Published On: Sun, Jan 12th, 2014

What asset classes will you be focusing on in 2014?

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Purpose:Another year has come and gone and some are saying its probably for the best. Trading has been mediocre though improving, some funds have performed well and some haven’t. Investor tastes, macro conditions and other factors see the ebb and flow of money in and out of investments and next year will be no different. With limited money to spend on innovation partly due to flagging business but also complying with the regulatory burden the electronic trading industry continues to bare we look to next year and asset class appetites.To get a sense of what people are focusing on in this year we asked: What asset classes will you be focusing on in 2014?
Results:

What asset classes will you be focusing on in 2014?

What asset classes will you be focusing on in 2014?

Analysis:
At this time of year it is always nice to get an idea of trends in our industry in order to invest in appropriate resources and plan accordingly. We ran a poll in order to do just that asking what asset classes will you be focusing on in 2014.

For the most part it seems that there is no standout asset class but a broad interest across a good many of them. Futures at 26.32% did come in ahead of the rest though not by much. Hedging and arbitrage are drivers for this asset class. We are seeing more derivative products across Asia with SGX focusing on index flavours, the HKEx and LME takeover of course, Japan has seen improvement at TOCOM, TFX and JPX, Bursa Malaysia’ FCPO contract is gaining traction and Thailand is getting into the game as well.

Cash, FX and OTC all came in a close 2nd each garnering 21% of the votes. Asia’s cash trading in 2013 grew by over 40% lead by China and Japan as the second and third largest economies move to prime their respective pumps and see a return to real growth. FX is probably not a big surprise with Japan having the world’s largest retail market and Singapore as the third largest market surpassing Japan. FX will likely continue to be a viable asset class for the trading industry into the foreseeable future. OTC has been a focus for quite some time but in the last half of 2013 has Asia really started to bring in clearing and risk management to this asset class with Singapore, Australia, Korea, Hong Kong and Japan all throwing their hats into the ring. OTC trading in Asia is around 10% of global flows but is expected to grow as the region continues to do so.

Coming in last was fixed income. Not really a surprise. Asia’s bond market is relatively small, though growing in China, and with interest rates looking to rise as the US Fed’s quantitative easing winds down and Japan continues to pump money into its economy, fixed income as an investment does not make sense. Additionally, with markets at all time highs there will likely be a flow of money out of fixed income from those who wished capital preservation and into the equity markets.

 

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