terms of pricing on both government and corporate bonds - are also improving the quality of their own products and services," he says. Global firms can compete by stressing their higher-quality services, whether in research or banking relationships, but Asian players are looking to up their games in research and electronic trading.

Researchers, especially those willing to relocate overseas, are in a good position - good enough to drive bidding wars and reap major compensation, particularly from local dealers. Greenwich found that 42 percent of Asian institutions are likely to directly or indirectly compensate their dealers for research (mainly published research), compared with only 30 percent of European institutions.

Another growth area: electronic trading. While only about 25 percent of Asian institutions now trade fixed income electronically, institutional demand is growing dramatically for electronic trading of Asian government bonds and credit products. It's a tempting target for global banks with established e-trading platforms, so expect some hiring on that front as well in the next few months.