Deutsche Bank
Equities
Global Market Structure
Asia Pacific Newsletter
Issue 34
2
Global Market Structure
Issue 34, 2014
Welcome to the APAC Market Structure News Book containing summaries of regulatory
and exchange news accompanied by microstructure analytics.
Contents
APAC and ASEAN
4
Hong Kong
6
China10
Taiwan13
Japan16
India19
South Korea
24
Australia27
Thailand30
Singapore32
Philippines34
Indonesia35
Malaysia 36
Chart Definitions 37
Editor
Jessica Morrison, Head of APAC Market Structure
jessica.morrison@db.com
Quantitative Content
Winnie Khattar, Head of APAC Analytics
winnie.khattar@db.com
Contributors
Andrew Walker, Shalabh Sood, Feiran Tao
3
Deutsche Bank
Equities
Global Market Structure
Global Market Structure
Newsletter Issue 34, 2014
APAC and ASEAN Summary
New governments in India and Thailand have lead to highlights for Asia in May and June. Election results in India were announced mid-May
and index has rallied over 17% since the new BJP government came to power (24% YTD). There’s bullish sentiment among investors as the
new Finance Minister in India announced a series of tax reforms at the Union Budget earlier in July.
In Thailand military has taken control to bring an end to political unrest that had been ongoing since November last year, during which
period foreign investors had withdrawn their money from the country. SET50 Index has now gained 11% since peace returned in May 2014,
equities volumes are up 30% YOY and nearly 100% up since January this year.
China and Hong Kong have also seen a rally in the last two weeks, following as China GDP growth numbers came out better than expected
and July flash PMI rose to its 11-month high level.
Fig 1: APAC Volatility (30 day index return volatility)
6
0.5
5
4
3
2
1
4
4
3
3
2
2
1
1
USA
Europe
Australia
China
Hong Kong
USA
India
USA
Europe
Japan
Europe
Australia
South Korea
Australia
China
Taiwan
China
Hong Kong
Hong
India Kong
India
Japan
Japan
South Korea
South Korea
Taiwan
Taiwan
0.4
Fig 1: APAC Volatility (30 day index return volatility)
Fig0.3
1: APAC Volatility (30 day index return volatility)
0.5
0.5
0.2
0.4
0.4
0.1
0.3
0.3
0.0
0.2
0.2 Jun-13
6
6
Jul-13
Aug-13
5
5
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-13
Jun-13
0.1 Thomson Reuters
Source:
0.1
1. 0.0
High volatility period in India ahead of election results in month of May.
0.0
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Index
gain over
10% Aug-13
leading up
to results
Jun-13
Jul-13
Aug-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Source:
Thomson
Reuters
2.
Biggest CNY drop in the year, as USD gained after FED raised its
Source: Thomson Reuters
interest rate forecasts for next year
3.
apanese
yen rallied,
asindex
sell return
off involatility)
emerging markets deepened and
FigJ2:
ASEAN Volatility
(30 day
increased scrutiny of credit risk in China boosted demand for Japan
0.6
3
assets
4. China’s 3rd plenum meeting after 35 years from last to plan next phase
Jan-14
Feb-14
Mar-14
Apr-14
May-13
Jun-13
of China’s
economic
reform
Jan-14
Feb-14
Mar-14
Apr-14
May-13
Jun-13
5. INR currency depreciation. INR slid 14% against USD as India’s current
account deficit widened
6. China cash crunch and poor GDP data signalling economic slowdown
2
1
2
2
1
1
USA
Europe
Indonesia
Malaysia
Philippines
USA
Thailand
USA
Europe
Singapore
Europe
Indonesia
Indonesia
Malaysia
Malaysia
Philippines
Philippines
Thailand
Thailand
Singapore
Singapore
0.5
Fig 2: ASEAN Volatility (30 day index return volatility)
0.4ASEAN Volatility (30 day index return volatility)
Fig 2:
0.6
0.3
0.6
0.5
0.2
0.5
0.4
0.1
0.4
3
3
0.3
0.0
0.3
Jun-13
Jul-13
0.2
0.2
Source:
Thomson Reuters
0.1
0.1
0.0
0.0
Jun-13
Jul-13
Jun-13
Jul-13
Source: Thomson Reuters
Source: Thomson Reuters
Aug-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-13
Jun-13
Aug-13
Aug-13
Aug-13
Aug-13
Sep-13
Sep-13
Oct-13
Oct-13
Nov-13
Nov-13
Dec-13
Dec-13
Jan-14
Jan-14
Feb-14
Feb-14
Mar-14
Mar-14
Apr-14
Apr-14
May-13
May-13
Jun-13
Jun-13
1. Thailand index, volatility and volumes surges adter Thailand’s army formally
assumed control on May 22nd. Index has risen over 8% since
Fig 4: ASEAN Market Share Distribution
2. Strong foreign investor inflows over 3 weeks in Indonesia. Index rallied nearly 5% in three weeks
3. IDR currency
14 depreciation - 15% fall against USD as Indonesia’s current account deficit
14 widended
Fig 3: APAC Market Share Distribution
13
13
Fig 4: ASEAN Market
Share Distribution
12
Fig 4: ASEAN Market Share Distribution
12 Share Distribution
Fig 3: APAC Market
Fig 3: APAC Market Share Distribution
14
14
13
13
12
12
Source: Thomson Reuters
Source: Thomson Reuters
Fig.5
Source:Impact
Thomson Cost
ReutersEstimate
(bps)
4
40.0
35.0
30.0
Australia
China
2012 2013 2014
6% 5% 6%
35% 37% 37%
Hong Kong
8% 7% 8%
India
4% 3% 4%
2012 2013 2014
Japan
26% 34% 32%
Australia 2012
6% 2013
5% 2014
6%
South Korea 10% 6% 6%
Australia
6% 37%
5% 37%
6%
China
35%
Taiwan
5% 4% 5%
China
35%
37%
37%
Hong
Kong
8% 4%
7% 3%
8%
ASEAN
5%
Hong Kong
8%
7%
India
4% 3% 8%
4%
India
4%
3%
4%
Japan
26% 34% 32%
Japan
26%
34%
32%
South Korea 10% 6% 6%
SouthTaiwan
Korea 10%
5% 6%
4% 6%
5%
Taiwan
5% 4%
4% 3%
5%
ASEAN
5%
ASEAN
5% 4% 3%
14
14
13
13
12
12
2012 2013 2014
Thailand
Source: Thomson Reuters
Source: Thomson Reuters
Source: Thomson Reuters
28% 35% 33%
Philippines
6% 7%
Malaysia
16% 16%
Singapore 2012
31% 2013
26%
Indonesia 2012
18% 2013
17%
Thailand
28% 35%
Thailand
28%
Philippines
6% 35%
7%
Philippines
6% 16%
7%
Malaysia
16%
Malaysia
16% 26%
16%
Singapore
31%
Singapore
31% 17%
26%
Indonesia
18%
Indonesia
18% 17%
6%
20%
25%
2014
16%
2014
33%
33%
6%
6%
20%
20%
25%
25%
16%
16%
Hang Seng
Composite
Taiwan TAIEX
S&P/ASX 200
0.2
0.15
0.1 Thomson Reuters
Source:
Fig
3: APAC Market
0.05
0
Share Distribution
14
13
Source: Thomson Reuters
Source:Estimated
Thomson Reuters
12
Fig.5
Cost of Trading
Jan-13 Reuters Feb-13
Source: Thomson
Mar-13
South
12%
Hong Korea
Kong
9% 11%
9% 6%
7%
Hong Kong
8% 7% 8%
Taiwan
6%
India
3% 6%
4% 4%
2%
India
4% 3% 4%
Japan
24% 28% 36%
Japan
26% 34% 32%
South Korea
12% 11% 6%
South Korea 10% 6% 6%
Taiwan
6% 6% 4%
Taiwan
5% 4% 5%
Apr-13
May-13
ASEAN
5% 4%
3%
50.0
Australia
China
2012 2013 2014
6% 5% 6%
35% 37% 37%
Hong Kong
India
Japan
South Korea
Taiwan
ASEAN
8% 7% 8%
4% 3% 4%
26% 34% 32%
10% 6% 6%
5% 4% 5%
5% 4% 3%
Impact
Cost Estimates
(bps)Estimates
Impact
Cost
Impact
Estimates
Cost
(bps)
(bps)
Fig.545.0
Estimated Cost of Trading
40.0
50.0
Fig.535.0
Impact Cost Estimate
30.0
45.0
40.0
40.0
Fig 3:25.0
APAC Market Share Distribution
35.0
20.0
35.0
13
12
11
15.0
30.0
30.0
10.0
25.0
25.0
5.0
20.0
20.0
0.0
15.0
Source: Thomson
0.0%Reuters
15.0
10.0
2.0%
5.0
10.0
Source:0.0
Thomson Reuters
5.0
0.0%
2.0%
4.0%
2011 2012 2013
Australia
6% 6% 6%
4.0%
China
39% 37% 39%
0.0
0.0%Cost
Fig.5
Source:Impact
Thomson
ReutersEstimate
2.0%
Hong Kong
India
Japan
South Korea
Taiwan
Impact Cost Estimates (bps)
40.0
Source: Thomson Reuters
35.0
30.0
Fig.625.0
Turnover Velocity
9%
3%
24%
12%
6%
Source:
Thomson Reuters
Fig
4: ASEAN
Market Share Distribution
14
13
Source: Thomson Reuters
12
Jun-13
Jul-13 Source: Thomson
Aug-13 Reuters
9%
4%
28%
11%
6%
7%
2%
36%
6%
4%
Sep-13
2012 2013 2014
13
12
11
10.0%
Thailand
28% 35% 33%
Philippines
Malaysia
Singapore
Indonesia
6% 7% 6%
16% 16% 20%
31% 26% 25%
18% 17% 16%
12.0%
6.0%
Trade size (%ADV)
8.0%
10.0%
12.0%
6.0%
Trade size (%ADV)
8.0%
10.0%
12.0%
Source:
Thomson Reuters
20.0
14.0%
Hang Seng
Composite
Taiwan TAIEX
S&P/ASX 200
Hang
StraitsSeng
Times
Composite
Nikkei
225
Taiwan
TAIEX
NSE
S&P
Nifty
Hang
Seng
S&P/ASX
Kospi
200200
Composite
Straits
Times
Taiwan TAIEX
Nikkei 225200
S&P/ASX
NSE S&P
Nifty
Straits
Times
Kospi 200
Nikkei
225
NSE S&P Nifty
Kospi 200
14.0%
2011 201214.0%
2013
Thailand
28% 33% 40%
Philippines
Malaysia
Singapore
Indonesia
4% 6% 6%
15% 15% 15%
32% 29% 24%
21% 16% 15%
Source: Thomson Reuters
200%
Singapore
Global Market Structure
Oct-13
Fig 4: ASEAN Market Share Distribution
Source:
6.0%
8.0% Thomson Reuters
Trade size (%ADV)
4.0%
Thailand
28% 29%
33% 24%
40%
Singapore
32%
2013 2014
Indonesia 2012
21%
Philippines
4% 16%
6% 15%
6%
Thailand
28%
Malaysia
15% 35%
15% 33%
15%
Philippines
6% 29%
7% 24%
6%
Singapore
32%
Malaysia
16%
Indonesia
21% 16%
16% 20%
15%
Singapore
25%
Nov-13 31% 26%
Dec-13
Indonesia
18% 17% 16%
Fig.615.0
Turnover Velocity
Hang Seng
Composite
Taiwan TAIEX
S&P/ASX 200
Straits Times
Nikkei 225
NSE S&P Nifty
Kospi 200
10.0
150%
Fig.6
Turnover Velocity
200%
5.0
100%
50Estimated
0.0
Fig.5
Cost of Trading
150%
0.0%
45
50.0
40
50%
Source:
45.0Thomson Reuters
35
100%
40.0
30
0%
35.0
25
50%
Japan
30.0
20
Billions (bps)
Impact Cost Estimates
2.0%
China
4.0%
South Korea
6.0%
Trade size (%ADV)
Thailand
25.0
15
0%
20.0 Thomson Reuters
Source:
10
15.0
Japan
China
South Korea
Thailand
5
10.0
0
5.0
Fig.6
Turnover
Velocity
Source:
Thomson
South Reuters
Korea
Japan
Hong Kong
0.0
50
0.0% Reuters
2.0%
4.0%
Source: Thomson
45
40 Thomson Reuters
Source:
35 Primary Futures Turnover vs Open Interest
Fig.7
30
25$60
20 Primary Futures Turnover vs Open Interest
Fig.7
15$50
10$40
Fig.8
APAC Market Microstructure Matrix
$60
5
$30
$50
Fig.60Turnover Velocity
Japan
Hong Kong
$20
$40 South Korea
8.0%
10.0%
Taiwan
Australia
Indonesia
India
Philippines
Malaysia
Hong Kong
Taiwan
Australia
Indonesia
India
Philippines
Malaysia
Hong Kong
Taiwan
China
India
Singapore
8.0%
Thailand
10.0%
Singapore
Malaysia
12.0%
14.0%
Avg Turnover (US$ Bn)
Open Interest (US$ Bn)
Billions
6.0%
Trade size (%ADV)
Avg Turnover (US$ Bn)
14.0%
Open Interest
Hang(US$
SengBn)
Composite
Taiwan TAIEX
S&P/ASX 200
Straits Times
Nikkei 225
Singapore
NSE S&P Nifty
Kospi 200
12.0%
Open Interest (US$ Bn)
Avg Turnover (US$ Bn)
Open Interest (US$ Bn)
Taiwan
China
India
Singapore
Avg Turnover (US$ Bn)
Malaysia
Thailand
200%
$10
$30 Thomson Reuters
Source:
$0
$20
150%
$10
South Korea
Japan
Hong Kong
Taiwan
China
India
Singapore
Thailand
Malaysia
Japan
Hong Kong
Taiwan
China
India
Singapore
Thailand
Malaysia
100%
$0
Source: Thomson Reuters
50%
South Korea
Fig.8
APAC
Market
Source:
Thomson
Reuters Microstructure Matrix
0%
Japan
China
South Korea
Thailand
Taiwan
YTD
Index
Return
India
Avg
Trade
size
Malaysia
7.6%
0.02%
2.1%
-1%
11
3,686
19%
25
1,651
19%
13.3
6.5%
6%
14
6,024
100%
26.2
3.7%
3.2%
22
69%
84%
6.5
4.4%
5.2%
5%
77%
100%
15.2
-0.8%
$40
INDIA
4%
39%
100%
21.1
$30
THAILAND
1%
61%
100%
SINGAPORE
$20
1%
9%
MALAYSIA
$10
1%
22%
INDONESIA
$0
1%
58%
South Korea 0%
PHILIPPINES
Japan
28%
Source: Thomson Reuters% APAC
Country
Market
Source: Thomson Reuters
Share
Turnover
Velocity
Primary/
ATS
Market
Share
Expected
Arrival Cost
5% ADV
Order Size
(BPS)
CHINA
36%
109%
100%
-
JAPAN
31%
160%
89%
23.7
HONG KONG
8%
13%
99%
SOUTH KOREA
6%
101%
$60
AUSTRALIA
6%
$50
TAIWAN
Fig.7 Primary Futures Turnover vs Open Interest
Source: Thomson Reuters
Australia
Indonesia
59,468
139
24,611
19,039
86
15%
5,050
6,293
41
77
10%
4,897
16,065
54
13
1,146
9%
4,941
2,976
11
8.2%
35
5,447
8%
23
2.3%
23.5%
4
312
10%
4,375Avg Turnover
5,307
(US$ Bn)
4,018
2,942
4
-
2.1%
15.5%
43
7,770
10%
1,423
1,829
0
100%
11.4
3.8%
6.7%
22
4,220
9%
635
326
1
100%
-
-0.4%
0.4%
31
6,479
4%
528
286
0
100%
-
4.3%
19.1%
18
10,265
24%
383
9
0
0.4%China 16.7%
India
18
-
1
Singapore
9,277
12%
Avg. Daily
Equity
Volume
(Mn USD)
Singapore
25,738
Taiwan
20D Avg.
Volatility
Hong Kong
Avg.
Daily ETF
Volume
(Mn USD)
-
Avg
Spread
(BPS)
Philippines
Avg. Daily
Futures
Volume
(Mn USD)
Hong
Kong
100%
MTD
Index
Return
Open Interest (US$ Bn)
Thailand
207
Malaysia
Source: Thomson Reuters
Contact
Email: Tel: global.marketstructure@list.db.com
+852 2203 5710
5
Global Market Structure
Hong Kong
Deutsche Bank
Equities
Global Market Structure
Hong Kong Newsletter Issue 34, 2014
Hong Kong
Fig 1: Turnover Velocity
2012 Turnover
2013 Turnover
2014 Turnover
20%
18%
The SFC have released an annual report for 2013-14 that provides an
overview of the regulatory developments and achievements from the
last year whilst also setting out the strategy and priorities for the future.
14%
——Re-focus on conduct to ensure behaviours are consistent with longterm sustainability.
——Enhanced public disclosures (and increased use of review of such
announcements to identify questionable behaviour).
——Increased corporate governance engagement with companies.
——Encouraging shareholder engagement with the companies they
Turnover Velocity (%)
Key themes from the Chairman and CEO messages include:
16%
——Focus on more robust design and approval processes for new
products.
——Continuing to seek remedial redress for the investing public where
they have suffered from market misconduct.
——Collaboration with China (including the mutual stock market access
$100
$80
8%
automatically adopting US and European approaches).
To access the full report click here:
$60
6%
$40
4%
$20
2%
0%
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
$0
Source: Thomson Reuters
Fig 1. Despite the low volatility in the region, Hong Kong equities turnover is at par with
2013 level and well above 2012 turnover.
Fig 2: Equities(Cash), Futures and ETFs Monthly ADV
$10
EQUITY
FUTURES
80
ETFS
$8
60
$6
40
$4
20
$2
$0
project between Shanghai and Hong Kong).
——Fostering international regulatory collaboration (without necessarily
$120
10%
Equities & Futures (US$Billions)
cultures.
$140
12%
have invested in.
——More oversight of intermediaries to promote control and risk
$160
Turnover (Billions USD)
“Regulation for Quality Markets” - SFC annual report published
2012 Velocity
2013 Velocity
2014 Velocity
Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14
ETFs (US$ Millions)
Market Structure
0
Source: Thomson Reuters
Fig 2. ETFs turnover in Hong Kong is down nearly 50% versus last year. ETF industry is
Hong Kong is primarily concentrated on Hong Kong and mainland stocks,but given the
performance of Hong Kong and mainland stocks hasn’t been great so far this year the
investor confidence and consequently ETF volumes are on a decline.
http://www.sfc.hk/web/annualreport2013-14/html/index.html
Potential reduction in Hong Kong trading levy
Fig 3: YoY futures average daily turnover
The Securities and Futures (Levy) (Amendment) Order 2014 sets out a
proposal to reduce the Hong Kong trading levy by 10%. Such a change
would impact the current rates as follows:
$12,000
——Levy on security transactions reduced from 0.0030 % to 0.0027 %.
——Levy on futures contracts reduced from HK$0.60 to HK$0.54.
——Levy on Mini-Hang Seng Index Futures contracts, Mini-Hang Seng
$6,000
It is estimated that these changes would decrease market transaction
costs by approximately HK$105 million per annum. If approved by the
Legislative Council the change would take effect from 1st November.
$8,000
$4,000
$2,000
Millions
Index Options contracts, Mini-Hang Seng China Enterprises Index
Futures contracts, a stock futures contract or an option for such a
contract reduced from HK$0.12 to HK$0.108.
HSI Fut
$10,000
$0
July-13
Aug-13 Sep-13
Oct-13 Nov-13
Dec-13 Jan-14
Feb-14
Mar-14 Apr-14 May-14 Jun-14
Source: Thomson Reuters
Fig 3. Trading volumes in futures also come off as markets slows down, futures trading
down compared to same period last year as well.
Fig 4: Lit versus Dark Market Share
HKG
The Hong Kong Monetary Authority (“HKMA”) Chief Executive Norman
Chan Tak-lam has reiterated his ongoing support for the Linked
Exchange Rate System (“LERS”) under which the HKD is pegged to the
USD. His comments appeared in a HKMA letter reflecting on his first 5
year term as Chief Executive. Norman Chan Tak-lam commented that
“The HKMA and the HKSAR Government’s commitment to maintaining
Apr-12
Jul-12
Source: Thomson Reuters
6
Dark
%
HKMA pledges continuing support for USD peg
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Jan-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14 Jun-14
Global Market Structure
Hong Kong
the LERS is clear and unwavering. Despite its imperfections, the
LERS is still the most suitable regime for Hong Kong after thorough
consideration of all the related factors and analysis”.
Fig 5: Average Index Spread and Trade Sizes
Avg Trade Size
Average Spread (BPS)
8000
7000
12
6000
10
5000
8
4000
Avg Spread (BPS)
14
6
3000
4
2000
2
1000
0
Apr-14
May-14
Jun-14
0
Avg Trade Size
16
These comments came a week after the HKMA’s first foreign exchange
market intervention since Q4 of 2012. The HKMA were obliged to
defend the peg by buying US$2.1 billion and it is expected that further
actions will be required going forwards as upward pressure builds on
the HKD as a result from inflows into Hong Kong’s equity and bond
markets and renewed optimism towards the Chinese equity market.
To read the whole HKMA letter click here:
Source: Thomson Reuters
Fig 5. Index spread and trade sizes in Hong Kong are nearly unchanged in the year so far
and YoY.
http://www.hkma.gov.hk/eng/key-information/insight/20140707.shtml
Fig 6: MoM Index Price Change
The Securities and Futures and Companies Legislation (Uncertified
Securities Market Amendment) Bill 2014 sets out the proposal to
introduce a paperless securities market regime.
%
6
5
4
3
2
1
0
-1
-2
-3
-4
-5
-6
Hong Kong planning to introduce paperless securities regime
The key points of the Bill include:
——Investors would be able to choose to hold and transfer securities
without paper documentation.
——Investors would be able to register securities in their own names
FY2013
Jan-14
Feb-14
Mar-14
Apr-14
May-14
(therefore enjoying full legal ownership).
Jun-14
——The Bill would introduce the broad framework into the Securities
Source: Thomson Reuters
Fig 6. Hong Kong index gained 5% in May-June combined as quarterly results for Hong
Kong and China turned out better than expected estimates.
and Futures Ordinance (“SFO”) and the Companies Ordinance (with
the operational details contained in some new subsidiary legislation
under the SFO).
——The scheme will fall under the oversight of the Securities and Futures
Commission (“SFC”).
——Initially only shares listed on (or to be listed on) the Hong Kong Stock
Exchange would be covered but it is expected that the scheme
would subsequently be expanded to cover other Hong Kong Stock
Exchange products (e.g. debentures and unit trusts).
Fig 7: Large and Mid Cap Index movers
Market Movers - Large Cap
Stock
Volume traded
(US$)
20D/
100D
ADT
Stock
Price
Return
Volume traded
(US$)
20D/
100D
ADT
——There will be a transition period where both the paper-based and
7%
2,364,072,000
0.88
0151.HK
4%
482,780,000
1.14
6%
5,291,128,000
0.99
0027.HK
3%
1,960,434,000
0.88
5%
1,530,668,000
0.74
0762.HK
3%
787,352,000
0.77
5%
1,583,292,000
0.74
0004.HK
2%
740,834,300
0.85
4%
1,513,736,000
0.70
0019.HK
1%
281,780,100
0.74
-1%
1,411,359,000
0.66
0012.HK
-2%
436,589,100
1.15
-2%
1,010,038,000
0.78
0011.HK
-2%
328,400,100
0.88
Professor K C Chan (Secretary for Financial Services and the Treasury)
announced that “it marks an important step forward for Hong Kong
moving towards an uncertified securities market regime which will
increase overall market efficiency, improve investor protection and
enhance Hong Kong’s competitiveness”.
-2%
2,468,446,000
0.69
2388.HK
-2%
601,354,000
0.92
-4%
2,230,521,000
0.79
0322.HK
-2%
177,257,400
0.79
-5%
1,445,428,000
0.93
0688.HK
-4%
1,309,614,000
0.92
Fig 6: MoM Index Price Change
6
1928.HK
5
0700.HK
4
3
0857.HK
2
0883.HK
1
0386.HK
0
-1
1299.HK
-2
0001.HK
-3
-4
0941.HK
-5
0005.HK
%
-6
2628.HK
Market Movers - Mid Cap
Price
Return
FY2013
Jan-14
Feb-14
Mar-14
Apr-14
May-14
uncertified systems operate in parallel.
The full Bill is available under the following link:
www.fstb.gov.hk/fsb/topical/usma.htm
Jun-14
2013 Fund Management Activities Survey results released
Source: Thomson Reuters
Fig 7. Tech Stock 700 HK (Tencent Holdings) with 8.9% weight in HSI index, posted
better than expected results. Stock gained 5.8% and index level rose to its highest
since April.
Fig 8: Avg Monthly IPO size and Exchange Market Cap
Average Monthly IPO Volume (US$m)
4,000
Exchange Market Cap (US$Trillion)
3,500
78
2,500
76
2,000
74
1,500
72
1,000
500
70
0
68
FY 13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Market Cap (US$ trillion)
80
3,000
IPO Volume (US$ m)
82
Source: Dealogic
Fig 8. Hong Kong IPO market picked up, with 30 new listings in months of May-June,
together adding US$ 4.5Bn to exchange market cap.
Since 1999 the SFC have conducted an annual Fund Management
Activities Survey (“FMAS”) in order to help collect important data for
operations and strategy planning. 555 firms voluntarily contributed to
the 2013 survey, the results of which have now been released.
The highlight finding was that the combined fund management
business reached a record high of HK$6,007 billion at the end of 2013
representing a 27.2% increase on the previous year. Mrs Alexa Lam
(SFC Deputy Chief Executive and Executive Director of Investment
Products, International and China) commented that “the record
high assets under management of our combined fund management
business at the end of 2013 ranks us among the top asset management
hubs in Asia ex Japan”.
The full report is available for review under the following link:
http://www.sfc.hk/web/EN/files/ER/Reports/2013%20FMAS%20Report.pdf
Hong Kong and Malaysia host Islamic fund seminar
On 17th June the SFC and the Securities Commission Malaysia (“SC”)
together held a seminar to discuss the opportunity for Hong Kong to
become a platform for Islamic fund products.
7
Global Market Structure
Hong Kong
——Investors may exercise their A Share voting rights by giving
Fig 9: IPO Sector Distribution
Jan-May 2014
Utility & Energy
Jun 2014
TMT
REGAL
M&M
instructions through CCASS participants using the existing Voting
Instruction Maintenance function. The exchange will confirm
whether they are able to submit a split vote to the Shanghai Stock
Exchange in due course.
——No outstanding Continuous Net Settlement short position is
Industrials
permitted or all corresponding standing instructions will be put onhold for the Exchange Participant.
Healthcare
FIG
Consumer
——ChinaClear will be treated as another clearing participant (however
Construction/Building
they will not have access to the guarantee fund).
Auto/Truck
Fig 4: IPO Performance
0%
20%
40%
60%
80%
100%
The full briefing paper is available here:
Source: Dealogic
http://www.hkex.com.hk/eng/market/sec_tradinfra/chinaconnect/Documents/
Water%20EP-CP%20briefing%202nd%20round%20ppt%20(full%20pack)_vF5.
pdf
Fig 10: IPO Performance
# of IPO
1 day
1 month
Current
Mar-14
4
-8%
-12%
-17%
Apr-14
3
-1%
-2%
23%
May-14
6
3%
7%
7%
Jun-14
25
-2%
0%
4%
Source: Dealogic
Mrs Alexa Lam (SFC Deputy Chief Executive Officer and Executive
Director of Investment Products, International and China) said “our
Source: Thomson
Reuters
robust
infrastructure
and world class reputation as well as first mover
advantage in RMB finance and products, all combine to make Hong
Kong an excellent platform to further develop Islamic products for sale
to investors domestic and internationally”.
SFC publish first corporate regulation newsletter
The first edition of the Corporate Regulation Newsletter has now been
published by the SFC. The SFC Chief Executive Officer Ashley Alder
said that “this newsletter is part of ongoing efforts to improve corporate
behaviour in general”.
Note that the HKEx website now has a dedicated Stock Connect section
that can be accessed through the link below. All related materials can
be accessed and reviewed here including:
——Information Books for both Investors and Market Participants.
——Technical system specification requirements.
——Educational videos.
——Presentation materials used for various briefing sessions.
——FAQ papers.
——Copies of news releases and circulars.
http://www.hkex.com.hk/eng/market/sec_tradinfra/chinaconnect/chinaconnect.htm
Shanghai-Hong Kong Connect Gateway offline simulator
package available for download
EP’s are now able to download the China Connect Open Gateway
(“CCOG”) Offline Simulator Package by following the instructions in the
HKEx circular below:
http://www.hkex.com.hk/eng/market/partcir/sehk/2014/Documents/CT02314E.pdf
The first newsletter focuses on corporate behaviour, disclosures and
listing applications and is available on the SFC website under the
following link:
The package is intended to help EP’s perform system testing in
preparation for the forthcoming Shanghai – Hong Kong Stock mutual
market access.
http://www.sfc.hk/web/files/ER/Reports/CRN/CR_20140704.pdf
HKEx launches the Orion Central Gateway
Interested parties can receive this newsletter automatically going
forwards by opting in on the subscribe section of the SFC website here:
On 27th June the HKEx announced the launch of the Orion Central
Gateway which acts as a new access point for Stock Exchange
Participants (“EPs”) to connect to the HKEx’s securities trading system.
54 EPs are already connected via the OCG but the existing Open
Gateway connectivity will continue in parallel allowing other EPs to
migrate in the future.
https://www.sfc.hk/CampaignHelper/campaignForm.jsp?lang=EN
Venue News
HKEx release more details on the Shanghai – Hong Kong Stock
Connect
In July the HKEx published a Participant Briefing paper containing
further updates on the Stock Connect project. Importantly, Market
Participants are required to have completed their end to end testing and
confirm their readiness to the HKEx by the deadline of 15th August.
Other key points from the paper include:
——There will be no bulk cancel functionality therefore orders will need
to be cancelled individually as required.
——Existing 30% aggregate foreign ownership limits will apply to A
Shares. The HKEx will cease taking orders when 28% foreign
ownership is reached and will only start re-accepting orders once the
level subsequently falls back below 26%. If a Stock Connect order
results in the 30% limit being breached then the HKEx will require the
relevant EP to follow a force sell down process.
——An additional morning settlement session will be created allowing
the pre delivery check to be performed pre open on T rather than
on T-1 to make it easier for custodians and brokers to meet the
requirement of transferring A Shares to the selling broker.
——A new tiered CCASS portfolio fee will be introduced.
8
The OCG connectivity has several advantages including:
——New architecture eliminates the Exchange’s footprint within EPs’
premises.
——Introduces an industry standard FIX interface.
——Reduced latency.
——Increased resiliency.
Charles Li, HKEx CEO, said that “the successful launch of the OCG
was another big step for our Orion programme and we appreciate the
preparation work of the EPs that were involved in the roll out. We will
continue to invest in technology for our markets to ensure they remain
attractive”.
HKEx to consider special listing boards
HKEx Chairman Chow Chung-kong confirmed that they hope to set up
a consultation to consider specialised listing boards during the second
half of 2014. He said “Hong Kong is a financial hub. We have to be very
aware of market changes and demands. We have a very open attitude
as to what to do in the future”.
These comments follow a recent suggestion from the Financial Services
Development Council that the HKEx and regulators should set up
Global Market Structure
Hong Kong
several new boards to help increase the attractiveness of Hong Kong as
a venue for potential listing candidates.
2014 H-share listings may break 2006 record
Long queue times and listing quotas on the Shanghai and Shenzhen
exchanges are leading some Chinese firms to pursue H-share listings
in Hong Kong instead. The annual record for the number of H-share
listings was set in 2006 with 23 but in the first half of 2014 there have
already been 13 (raising HK$31 billion) with at least another 10 currently
in the pipeline for the remainder of the year according to PWC capital
markets group partner Edmond Chan. This represents a significant
increase on the 2013 total of 3.
HKEx publishes Consultation Paper on Corporate Governance
On 20th June the Stock Exchange of Hong Kong Limited (a subsidiary
of HKEx) published a consultation paper on proposed changes to the
internal controls section of their Corporate Governance Code and
Corporate Governance Report (Appendix 14 and Appendix 15 of the
Main Board listing rules and the Growth Enterprise Market Listing Rules
respectively).
SGX creates liquidity hub in Hong Kong
On July 8th it was announced that the first connectivity had been
established as the Singapore Exchange (“SGX”) opened a Hong Kong
office and created a presence in the Hong Kong data centre. SGX and
Hong Kong Exchanges and Clearing first signed a MoU in December
2013 with the intention of increasing cooperation and connectivity
between the two financial centres.
This new liquidity hub will allow Hong Kong brokers to have direct
electronic access to trade derivative products via Singaporean based
SGX member brokers. Five firms were signed up at the time of the
announcement although it is hoped that hundreds more will follow.
Charles Li, HKEx Chief Executive said “we welcome SGX to the hosting
services ecosystem at our Data Centre. We will continue to explore
ways we can cooperate in areas of common interest”.
The key changes contained in the consultation paper include:
——Highlighting that internal controls are an integral part of risk
management.
——Defining risk management and internal control roles and
responsibilities for the board, committees and management.
——Enhanced disclosure recommendations for internal control policies,
processes and annual control reviews.
——Internal audit recommendations.
David Graham, HKEx’s Chief Regulatory Officer and Head of Listing,
said that “this consultation paper is part of our ongoing efforts to
ensure that the Code remains up-to-date and reflects international best
practice”.
The full consultation paper can be accessed at the following link:
http://www.hkex.com.hk/eng/newsconsul/mktconsul/Documents/cp201406.pdf
Interested parties are invited to respond to the consultation paper before
the 31st August deadline via the questionnaire contained in the below
news release:
http://www.hkex.com.hk/eng/newsconsul/hkexnews/2014/140620news.htm
HKFE revises minimum margins for Futures contracts
On 24th June the Hong Kong Futures Exchange Limited (“HKFE”)
updated the minimum margins that EPs collect from their clients on
futures contracts. The revised minimum margin levels came into effect
on 2nd July and are available in the following link:
http://www.hkex.com.hk/eng/market/rm/rm_dcrm/riskdata/margin_hkcc/
fomargin.htm
The HKFE stressed that these are minimum levels and that the actual
margin collected by EPs should be set according to their clients
particular circumstances.
HKEx extend after hours futures trading
From 3rd November the After-hours Futures Trading (“AHFT”) session
will be extended as shown in the table below.
Current Arrangement Arrangement from
3 November 2014
AHFT Trading
Session
5:00 pm - 11:00 pm
5:00 pm - 11:45 pm
T+1 Clearing Session
5:00 pm - 11:45 pm
5:00 pm - 12:30 am
This change is intended to increase the business hours overlap with
other key international markets. EPs will be able to test their readiness
for this change in a forthcoming market simulation that the HKEx will
arrange.
Sources:
http://www.hkex.com.hk/
http://www.scmp.com/
http://www.sfc.hk/
http://www.hedgeweek.com/
http://www.info.gov.hk/
http://www.ejinsight.com/
http://www.fstb.gov.hk/
http://www.cnbc.com/
http://www.hkma.gov.hk/
Contact
Email: Tel: global.marketstructure@list.db.com
+852 2203 5710
9
Global Market Structure
China
Deutsche Bank
Equities
Global Market Structure
China Newsletter Issue 34, 2014
China
Fig 1: Turnover Velocity
160%
The following new QFII licenses received quota in May and June:
May:
1. Greystone Managed Investments Inc., US$100 million
2. Cascade Investment, L.L.C., US$200 million
Turnover Velocity (%)
QFII and RQFII updates
6. Nordea Investment Management AB, US$100 million
7. HFT Investment Management (HK) Limited, US$100 million
June:
1. Oppenheimer Funds, Inc., US$200 million
2. Overlook Investments Limited, US$100 million
3. Taishin International Bank Co., Ltd., US$100 million
In addition, the following quota was granted to existing QFIIs:
May:
1. Abu Dhabi Investment Authority, US$500 million
June:
1. Platinum Investment Company Limited, US$150 million
2. Aberdeen Asset Management Asia Limited, US$55 million
$400
$350
120%
$300
100%
$250
80%
$200
60%
$150
40%
$100
20%
$50
0%
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
$0
Dec
Source: Thomson Reuters
Fig 1. Volatility in China hit record low in May as investor interest in equities and related
products declined. Trading volumes slow down in equities, futures and ETFs.
Fig 2: Equities(Cash), Futures and ETFs Monthly ADV
$100
Equities & Futures (US$Billions)
5. Matthews International Capital Management, L.L.C., US$100 million
$450
140%
3. Hyundai Securities Co., Ltd., US$100 million
4. NTUC Income Insurance Co-operative Limited, US$100 million
2012 Velocity
2013 Velocity
2014 Velocity
Turnover (Billions USD)
2012 Turnover
2013 Turnover
2014 Turnover
180%
EQUITY
FUTURES
250
ETFS
$80
200
$60
150
$40
100
$20
50
$0
Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14
ETFs (US$ Millions)
Market Structure
0
Source: Thomson Reuters
Fig 2. Domestic futures volumes also decline as equities volume keeps low. Futures
turnover is down 38% since the beginning of this year.
Fig 3: YoY futures average daily turnover
CSI 300 Fut
$100,000
3. Neuberger Berman Europe Limited, US$75 million
$80,000
4.Prudential Financial Securities Investment Trust Enterprise, US$50
million
5. William Blair & Company, L.L.C., US$100 million
$60,000
HSCEI Futures
SGX FTSE China A50
$40,000
Millions
$20,000
Separately, SAFE granted new RQFIIs the following quota:
$0
July-13
Aug-13 Sep-13
Oct-13 Nov-13
Dec-13 Jan-14
Feb-14
Mar-14 Apr-14 May-14 Jun-14
Source: Thomson Reuters
May:
1. Cephei Capital Management (Hong Kong) Limited, RMB 1.3 billion
3.Schroder Investment Management (Hong Kong) Limited, RMB 1
billion
Fig 4: Average Index Spread and Trade Sizes
14
4. Macquarie Funds Management Hong Kong Limited, RMB 1 billion
1. Fullerton Fund Management, RMB 1.2 billion
2. Nikko Asset Management Asia, RMB 1 billion
3. CMS Asset Management (HK) Co., Limited, RMB 1 billion
4. Yue Xiu Asset Management Limited, RMB 1 billion
5. Pureheart Capital Asia, RMB 0.2 billion
10
Average Spread (BPS)
6000
5000
10
Avg Spread (BPS)
June:
Avg Trade Size
12
4000
8
3000
6
2000
4
1000
2
0
Jan-14
Source: Thomson Reuters
May-14
Jun-14
0
Avg Trade Size
2. BlackRock Asset Management North Asia Limited, RMB 2 billion
Global Market Structure
China
1
0
-1
-2
-3
-4
-5
-6
-7
-8
% -9
Cumulative QFII licenses with quota
60
250
Cumulative Investment Quota approved
50
200
40
150
30
100
20
50
10
0
0
Jan-14
Feb-14
Mar-14
Apr-14
May-14
2003
Jun-14
Fig 5. China’s benchmark index remained within a small volatility range for most of the
period, closing at +/- 1% from previous open each day.
2007
2008
2009
Average Monthly IPO Volume (US$m)
Market Movers - Mid Cap
20D/
100D
ADT
Stock
Price
Return
Volume traded
(US$)
20D/
100D
ADT
2010
2011
2012
2013
2014
YTD
600372.SS 16%
505,421,500
0.75
002081.SZ 24%
808,266,500
1.32
600383.SS 14%
373,258,700
0.33
600893.SS 19%
913,746,800
0.97
601989.SS 10%
1,029,998,000
1.00
000768.SZ 16%
601,578,700
1.37
000333.SZ 10%
997,493,000
0.83
002450.SZ 14%
535,371,200
0.83
000858.SZ 7%
546,631,700
0.51
002292.SZ 13%
525,087,000
0.82
600309.SS -6%
390,650,000
0.83
601117.SS -7%
310,650,500
0.62
002415.SZ -7%
750,870,700
0.92
000413.SZ -7%
415,782,900
1.00
000538.SZ -8%
802,762,300
1.05
000024.SZ -8%
644,054,700
0.70
601633.SS -10%
394,862,200
0.72
002146.SZ -9%
556,236,800
0.54
000001.SZ -14%
1,499,451,000
0.90
600827.SS -14%
598,587,700
0.66
Source: Dealogic
Fig 6. Biggest gainers in the month of June were Industrials stocks that posted better
than expected Q2 results.
Exchange Market Cap (US$Trillion)
6,000
18.3
5,000
18.2
18.1
4,000
IPO Volume (US$ m)
Market Movers - Large Cap
Volume traded
(US$)
2006
Fig 7: Avg Monthly IPO size and Exchange Market Cap
Fig 6: Large and Mid Cap Index movers
Price
Return
2005
Source: Deutsche Bank, CSRC, SAFE
Source: Thomson Reuters
Fig 4: IPO Performance
2004
18
3,000
17.9
2,000
17.8
1,000
0
17.7
FY 13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
17.6
Market Cap (US$ trillion)
FY2013
Stock
300
US$ bn
Cumulative QFII Licenses and Quota Granted
Fig 5: MoM Index Price Change
Source: Dealogic
Fig7. Mainland China IPO market resumed after 4 month halt. 9 new listings took place
in the month of June. CSRC said it is planning 100 new listings in second half of this year.
Fig 8: IPO Sector Distribution
Jan-May 2014
Utility & Energy
Jun 2014
TMT
M&M
Industrials
The following was granted to existing RQFIIs:
May:
1. CSOP Asset Management Limited, RMB 2 billion
2. Harvest Global Investments Limited, RMB 1 billion
3. HFT Investment Management (HK) Co., Ltd., RMB 1.5 billion
4. E Fund Management (HK) Co., Limited, RMB 500 million
5. GF International Investment Management Limited, RMB 1.5 billion
6.LFM Global Investment (Hong Kong) Company Limited, RMB 500
million
7. Everbright Securities Financial Holding Co., Ltd., RMB 800 million
8. Guotai Junan Financial Holdings Ltd., RMB 1 billion
9. Guoyuan Securities (HK) Co., Ltd., RMB 1 billion
Healthcare
Consumer
Auto/Truck
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Source: Dealogic
New “negative list” released for Shanghai FTZ
On 1st July the Shanghai Municipal People’s Government issued a
revised negative list. The negative list was first published in 2013 and
contains industry sectors which are subject to foreign investment
restrictions or prohibitions. Therefore any sector not on the list is open
to foreign investment and such investments have a simplified filing
procedure with no requirement for government approval.
12.China Life Franklin Asset Mgt. Co. Ltd., RMB 3 billion
51 sectors have been removed completely from the list (though a
significant number of these relate to sectors being combined and
regrouped). Sectors where foreign investment restrictions have been
removed include:
13.China Everbright Assets Management Limited, RMB 1.2 billion
——Development of tracts of land.
June:
——Operation of premises to provide internet access.
10.China Investment Securities (HK), RMB 300 million
11.Taikang Asset Management (Hong Kong) Limited, RMB 1 billion
1. ICBC Credit Suisse Asset Management (International) Co., Limited,
RMB 2 billion
——Railway cargo transport companies.
2.UBS SDIC Asset Management (Hong Kong) Company Limited, RMB
1 billion
——Cotton processing.
3. CITIC Securities International Company Limited, RMB 0.5 billion
——Paper pulp and paper manufacturing.
4. Guoyuan Securities (HK) Co., Ltd., RMB 1 billion
5.China Orient International Asset Management Limited, RMB 1.5
billion
6. SinoPac Asset Management (Asia) Ltd., RMB 0.5 billion
7.China Securities (International) Finance Holding Company Limited,
RMB 1.2 billion
——Production of Benzedrine, dyes and coatings.
——Production of chemical medicines.
——Smelting of non-ferrous metals.
——Wholesale, retail and distribution of vegetable oil and sugar
11
Global Market Structure
China
Although these changes continue the trend of further opening up the
Shanghai FTZ they were not as substantive as some foreign investors
had expected.
Korea and Germany join RQFII scheme
In July the overseas expansion of the RQFII scheme continued as Korea
and Germany were each granted RMB 80 billion of quota. The China
Securities Regulatory Commission (“CSRC”) confirmed that as at June
there were 84 overseas financial institutions that have been granted an
aggregate RQFII quota of RMB 250 billion.
China and Korea also agreed to create a direct trading mechanism
between RMB and the Won (eliminating the intermediate need to
exchange the currencies into USD) . Bank of Communications has been
appointed as a clearing bank for RMB business in Seoul.
QDII scheme hits 3 year low
The Qualified Domestic Institutional Investor scheme (“QDII”) allows
Chinese to invest in overseas equities and fixed income products and
forms part of China’s efforts to create an efficient mechanism for twoway cross-border capital flows. However at the end of June only RMB
52 billion was held in QDII funds representing the lowest level since
2011.
Stefano Chao at AZ Investment Management suggests that the QDII
scheme suffered from unfortunate timing. “QDII is very unfortunate
because it was introduced in 2007, when stock markets were at their
peak. The financial crisis the year after led to massive losses, and
since then the QDII has had a bad reputation in Chinese households”.
By contrast funds have flowed in the opposite direction from overseas
investors into China at a much faster rate.
Asset management industry reform guidelines announced
by CSRC
China summer rally
Following the trading slow down post Chinese new year and holiday
season, China benchmark index has rallied over 7% since beginning
of July over growth signals from positive Q2 GDP numbers. Q2 GDP
climbed 7.5% versus 7.4% in Q1. Along with GDP, China July HSBC
flash PMI rose 3% to 52 (the highest reading in the past 18 months)
which helped boost optimism in the China stock market. Index gains
were backed with volumes, as trading volumes also jumped 46% in last
3 weeks of July.
Venue News
More details released for the Shanghai – Hong Kong Stock
Connect
See the Hong Kong section for some further updates on the Shanghai –
Hong Kong Stock Connect scheme.
Personnel News
Mao Zhirong named as CEO of CESC
With effect from 1st August Mao Zhirong will replace Bryan Chan
as Chief Executive Officer of China Exchanges Services Company
(“CESC”). Mr Mao is currently a director at CESC and also acts as the
HKEx’s head of Mainland development.
CESC also announced that Sanly Ho (currently head of derivatives
trading at HKEx) will join as a director of CESC.
In June the CSRC released a framework for asset management industry
reform. Several topics and issues are covered including:
——Foreign ownership limits (possibly allowing majority foreign
ownership or even total foreign ownership).
——Mutual market access (possibly to be expanded to other markets in
addition to Hong Kong).
——Long-term savings and pensions.
More specific details on the reform agenda and the priorities are
expected in the future.
RMB real time settlement launched in Australia
In July the real time RMB Settlement Service for RMB denominated
payments went live in Australia marking another step forward for the
internationalisation of the RMB. The service was a joint project between
the Bank of China (“BOC”) and Australian Securities Exchange (“ASX”)
and it utilises ASX’s Austraclear settlement system (with BOC acting as
the approved Foreign Currency Settlement Bank).
Previously RMB denominated cash records could only be represented
in Austraclear in AUD however they can now appear as RMB and
payments can be made between participants in real time. Such RMB
payments are not restricted to security transactions. Trade, investment
and other payments can also benefit from this service.
China and Switzerland sign bilateral swap agreement
On 21st July a bilateral swap agreement was announced by the central
banks of China and Switzerland. The deal allows the central banks to
purchase and repurchase RMB 150 billion (CHF 21 billion) and will help
to establish the RMB market in Switzerland. Furthermore, the Swiss
central bank was also granted a RMB 15 billion investment quota in the
Chinese interbank bond market.
12
Sources:
http://www.csrc.gov.cn/
http://www.asiaasset.com/
http://www.szse.cn
http://www.globaltimes.cn/
http://www.safe.gov.cn/
http://www.z-ben.com/
http://www.cesc.com/
http://www.lexology.com/
http://www.mayerbrown.com/
http://www.scmp.com/
Contact
Email: Tel: global.marketstructure@list.db.com
+852 2203 5710
Deutsche Bank
Equities
Global Market Structure
Taiwan
Global Market Structure
Taiwan Newsletter Issue 34, 2014
Taiwan
Fig 1: Turnover Velocity
100%
a trading member of a foreign futures exchange; and
——Overseas subsidiaries in which a securities firm or futures
commission merchant holds greater than 50 % of the shares and that
are approved by the local competent authority to operate a futures
brokerage business.
It is hoped that this will encourage more foreign firms to open omnibus
futures trading accounts.
Renminbi fund share class restrictions lifted by FSC
Local fund companies are now able to launch RMB share classes in funds
holding underlying assets that are mainly denominated in currencies
other than RMB. This came into effect on 1st July when the FSC lifted the
previous restriction whereby RMB denominated funds were required to
invest at least 60% of their assets in RM B denominated assets.
The previous restriction was intended to protect against liquidity
risks posed by large redemption requests however this risk has been
mitigated by the recent growth in the Taiwanese RMB asset pool and
local foreign currency market. (Local fund companies are now required
to disclose associated currency exchange costs and risks in relation to
these new funds).
$90
$80
$70
Turnover Velocity (%)
80%
$60
$50
60%
$40
40%
$30
$20
20%
0%
$10
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
$0
Dec
Source: Thomson Reuters
Fig 1.Taiwan’s turnover and turnover velocity is ahead of last year, as foreign investor
flock to Taiwan tech sector which is closely linked to growth in US and European
market. Global investors have added US$ 9.6Bn in the country so far this year compared
to US$ 2.7Bn for whole of 2013.
Fig 2: Equities(Cash), Futures and ETFs Monthly ADV
$8
Equities & Futures (US$Billions)
——Offshore foreign futures commission merchants who are qualified as
2012 Velocity
2013 Velocity
2014 Velocity
Turnover (Billions USD)
Opening omnibus futures trading accounts made easier for
foreign firms
At the end of May, the Securities and Futures Bureau (“SFB”) Financial
Supervisory Commission (“FSC”) expanded the scope of companies
that may open omnibus accounts. Previously offshore foreign futures
commission merchants who are qualified as a clearing member of a
foreign futures exchange could open an omnibus account. This has now
been expanded to cover:
2012 Turnover
2013 Turnover
2014 Turnover
120%
EQUITY
FUTURES
ETFS
50
40
$6
30
$4
20
$2
10
$0
ETFs (US$ Millions)
Market Structure
0
Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14
Source: Thomson Reuters
Fig 2. Taiwan ETFs demand still being driven by foreign investors, funds with electronics
and semiconductor companies exposure gained most.
Fig 3: YoY futures average daily turnover
$6,000
Taiex Fut
MSCI Taiwan
$5,000
Taiex Banks & Insu Fut
Taiex Electronics Fut
$4,000
Thomas Cheong (CEO and Executive Director at Manulife Asset
Management Taiwan) said “now it’s a mad rush to be the first one to
offer products with a renminbi-hedged share class in Taiwan”.
TFSR white paper on the financial services industry expected in
late July
The Board of Directors of the Taiwan Financial Services Roundtable
(“TFSR”) recently met to discuss a variety of proposals intended
to overhaul the Taiwanese financial sector and the results of these
discussions are expected to be published in a white paper on 18th
July. Consolidation of financial services firms and the opening up of
Taiwanese financial products are likely to be included.
$3,000
$2,000
Millions
At the end of May there were 27 RMB denominated funds in Taiwan
with RMB 4.82 billion of assets under management which is relatively
small in comparison to the RMB 290.08 billion of RMB deposits in
Taiwan. It is expected that the lifting of this restriction will lead to the
creation of more RMB denominated funds with wider diversification of
underlying assets thus providing more investment opportunities for the
significant and growing RMB deposit base.
$1,000
$0
July-13
Aug-13 Sep-13
Oct-13 Nov-13
Dec-13 Jan-14
Feb-14
Mar-14 Apr-14 May-14 Jun-14
Source: Thomson Reuters
Fig 3. Taiex’s electronics index is up 20% since beginning of this year with trading
volume up nearly 40%. Futures trading in Taiex’s electronics future are similarly trending
upwards.
Prior to the meeting, the TFSR Chairman Lee Sush-der also commented
that Taiwan’s equity market had benefitted from a significant reduction
in settlement defaults and instances of insider trading.
22 financial industry associations are collectively represented by the
TSFR and the objective of the TSFR is to help the Taiwan government
restructure and grow the financial services industry in Taiwan.
13
Global Market Structure
Taiwan
Venue News
Fig 4: Average Index Spread and Trade Sizes
45
Avg Trade Size
Average Spread (BPS)
7000
40
6000
30
5000
25
4000
20
3000
15
2000
10
1000
5
0
Relaxed day trading rules now in effect
Avg Trade Size
Avg Spread (BPS)
35
Jan-14
May-14
Jun-14
0
Source: Thomson Reuters
——The day trading can be completed either before markets close or
alternatively in after-hours trading.
12
10
——Brokers need to have access to sufficient inventories of the stocks
8
to cover the event of investors selling more stock than they have and
failing to repurchase on the same day.
6
4
2
0
——For this purpose brokers can utilise inventory from their own pool of
investors or borrow the stocks from willing lenders.
-2
-4
FY2013
Jan-14
Feb-14
Mar-14
Apr-14
May-14
——If investors are unable to complete the subsequent reversed
Jun-14
Source: Thomson Reuters
Fig 5. Taiwan’s benchmark TWSE Index is currently trading at its 6-year high level
following consistent gains all through this year
Market Movers - Large Cap
Market Movers - Mid Cap
Price
Return
Volume traded
(US$)
20D/
100D
ADT
Stock
Price
Return
Volume traded
(US$)
20D/
100D
ADT
39%
152,609,700
2.36
3645.TW
49%
88,502,600
2.43
24%
319,371,000
1.50
4106.TW
39%
123,249,900
3.48
23%
1,026,024,000
0.84
9944.TW
37%
76,820,510
1.51
21%
2,376,441,000
1.19
2910.TW
33%
565,565
1.57
19%
518,064,100
1.04
1533.TW
26%
285,709,400
1.89
-8%
18,784,910
0.67
3454.TW
-13%
68,061,490
0.77
-9%
72,595,340
0.73
3059.TW
-13%
101,900,100
0.77
-11%
37,585,320
0.75
2062.TW
-13%
88,954,460
1.18
-13%
121,248,100
2.67
8101.TW
-13%
36,172,300
-16%
276,026,600
-16%
56,655,100
Fig 6: MoM Index Price Change
FY2013
Jan-14
0.68
Feb-14
purchase then they can change their trading type from sell order
status to either short sale or borrow securities via the “Borrowed
Securities Due to Day Trade Scheme”.
——If investors do not borrow securities through this scheme on trade
date then the broker will arrange for a borrow on behalf of the
investor on T+1 by commissioning securities finance enterprises to
conduct competitive bid or negotiated SBL. (In the mean time, the
broker must buy back the shares on behalf of the clients on T+1 as
well, for returning the borrow on T+3).
Fig 6: Large and Mid Cap Index movers
6
6166.TW
5
2231.TW
4
3008.TW
3
2
3673.TW
1
2049.TW
0
-1
2511.TW
-2
1337.TW
-3
2520.TW
-4
-5
5522.TW
%
-6
2439.TW
same day. (Buying then selling a stock on the same day was already
allowed).
the FTSE TWSE Taiwan 50 Index, the FTSE TWSE Taiwan-Mid-Cap
100 Index and the GreTai 50 Index).
14
Stock
——Investors are now permitted to sell a stock and buy it back on the
——The new rule is effective from 30th June.
——200 selected Taiwanese stocks are eligible (being the constituents of
Fig 5: MoM Index Price Change
%
Further to the previously announced relaxation of the day trading
rules, sell-then-buy day trading has now started on the Taiwan Stock
Exchange (“TWSE”). Key points include:
3003.TW
Mar-14
Apr-14
May-14
——If the broker is unable to source sufficient stock borrow on T+1
then the TWSE or GreTai Securities Market (“GTSM”) will arrange a
borrow on behalf of the investor through the settlement driven SBL
system on T+2.
—— Sell then buy day trading (and the associated Borrow Securities Due
to Day Trade Scheme) will be suspended 5 business days ahead
of registration closing dates for affected stocks in order to avoid
dividend and rights assignment risks for investors who may fail to
complete reversed purchase trades.
0.80
The FSC forecast that this new rule may increase daily stock turnover by
between 3% and 5%.
0.60
Jun-14
Source: Thomson Reuters
See below link for the full TWSE press release:
http://www.twse.com.tw/en/about/press_room/tsec_news_detail.php?id=14472
Fig 8: IPO Sector Distribution
Jan-May 2014
IPO Volume (US$ m)
Exchange Market Cap (US$Trillion)
M&M
27.0
70
26.5
60
26.0
50
25.5
40
25.0
30
24.5
20
24.0
10
23.5
0
FY 13
Source: Dealogic
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Industrials
Market Cap (US$ trillion)
Average Monthly IPO Volume (US$m)
80
Consumer
Auto/Truck
Fig 4: IPO Performance
0%
20%
40%
60%
80%
100%
Source: Dealogic
23.0
Fig 9: IPO Performance
# of IPO
1 day
1 month
Current
Mar-14
1
26%
37%
59%
Apr-14
-
-
-
-
May-14
2
29%
31%
28%
Jun-14
1
12%
0%
1%
Source: Dealogic
14
Jun 2014
TMT
Fig 7: Avg Monthly IPO size and Exchange Market Cap
Global Market Structure
Taiwan
TAIFEX and EUREX create link
TAIEX options and futures are now available outside Taiwanese trading
hours thanks to a new link between the Taiwan Futures Exchange
(“TAIFEX”) and the Eurex Exchange. The linkage has been achieved
by listing new derivative contracts on Eurex where the underlying is the
corresponding contract on TAIFEX.
This provides international investors with the opportunity to trade TAIEX
futures and option contracts within European and U.S. trading hours.
Eurex described initial trading volumes as “promising”.
GTSM engages with Ireland
The GTSM joined the first Ireland-Taiwan Joint Business Council
Meeting in late May. The session was organised by the Chinese
International Economic Cooperation Association to allow both parties to
exchange ideas on opportunities to develop financial services in Taiwan.
GTSM Chairman Soushan Wu also represented the Taiwan BioIndustry
Organition when signing an MoU with PharmaChemical Ireland to
promote biotech industry development within both countries.
GTSM introduce new index linked to labour market
The GTSM have introduced a new index called the GreTai Labor
Employment 88 Index. The index is intended to enhance the
transparency of companies who hire more local employees and
encourage institutional investors to invest more heavily in them.
To be eligible for inclusion companies must pass certain deficit and
employee contribution (operating profit / number of employees)
tests. Then the companies are ranked based on the number of local
employees in the previous year with the top 88 being selected for
inclusion in the index.
The index constituents are refreshed annually in April while companies
with severe reductions in employee numbers or labour rights issues are
excluded.
Sources:
http://www.twse.com.tw/
http://www.etf.com/
http://www.gretai.org.tw/
http://www.ignitesasia.com/
http://www.eurexchange.com/
http://www.chinapost.com.tw/
http://www.taipeitimes.com/
Contact
Email: Tel: global.marketstructure@list.db.com
+852 2203 5710
15
Global Market Structure
Japan
Deutsche Bank
Equities
Global Market Structure
Japan Newsletter Issue 34, 2014
Japan
Fig 1: Turnover Velocity
300%
a. Strengthening corporate governance.
b. P
romotion of non-traditional funding options (e.g. asset-backed
lending).
2. Building medium to long term retail investment growth through
various measures including:
a. Increasing the quality and quantity of asset management firms.
b. D
iversifying the range of available products that are suitable for
retail investors through innovation.
c. Clarification of the fiduciary duties owed to retail investors by fund
managers.
3. Realising the growth potential of the Asia region by improving Asian
market functions and upgrading the Japanese financial infrastructure.
For example:
a. Support of the newly established Asian Financial Partnership
Centre (“AFPAC”) of the FSA and continued promotion of the Asian
Bond Markets Initiative (“ABMI”).
b. Enhanced cross-border settlement processes.
c. Development of accounting professionals with a focus on
international co-operation and networking.
4. Developing a highly skilled financial workforce. With more specific
targets including:
a. Fostering a better business and living environment for highly skilled
financial professionals.
b. Improve financial awareness across the general public with widely
available financial education.
c. More specialised finance and investment courses for graduates and
undergraduates.
d. Enhanced measures to promote female professionals and diversity.
See following link for the full paper:
$700
Turnover Velocity (%)
$600
$500
150%
$400
$300
100%
$200
50%
0%
$100
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
$0
Dec
Source: Thomson Reuters
Fig 1. June turnover volumes picked up in Japan relative to past months on back of
quarterly results. In overall market turnover, China is now ahead of Japan leading
APAC’s equity market share.
Fig 2: Equities(Cash), Futures and ETFs Monthly ADV
$35
EQUITY
140
ETFS
FUTURES
$30
120
$25
100
$20
80
$15
60
$10
40
$5
20
$0
Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14
0
Source: Thomson Reuters
Fig 2. Similar trends seen across equity products in Japan. Slight increase in turnover
over April as Japan reported highest jobs level in 22years and rest of the Asian markets
gained. Shinzo Abe’s economic reforms announcement 3rd Arrow is expected to bring
back the volumes in equities
Fig 3: YoY futures average daily turnover
$20,000
Nikkei225 Fut
Topix Fut
SGX Nikkei
$15,000
$10,000
$5,000
$0
July-13 Aug-13 Sep-13
Oct-13 Nov-13 Dec-13 Jan-14
Feb-14 Mar-14 Apr-14 May-14 Jun-14
Source: Thomson Reuters
Fig 3. Topix futures volume trading is down 14% since beginning of this year and 40%
versus same period last year
Fig 4: Market Share by Venue
TYO 0.46%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Jan-12
JNX 0.29%
CHJ 0.18%
FKA
%
http://www.fsa.go.jp/en/refer/councils/vitalizing/20140612/01.pdf
$800
200%
Equities & Futures (US$Billions)
1. Attract more medium to long term investment both locally and
internationally. Recommendations include:
$900
250%
Millions
The paper sets out specific recommendations under the following four
broad policy areas:
2012 Velocity
2013 Velocity
2014 Velocity
Turnover (Billions USD)
Panel for Vitalisating Financial and Capital Markets issues follow
up recommendations
The Financial Services Agency (“FSA”) and the Ministry of Finance
commissioned an expert panel to provide strategic advice on financial
and capital market policies. The panel’s original recommendations
were published at the end of 2013. Since then the panel have continued
their discussions culminating in the recently issued update paper called
“Follow-up and Further Recommendations for Vitalising Financial and
Capital Markets”.
2012 Turnover
2013 Turnover
2014 Turnover
350%
ETFs (US$ Millions)
Market Structure
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14 Jun-14
Source: Thomson Reuters
Fig 4. Chi-X and Japannext trading market share unchanged in Japan at 2% and 8%
respectively
16
Global Market Structure
Japan
Fig 9: IPO Sector Distribution
Fig 5: Average Index Spread and Trade Sizes
35
Avg Trade Size
Average Spread (BPS)
3000
30
2500
REGAL
2000
Industrials
20
1500
15
1000
10
500
5
0
Jan-14
May-14
Jun-14
0
Jun 2014
80%
100%
Healthcare
Avg Trade Size
Avg Spread (BPS)
25
Jan-May 2014
TMT
FIG
Consumer
Construction/
Building
FigAuto/Truck
4: IPO Performance
0%
20%
40%
60%
Source: Dealogic
Source: Thomson Reuters
Fig 5. Second round of tick reduction that will go live on July 22nd on all of Topix100
names is expected to bring tick sizes and spreads narrower for impacted stocks
Fig 10: IPO Performance
Fig 6: MoM Index Price Change
60
50
# of IPO
1 day
1 month
Mar-14
11
46%
38%
Current
54%
Apr-14
5
36%
49%
122%
May-14
1
5%
0%
-1%
Jun-14
8
54%
0%
100%
Source: Dealogic
40
30
FSA to change follow-on offering rules
20
10
Currently the Financial Instruments and Exchange Act requires there to
be seven days between launch and trade date for follow-on offerings.
The FSA are planning to change this requirement to allow same-day
pricing whilst also explicitly permitting pre-marketing.
Source: Thomson Reuters
0
% -10
FY2013
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Source: Thomson Reuters
Fig 6. Topix index gained ~5% in month of June as the country’s jobs availability
improved and corporate tax reductions and deregulation announcement by Shinzo Abe
are expected to support economic expansion.
The new rules would only be applicable to:
——Firms where the market capitalisation and the annual sales both
exceed ¥100 billion.
——Sales of common stock, investment securities (e.g. REITs) and share
acquisition rights.
Fig 7: Large and Mid Cap Index movers
Market Movers - Large Cap
Stock
Fig 6:
Price
Volume traded
MoMReturn
Index (US$)
Price Change
6
4516.T5
4
8515.T
3
8589.T2
4612.T1
0
5413.T-1
2501.T-2
3863.T-3
-4
3865.T-5
%
-6
3191.T
3880.T
The change is intended to make follow-on offerings more attractive to
Japanese companies by allowing them to better gauge upfront investor
appetite and by eliminating the downward share price risk inherent
in the existing seven day period. Furthermore the amendment would
more closely align the follow-on rules in Japan with those in other global
financial hubs.
Market Movers - Mid Cap
20D/
100D
ADT
Stock
Price
Return
Volume traded
(US$)
20D/
100D
ADT
49%
371,563,700
2.02
6331.T
98%
1,458,871,000
4.81
48%
11,038,470,000
2.00
4968.T
44%
22,485,870
2.45
32%
124,466,100
1.37
7844.T
40%
480,040,600
1.42
26%
534,785,500
1.16
6381.T
28%
17,778,110
1.60
26%
242,338,000
1.15
2695.T
28%
53,791,890
1.09
-7%
255,382,300
1.32
4651.T
-8%
427,882,600
1.06
-8%
383,085,500
1.19
2120.T
-8%
28,996,210
0.59
-10%
87,128,380
0.96
6751.T
-11%
39,328,950
1.02
-16%
114,711,200
0.35
5959.T
-12%
79,270,550
FY2013
-22%
Jan-14
282,514,200
Feb-14
3.17
Mar-14
6330.T
Apr-14
-13%
May-14
129,025,600
The FSA are expected to release further details in a public draft prior to
the changes coming into effect later this year.
FSA to establish a new team to supervise asset management
companies
1.77
The FSA are intending to create a new group to specifically supervise
asset management companies in Japan. The move to bolster oversight
of the asset management industry follows the 2012 AIJ Investment
Advisors case where over ¥100 billion of pension money was lost and
subsequently covered up.
Jun-14
1.52
Source: Thomson Reuters
Further announcements from the FSA are expected.
Japanese Pension Fund drives TOPIX increase
Fig 8: Avg Monthly IPO size and Exchange Market Cap
IPO Volume (US$ m)
4,500
Exchange Market
Cap (US$Trillion)
288
4,000
286
3,500
284
3,000
282
2,500
280
2,000
278
1,500
1,000
276
500
274
272
0
FY 13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Market Cap (US$ trillion)
Average Monthly IPO
Volume (US$m)
Jun-14
Source: Dealogic
Fig 8. 8 new IPOs took place in June, most in the Electronics sector. May had 2 real
estate sector IPO, Invesco Office of the two was a US$ 436Mn listing.
The Government Pension Investment Fund (“GPIF”) manages ¥128.6
trillion of assets (at the end of last year) on behalf of almost 70 million
people in Japan making it the world’s largest pension fund. Historically
the GPIF has invested conservatively with a 60% domestic bond
allocation. However it is anticipated that the asset allocation guidelines
will be amended during the third quarter of this year resulting in higher
allocations for equity securities.
For example the current target allocation for Japanese and foreign
stocks is 12% each however this is expected to increase to 17% each.
The foreign bond allocation would also increase and a new allocation
for infrastructure, private equity and real estate investments would be
created. Offsetting these increases would be a decrease from 60% to
40% in the domestic bond allocation.
17
Global Market Structure
Japan
The switch could result in an additional equity security investment of
¥3.6 trillion and the expectation of this injection of funds has had a
positive impact on the TOPIX. (The TOPIX rose 11% between 21st
May and 1st July).
See the following link for the TSE website summary of the tick size
reductions covering both the previous Phase I and the forthcoming
Phase II:
FAQ on the Financial Instruments and Exchange Act
Arrowhead Renewal to be launched in September 2015
The FSA have released a FAQ document on the Financial Instruments
and Exchange Act (the main statute codifying securities law and
regulating securities companies in Japan).
In June the TSE announced further details for the project to renew
Arrowhead (their cash market trading system). New trading rules and
user testing are expected in early 2015 with the project ultimately due
to go live on 24th September 2015.
The full FAQ can be found in the following link:
http://www.tse.or.jp/news/20/b7gje6000004313n-att/leaflet_english.pdf
http://www.fsa.go.jp/en/laws_regulations/faq_on_fiea.pdf
The project consists of three main pillars:
FSA release draft regulation consultation on margin
requirements for non-centrally cleared OTC derivatives
1. Improve reliability – intended to address increased risks from
electronic trading (including new hard limits, dummy symbols for
testing and updated rules for sequential trade quotes).
The Basel Committee and the International Organisation of Securities
Commissions (“IOSCO”) have agreed certain standards on margin
requirements for non-centrally cleared OTC derivatives. The FSA are
intending to implement the same standards in Japan by proposing
changes to the Cabinet Office Ordinance under the Financial
Instruments and Exchange Act and also to the Comprehensive
Guidelines for Supervision.
2. Improve convenience – introduction of new functionality (for
example kill switches and cancel on disconnect).
3. Improve capabilities – designed to achieve enhanced speed,
stability and capacity to address large volumes from macro political
/ economic events, natural disasters etc.
The deadline for public comments is 4th August and the new
regulations are expected to be implemented from 1st December.
See the following link for the full project details:
Currently the draft amendments are available in Japanese under the
following link:
SBI Japannext announce delay to expected system upgrade
http://www.fsa.go.jp/en/newsletter/weekly2014/104.html
The FSA and the Bank of Mongolia swap letters of cooperation
On 25th June the FSA exchanged letters of cooperation with the Bank
of Mongolia. Under the terms of the arrangement the two parties will
share their experience and expertise with the aim of developing their
respective legal and regulatory frameworks.
Venue News
Phase II of the TOPIX100 tick size reductions go live
The Tokyo Stock Exchange (“TSE”) has implemented Phase II of
it’s tick size reduction roll out with the inclusion of further stock
price bands. From the start date of 22nd July, the TSE expect these
reductions to result in both price improvement and reduced time to
execution for market participants.
Price
http://www.tse.or.jp/english/news/20/140606_a.html
In June Chuck Chon (SBI Japannext GTO) announced that the
expected Proprietary Trading System (“PTS”) upgrade to 40G
would be delayed after issues were identified during stress testing
procedures. Trading will continue on the 10G system until the
weaknesses have been addressed and further testing sessions have
been successfully completed.
TSE report on appointment of outside directors
The TSE released a preliminary report showing that there has been
a significant increase in TSE listed companies who appoint outside
directors. As at June 2014 over 74% of the 1st Section companies
had at least one outside director representing an almost 12% increase
on August 2013.
The full report is available in the following link:
http://www.tse.or.jp/english/news/09/20140617_a.html
Tick Size
TOPIX100 Constituents
Other Issues
Current
Phase II
(22-Jul-14)
Up to ¥1,000
¥1
¥0.1
¥1
More than ¥1,000
up to ¥3,000
¥1
¥0.5
¥1
More than ¥3,000
up to ¥5,000
¥1
¥0.5
¥5
Phase I of the TOPIX100 tick size reduction project was completed in
January. Deutsche Bank Analytics released a study considering the
impact of the Phase I roll out and they plan to update that to consider
Phase II once a reasonable sample set has been generated. To access
the Phase I study click here:
http://cbs.db.com/new/pdf/REALIZED_Impact_of_Tick_Size_Reductions.pdf
Sources:
http://www.tse.or.jp/
http://www.fsa.go.jp/
http://www.bloomberg.com
http://online.wsj.com/
Contact
Email: Tel: 18
http://asiaetrading.com/
http://www.ifrasia.com/
http://www.reuters.com/
global.marketstructure@list.db.com
+852 2203 5710
Deutsche Bank
Equities
Global Market Structure
India
Global Market Structure
India Newsletter Issue 34, 2014
India
Fig 1: Turnover Velocity
60%
——The calculation for distributions dividend tax (“DDT”) has been
adjusted. Previously, DDT was at 15% applied to the distribution,
that is the amount paid to shareholders. As an example, if the
payout was Rs85, the 15% would be applied to Rs85 or Rs 12.75.
Post amendment, DDT will now be applied on the gross amount of
dividend payable. So rather than paying 15% on the Rs 85, it will be
grossed up by Rs 15 making the gross amount on which the DDT is
calculated Rs 100. It has been estimated by Ernst and Young that this
could result in an increase of around 3% depending on the size of the
payout.
——A provision to tax forfeited advances for transfer of capital assets
has been introduced, whereby there will be a tax liability in cases
where monies are received as an advance or otherwise in the course
of negotiations for transfer of capital assets but the transaction does
not fructify or is forfeited.
——The FDI limit for the insurance sector is proposed to be raised to 49%
from 26% with full Indian management and control through the FIPB
route.
——Incentives have been proposed for Real Estate Investment Trusts
0%
SEBI has also released further clarifications and guidelines related to the
operationalisation of the FPI regime as on next page.
$10
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
$0
Dec
Source: Thomson Reuters
Fig 1. New government came to power in month of May and Indian economy
is soaring with optimism. Equities turnover has doubled over the same period
compared to 2 years.
Fig 2: Equities(Cash), Futures and ETFs Monthly ADV
$5
EQUITY
5
ETFS
FUTURES
$4
4
$3
3
$2
2
$1
1
$0
0
Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14
Feb-14 Mar-14 Apr-14 May-14 Jun-14
Source: Thomson Reuters
Fig 2. ETFs and Futures trading volumes picked up in month of June following
appointment of new RBI governor Raghuram Rajan (former economist at IMF). ETF
trading is up 30% YoY and futures volumes up over 50% yoy.
Fig 3: YoY futures average daily turnover
SGX Nifty
NSE Nifty Banks
NSE Nifty
$1,500
Millions
$500
$0
July-13 Aug-13 Sep-13
Oct-13 Nov-13 Dec-13 Jan-14
Feb-14 Mar-14 Apr-14 May-14 Jun-14
Source: Thomson Reuters
Fig 3.SGX Nifty Index futures achieved record breaking volumes for the month of May
following results on Election Day (May 28). Monthly total volumes reached an all-time
high of 1.79Mn contracts and US$25Bn in notional value.
Fig 4: Market Share by Venue
NSI 0.53%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Jan-12
BSE 0.53%
%
The Foreign Portfolio Investor (“FPI”) regime which seeks to consolidate
all routes of foreign investments into the country has come into effect
since 1st June 2014. SEBI approved Designated Depository Participants
(“DDPs”) have already commenced granting registration to new FPIs
and migration of older FIIs into FPIs.
$20
10%
$1,000
FPI regime commences; SEBI issues further guidelines and
clarifications
$30
20%
The FM also said that any legislation with retroactive provisions would
be considered very seriously in terms of its impact to the country’s
economy and investment environment.
http://indiabudget.nic.in/ub2014-15/bh/bh1.pdf
$50
$40
$2,000
http://indiabudget.nic.in/budget.asp
$60
30%
(REITS) including complete pass through for the purpose of taxation.
A modified REITS type structure for infrastructure projects has also
been proposed as the Infrastructure Investment Trusts (INVITS).
Details of the budget are available here:
$70
40%
Turnover Velocity (%)
term capital assets if the holding period is less than 36 months
(previously 12 months earlier). This will have an impact on tax
liabilities for both resident and non-resident investors.
$80
50%
Equities & Futures (US$Billions)
——It is proposed to treat unlisted securities (including shares) as short-
2012 Velocity
2013 Velocity
2014 Velocity
Turnover (Billions USD)
Highlights from the Indian Union Budget, 2014
The new Finance Minister of India, Mr. Arun Jaitley presented his
maiden union budget on 10th July. Below are the key highlights:
2012 Turnover
2013 Turnover
2014 Turnover
70%
ETFs (US$ Millions)
Market Structure
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14 Jun-14
Source: Thomson Reuters
Fig 4. BSE market shared gained 1% over NSE as volumes surged at both venues in
May June period.
19
Global Market Structure
India
Guidelines on Risk management framework for Foreign Portfolio
Investors
Fig 5: Average Index Spread and Trade Sizes
7
Avg Trade Size
Average Spread (BPS)
600
6
SEBI has provided the below guidelines to stock exchanges and clearing
corporations with regard to trading and risk management of FPI trades.
500
5
400
300
3
200
2
100
1
0
Avg Trade Size
Avg Spread (BPS)
4
Jan-14
May-14
Jun-14
0
——Margining of FPI trades in the Cash Market
——The trades of FPIs in Category I, II & III shall be margined on a T+1
basis.
——Trades of FPIs who are Corporate bodies, Individuals or Family
Source: Thomson Reuters
Fig 5. During the period of highest volatility leading up to Election Results, equity
spreads widened and trade sizes were larger than usual.
offices shall be margined on an upfront basis as per the existing
margining framework for the non-institutional trades.
——Position limits for FPIs in the Equity Derivatives Segment
——Category I & II FPIs shall have position limits as presently available
Fig 6: MoM Index Price Change
to FIIs. Category III FPIs shall have position limits as applicable to
the clients.
8
6
——Allocation of FPI trades
4
——Entities trading on behalf of FPIs shall provide all details of those
2
FPIs to the stock brokers.
0
——The stock broker further provides the stock exchanges with the
-2
details of such related FPIs.
% -4
FY2013
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
——Stock exchanges need to implement a suitable mechanism to
Source: Thomson Reuters
Fig 6. India’s two benchmark indices Nifty Index and Sensex Index are both at an all
time high since post election rally in May.
ensure that allocation of trade by a FPI is permitted only within
such related FPIs.
——Custodians / DDPs to provide details of all FPIs including the
categorisation of FPIs to Stock exchanges to enable them to
implement these provisions.
Fig 7: Large and Mid Cap Index movers
Market Movers - Large Cap
Stock
Price
Volume traded
SEBI has allowed FPIs to invest in non-convertible/redeemable
preference shares or debentures issued by Indian companies and listed
on recognised stock exchanges in India on a repatriation basis. FPIs will
also be allowed to participate in the currency derivatives segment of
recognised exchanges subject to certain conditions.
20D/
100D
ADT
Stock
Price
Return
Volume traded
(US$)
20D/
100D
ADT
870,821,300
0.86
GAIL.NS
19%
377,472,500
1.47
504,911,400
0.89
ASPN.NS
17%
236,202,400
1.38
1,252,552,000
1.18
BAJA.NS
17%
256,206,200
1.18
The SEBI circulars are available here - 330,634,500
0.94
TEML.NS
14%
525,136,300
0.83
1,412,438,000
1.11
PGRD.NS
11%
447,499,600
1.39
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1400154572524.pdf
1,361,022,000
0.79
NMDC.NS 4%
232,359,000
1.11
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1403003705859.pdf
999,409,100
1.26
AXBK.NS
2%
719,516,000
0.61
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1403267985398.pdf
557,060,500
0.96
BHEL.NS
1%
629,746,100
1.16
KTKM.NS
0%
249,396,500
0.97
389,506,900
May-14
0.84
Jun-14
Fig 6: MoMReturn
Index (US$)
Price Change
6
TCS.NS
15%
5
4
SUN.NS
15%
3
HDFC.NS 11%
2
WIPR.NS
9%
1
0
INFY.NS
9%
-1
ICBK.NS
-2%
-2
ITC.NS
-2%
-3
-4
NTPC.NS -2%
-5
RELI.NS
-6%
%
-6
BRTI.NS
-7%
FY2013
Market Movers - Mid Cap
1,325,811,000
669,763,300
Jan-14
0.99
1.03
Feb-14
MAHM.NS Apr-14
-7%
Mar-14
Source:
http://www.business-standard.com/article/news-cm/sebi-allows-investments-byfpis-in-non-convertible-redeemable-preference-shares-or-debentures-of-indiancompanies-114061900497_1.html
Source: Thomson Reuters
Fig 7. Bharti Airtel, dropped 7% as Credit Suisse downgraded the stock over strong
upcoming competition from Reliance’s 4G services product Reliance Jio Infocomm
due to be launched later this year.
http://www.business-standard.com/article/pti-stories/sebi-comes-out-with-riskmanagement-norms-for-fpis-114051501375_1.html
SEBI brings in multiple reforms to boost Primary Markets
SEBI after its board meeting on 19th June announced a number of
reforms as outlined below in a bid to spool up and revitalise the ailing
Primary Market.
Fig 8: Avg Monthly IPO size and Exchange Market Cap
Exchange Market
Cap (US$Trillion)
IPO Volume (US$ m)
25
80
20
60
15
40
10
20
5
0
0
FY 13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
——Minimum public shareholding for Public Sector Undertakings
100
(“PSUs”)
Market Cap (US$ trillion)
Average Monthly IPO
Volume (US$m)
30
Jun-14
Source: Dealogic
Fig 8. Few small new listings took place in India in months of May-June. Finance
sector was the common denominator in 2 of the 5 new listings.
20
——SEBI has proposed to increase the minimum public shareholding
requirements for PSUs to 25% to make the rules consistent across
the market. Earlier, the requirement for PSUs was 10%.
——SEBI has recommended to the Ministry of Finance to amend the
Securities Contracts (Regulation) Rules appropriately in order to
implement the new rule.
——PSUs will be given a time period of three years to comply with the
requirements.
Global Market Structure
India
Fig 9: IPO Sector Distribution
Jan-May 2014
TMT
Jun 2014
http://www.thehindubusinessline.com/markets/sebi-unveils-measures-torevitalise-primary-market/article6129803.ece
M&M
Industrials
SEBI to share KYC details with other financial regulators and
banks
FIG
Consumer
Construction/
Building
SEBI has directed the KRAs (KYC Registration Agencies) to share
the KYC information available with them with financial institutions
regulated by other regulators as well. This initiative will pave the way
to have a common KYC framework across the financial sector and
hugely benefit end users as they will not have to furnish the KYC
details multiple times when dealing with entities regulated by different
regulators.
FigAuto/Truck
4: IPO Performance
0%
Source:
http://zeenews.india.com/business/news/economy/sebi-proposal-can-help-govtget-rs-50k-cr-via-psu-stake-sale_100818.html
20%
40%
60%
80%
100%
120%
Source: Dealogic
Fig 10: IPO Performance
# of IPO
1 day
1 month
Mar-14
3
13%
19%
Current
11%
Apr-14
1
76%
179%
179%
May-14
4
0%
5%
-7%
Jun-14
1
0%
0%
0%
SEBI has also directed the DDPs to share KYC details of FPIs with banks
provided they have authorisation from the respective FPI. Both the DDP
and the recipient bank will also need to maintain records of all such
exchanges.
Source: Dealogic
——The Indian Government currently holds more than 75% stake in
about 30 PSUs. This initiative will enable the government to raise
up toReuters
INR 50K crore at current valuations if the stake in all those
Source: Thomson
PSUs is reduced to below 75%.
——Minimum offer to public criteria during IPOs
——The requirements pertaining to minimum offer to public have
been rationalised and made consistent irrespective of post issue
capitalisation. This will help mid-size companies (with post listing
capitalisation of <4000 crore) looking to raise funds.
——The new rules specify the requirement to be 25% of the post issue
market capitalisation or INR 400 Crore, whichever is lesser. Earlier
the requirement was 25% for companies with capitalisation <
4000 crore and 10% for those having capitalisation >= 4000 crore.
——In case the dilution remains less than 25% at the time of IPO,
minimum public shareholding of 25% needs to be achieved
within three years of listing.
Source:
http://www.thehindubusinessline.com/markets/sebi-board-approves-sharing-kycdetails-with-fin-regulators/article6130154.ece
http://www.business-standard.com/article/pti-stories/sebi-asks-depositoryparticipants-to-share-fpi-info-with-banks-114061600855_1.html
SEBI revises Securities Lending and Borrowing framework
SEBI announced several revisions to the Securities Lending and
Borrowing (“SLB”) framework easing the existing short selling
norms. Under the new rules, Clearing Members will not be required
to enter into agreement with clients for trading in the SLB segment.
Only the Authorised Intermediaries (“AIs”) will be required to execute
an agreement with Clearing Members for the purpose of facilitating
lending and borrowing of securities. In addition, the agreement
——Shall specify the rights, responsibilities and obligations of the parties
to the agreement.
——Shall include the basic conditions for lending and borrowing of
securities as prescribed under SLB framework.
——Expansion of framework for Offer for Sale (“OFS”) through stock
——Shall lay out the exact role of AIs/CMs vis-à-vis the clients in the
——The list of companies eligible to use OFS route has been expanded
Also, the AIs shall ensure that there shall not be any direct agreement
between the lender and the borrower.
exchange mechanism
to top 200 companies (from top 100 earlier) based on their market
capitalisation.
——Even non-promoter shareholders having stakes greater than 10%
will be eligible to utilise the OFS route to offload their stake.
——A minimum 10% of the issue size needs to be reserved for retail
investors. Issuers can also offer applicable discounts to retail
investors which is expected to improve retail participation.
——Increase in investment ceiling for anchor investors
——The investment limit for anchor investors has been doubled to
60% of the Institutional investments bucket from 30% earlier. (The
institutional bucket is 50% of the overall IPO size, therefore limit
for anchor investors has been raised to 30% of the overall IPO
effectively from 15% earlier)
——Pricing mechanism for preferential issues
——The regulator has also directed that the pricing of shares for
preferential issues and qualified institutional placements (“QIPs”)
should be based on VWAP instead of closing prices.
The SEBI press release can be accessed here:
http://www.sebi.gov.in/sebiweb/home/document_detail.jsp?link=http://www.sebi.
gov.in/cms/sebi_data/docfiles/28252_t.html
agreement.
The SEBI release can be accessed here:
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1401793069171.pdf
Source:
http://www.mydigitalfc.com/news/sebi-eases-short-selling-norms-123
SEBI moves to regulate Research Analysts
In a bid to safeguard investors from any manipulation by research
entities and to bring in enhanced transparency in their activities, SEBI
board has approved the draft regulations for the Research sector after
consultations with market participants and feedback received from
public. Below are the major requirements under the new regulations.
——All individual research analysts and entities engaging in issuing
research reports/analyses or making recommendations on securities
or IPOs (brokerage houses, merchant bankers, proxy advisors etc)
will be required to register with SEBI.
——SEBI has specified minimum qualification requirements relating to
experience, qualification, certification and capital adequacy in order
to be able to register as a research analyst.
——Complete disclosures including financial interests and receipt of
compensation have to be included in all research reports and made
in all public appearances by research analysts in order to provide
complete transparency on any conflicts of interest.
21
Global Market Structure
India
——Limitations on publication of research reports and restrictions on
public appearances have been prescribed.
——Limitations on trading by research analysts and restrictions on their
compensation have also been prescribed.
——Guidelines for code of conduct, general responsibility and
maintenance of records are clarified.
——Investment Advisers, Credit Rating Agencies, Portfolio Managers,
——An AIF shall not invest in units of another AIF unless it is fund of AIFs.
The SEBI release can be accessed here -
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1403173065618.pdf
Source:
http://www.thehindu.com/business/markets/sebi-revises-guidelines-foralternative-investment-funds/article6133349.ece
SEBI revises fees for all market participants and intermediaries
Asset Management Companies, fund managers of Alternative
Investment Funds or Venture Capital Funds have been exempted
from the requirements.
SEBI has announced revised fee structure applicable to market
intermediaries across all categories. The new structure comes into
effect immediately.
——Internal communications that are not given to current or prospective
——Annual regulatory fee for exchanges with turnover < INR 10 lakh
clients and periodic reports or other communications prepared for
unit holders of Mutual Fund or Alternative Investment Fund or clients
of Portfolio Managers and Investment Advisers are not included in
the definition of research report.
These regulations will come into force on the 19th day from the date of
their publication in the Official Gazette.
The SEBI circular can be accessed here:
http://www.sebi.gov.in/sebiweb/home/document_detail.jsp?link=http://www.sebi.
gov.in/cms/sebi_data/docfiles/28252_t.html
Source:
http://www.business-standard.com/article/markets/sebi-approves-norms-forresearch-analysts-114061900628_1.html
SEBI revises guidelines for Alternative Investment Funds
SEBI has released revised guidelines for Alternative Investment Funds
(“AIFs”) in order to increase transparency and improve governance.
Following are the major revisions.
——AIFs will need to add a disclosure on all applicable fees and charges
along with a tabular example as an annexure to the placement
memorandum.
——AIFs will need to disclose the “disciplinary history” of the fund, its
sponsor, manager, directors, partners, promoters and associates in
the placement memorandum.
——Details should include pending and past legal cases (where the
person has been found guilty), criminal or civil prosecution, disputes
and non-payment of statutory dues.
——Summarised reports will be acceptable for operational actions such
as administrative warnings/deficiency letters etc, however AIFs will
be required to furnish complete details within 30 days of receiving
any requests for details from investors.
——Existing AIFs should send the “disciplinary history” to their investors
within 30 days of this circular. A copy shall also be filed with SEBI at
least 7 days prior to sending the same to the investors.
——Any changes to the placement memorandum must be
crore is fixed at INR 1 crore. For exchanges having turnover > INR
10 lakh crore, the fees will be INR 1 crore plus 0.00006% on turnover
in excess of INR 10 lakh crore with a maximum cap at INR 20 crore.
——For mutual funds the annual fees is revised to 0.0015% of the
average assets under management (AAUM) of up to Rs 10,000 crore
and 0.0010% of AAUM thereafter. Minimum and maximum caps of
INR 2.5 lakh and INR 1 crore respectively are applicable.
——For filing of rights issue documents, the fee is revised to INR 50,000
for issue size of up to Rs 10 crore, and 0.05 % of the issue size for
issues over Rs 10 crore.
——Stock brokers would be charged a fee of Rs 20 per one crore of
turnover.
The SEBI release can be accessed here -
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1400841851911.pdf
Source:
http://www.business-standard.com/article/pti-stories/sebi-revises-fee-for-marketintermediaries-114052301432_1.html
Venue Updates
P-Note investments at 6-year high, indices reach all-time highs
Foreign portfolio investment into Indian securities through participatory
notes (“P-notes”) reached its highest levels in 6 years during May this
year when the total investments through this route reached Rs 2.12 lakh
crore (over US$35 billion).
Riding on the wave of optimism after the results of the general elections
were declared and Bhartiya Janta Party (“BJP”) came into power with
absolute majority, FII inflows into the local markets surged which lead
the benchmark indices BSE Sensex and NSE Nifty to breach their
previous highs. On 2nd July, the NSE Nifty reached a closing high of
7,725.1 while the BSE S&P Sensex closed a record high of 25,841.2
buoyed by hope on incentives expected in the new government’s first
budget.
communicated to all existing/committed investors within 7 days and
also notified to SEBI.
Source:
http://www.financialexpress.com/news/P-Notes-investment-hits-6-yr-high-at--35bn-in-May/1265082
——Investors should be provided with an “exit route” in cases where
http://www.deccanchronicle.com/140702/business-market/article/indian-stockshit-new-high-hopes-budget-reforms
there is a dissent related to any material changes to the placement
memorandum and all expenses for the entire process shall be borne
by the manager/sponsor.
——Criterion for Category III AIFs (trading with a view to generate short
term returns) to report their end-of-day leverage to the custodian has
been relaxed and the timeline for submissions has been extended to
end of next working day.
——All redemption requests should now be reported to SEBI within two
days of receiving such requests.
22
http://stream.wsj.com/story/markets/SS-2-5/SS-2-569192/
BSE targeting HFT firms after tech upgrade
The Bombay Stock Exchange (“BSE”) which upgraded its trading
platform for equities and derivatives with the technology solutions
provided by Eurex, is now looking to enroll several HFT and proprietary
trading firms to participate in the Indian markets using BSE’s upgraded
market connectivity software.
Global Market Structure
India
The fact that the regulator SEBI has eased certain regulations related to
registration of foreign investors before participating in the local markets
also makes it easier to approach and convince these investors.
“Previously, foreign institutional investors including HFT firms had to
register directly with SEBI, which took a long time and made many
of them trade on Indian products in other markets like Singapore and
Dubai. The regulatory change at the start of June establishes a foreign
portfolio investor regime that allows FIIs, Individuals, family offices
and HFT firms to register via their custodians, which will be a game
changer.” Ashish Chauhan, BSE CEO said.
Source:
http://www.efinancialnews.com/story/2014-07-01/bombay-stock-exchangetargets-high-frequency-trading-after-tech-revamp?mod=home-topmod=home-to
p&ea9c8a2de0ee111045601ab04d673622
BSE hit by another technical glitch
On 11th June, the BSE experienced a technical issue in its calculation
engine which resulted in all real-time data feeds from the bourse to
market participants to go blank for nearly an hour. Although it did not
halt the trading, investors had to rely on prices from NSE during the
outage. A similar issue had appeared in April as well.
Source:
http://timesofindia.indiatimes.com/business/india-business/Technical-glitch-hitsBombay-Stock-Exchange/articleshow/36383143.cms
NSE, BSE to transfer more stocks to restricted categories
The National Stock Exchange (“NSE”) and BSE through a series of
notifications have notified the lists of stocks that have been transferred
to the restricted (Trade-to-Trade) category where speculative trading
is not allowed and delivery of the shares is mandatory. The action has
been taken after these stocks were identified in surveillance reviews
conducted by the bourses as per directions from SEBI. NSE has moved
a total of 234 scrips to the ‘T’ category while BSE has transferred 298.
Source:
http://www.business-standard.com/article/pti-stories/bse-nse-to-shift-scrips-of85-cos-to-restricted-trade-from-fri-114061600913_1.html
http://articles.economictimes.indiatimes.com/2014-06-10/news/50478710_1_nserestricted-trade-segment-mumbai
http://www.moneylife.in/article/bse-nse-to-move-over-213-scrips-to-restricted-tgroup/37620.html
F&O turnover at BSE surges past NSE
On 24th June, volumes on the BSE overtook rival NSE for the first time
with a record derivatives turnover of INR 3.36 lakh crore compared to
NSE’s INR 3.29 lakh crore. Overall, total market turnover of BSE and
NSE combined topped Rs. 6.67 lakh crore to mark a new record in
the derivatives segment. The BSE derivatives segment experienced a
sudden spike in trade volume of three Sensex option contracts which
lead to the record turnover.
Source:
http://profit.ndtv.com/news/market/article-bse-overtakes-nse-with-higher-f-oturnover-571770
http://www.mydigitalfc.com/news/bse-overtakes-nse-higher-fo-turnover-suddenspike-388
BSE – USE merger to be completed within 9 months
The boards of the BSE and the United Stock Exchange (USE) have
approved BSE’s proposal to acquire USE through a share-swap deal,
whereby for every 385 shares held in USE a shareholder would get one
share of BSE. The merger is expected to be completed in the next 9
months during which regulatory approvals and approval of shareholders
of both bourses will also be sought.
Contact
Source:
http://articles.economictimes.indiatimes.com/2014-06-15/news/50598262_1_
united-stock-exchange-bse-chairman-jaypee-capital-services
Email: Tel: global.marketstructure@list.db.com
+852 2203 5710
http://www.livemint.com/Money/5PK22VGFCXnvkAWDtuTAeI/BSE-USE-boardsapprove-merger.html
23
Global Market Structure
South Korea
Deutsche Bank
Equities
Global Market Structure
South Korea Newsletter Issue 34, 2014
South Korea
Fig 1: Turnover Velocity
160%
Other plans for include introduction of new derivatives products like
V-Kospi futures, sector index futures and night time trading of US dollar
futures. Though timelines of these products are not confirmed these
products are intended to provide investors a variety of instruments to
hedge. The Korea Exchange (“KRX”) will be given the ability to decide
on the number of listed derivatives products and their prices, which
currently are controlled by financial authorities. According to the FSC,
only 15 derivatives products are being traded on the main bourse in Korea
compared with 1,303 products in the United States and 100 in Japan.
Refer to FSC release article for more details
Turnover Velocity (%)
100%
$80
80%
$60
60%
$40
40%
$20
20%
0%
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
$0
Dec
Source: Thomson Reuters
Fig 1. Korea trading volumes have been slowly declining over the year but relatively
stagnant YoY. Due to lack of investment incentives and regulatory hurdles foreign
investor money is fading away.
Fig 2: Equities(Cash), Futures and ETFs Monthly ADV
$25
EQUITY
FUTURES
120
ETFS
100
$20
80
$15
60
$10
40
$5
ETFs (US$ Millions)
There are also regulatory entry barriers for retail investors to trade in
derivatives market. In order to overcome that, the FSC plans to introduce
a qualified retail investor scheme which has two stages. The first stage
allows retail investors to trade simple futures products at a smaller
margin with a reduced investor education requirement and mock
trading hours. Upon passing to the second stage, retail investors will
be able to trade complex futures and options products, such as V-Kospi
200 futures that allow investors to trade volatility which are due to be
launched before the end of 2014.
$100
120%
Equities & Futures (US$Billions)
However, market participants still have concerns that barriers such
as cost may inhibit growth such as the tax on exchange traded notes
(“ETNs”). Currently, for domestic equity underlyings, trading is tax-free,
but for foreign stocks the whole gain is treated as dividend income.
Since ETFs and ETNs cover the same underlying product, there is little
motivation for investors to trade ETNs over ETFs.
$120
140%
20
$0
0
Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14
Source: Thomson Reuters
Fig 2. Derivatives trading volumes continue to decline in Korea as economic growth
slowed down. Deregulation road map announced by FSC in June, might bring fresh
volumes into the market.
Fig 3: Average Index Spread and Trade Sizes
35
Avg Trade Size
Average Spread (BPS)
120
30
100
25
Avg Spread (BPS)
Last month, the Financial Services Commission (“FSC”) released
a road map for developing the country’s derivatives market amidst
declining volumes. The road map sees the exchange-traded derivatives
(“ETD”) market becoming a market for professional investors and the
derivatives-linked securities (“DLS”) market becoming the market for
retail investors. A range of new products including equity volatility
futures, sector index futures and the overnight trading of US dollar
futures are expected to be launched by the end of 2014. The FSC’s plans
aim to increase the autonomy of the local derivatives market and lure
more investors.
$140
Turnover (Billions USD)
FSC release plans to boost slowing derivatives trading
2012 Velocity
2013 Velocity
2014 Velocity
2012 Turnover
2013 Turnover
2014 Turnover
180%
80
20
60
15
40
10
20
5
0
Jan-14
May-14
Jun-14
0
Avg Trade Size
Market Structure
http://www.fsc.go.kr/eng
Source: Thomson Reuters
South Korea meets international standards of Anti-money
laundering
Fig 3. Average trade sizes which are already quite small in Korea continue to shrink
further amidst declining volumes. Down 20% yoy.
The Financial Action Task Force (“FATF”), an international body that sets
standards on anti-money laundering assessed South Korea as having
passed the evaluation of 16 key categories showing that the country
is enforcing legal and financial procedures and systems compatible to
international standards.
Fig 4: MoM Index Price Change
South Korea had missed nine categories out of the 16 in its last
examination conducted in 2009.
South Korea has also been appointed as the chair country of the FATF in
February and will hold the chairmanship for one year from July.
%
6
5
4
3
2
1
0
-1
-2
-3
-4
-5
FY2013
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Source: Thomson Reuters
Fig 4. KOSPI Index was led up with a gain in emerging market stocks as Indian elections
brought optimism and foreign inflow.
24
Global Market Structure
South Korea
Fig 5: Large and Mid Cap Index movers
Fig 6: Avg Monthly IPO size and Exchange Market Cap
Price
Return
Volume traded
(US$)
Average Spread (BPS)
21%
33,454,010
156,173,200
1.47
100
17%
25,431,330
0.89
80
1.19
343,072,000
1.02
003410.KS 16%
27,685,710
167,770,400
1.47
001430.KS 14%
101,309,300
230,525,400
1.42
010520.KS -5%
114,210,900
009150.KS
-8%
10
505,346,800
1.04
012450.KS -6%
169,255,200
005930.KS -9%
5
005830.KS -10%
0
051900.KS
-13%
Jan-14
6,779,901,000
1.20
007860.KS -6%
95,187,310
188,765,200
1.55
004370.KS -8%
57,214,250
732,472,800
1.51 May-14
010620.KS -9%
255,472,700Jun-14
1.62
60
0.57
40
0.89
0.92
20
0.63
0
0.83
Exchange Market
Cap (US$Trillion)
1050
1040
250
120
0.84
19%
011070.KS
13%
20
029780.KS 12%
15
138930.KS -7%
300
20D/
100D
ADT
1030
200
1020
150
1010
100
1000
50
990
0
980
FY 13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Market Cap (US$ trillion)
Price
Volume traded
20D/
Stock
ReturnIndex
(US$)Spread and Trade
100D Sizes
Fig 3: Average
ADT
35
Avg Trade Size
034220.KS 18%
950,343,200
1.15
003300.KS
30
047050.KS 15%
225,510,700
1.24
161890.KS
25
011170.KS
13%
564,088,400
0.96
007310.KS
IPO Volume (US$ m)
Stock
Avg Spread (BPS)
Average Monthly IPO
Volume (US$m)
Market Movers - Mid Cap
Avg Trade Size
Market Movers - Large Cap
Jun-14
Source: Dealogic
Fig 6. Auto/Truck sector IPOs in Korea, one each in May and June 071850 and 105550
Source: Thomson Reuters
Fig 5. Screen maker LG Display was the biggest gainer on talks of supplying Panasanic
Corp with TV panels.
Fig 7: IPO Sector Distribution
Jan-May 2014
Jun 2014
TMT
South Korea and China sign agreements to promote and expand
commerce and trade
In order to foster the growth in financial markets of the two countries,
the KRX and Bank of China plan to develop RMB based financial
products. South Korean Park Geun-hye and her Chinese counterpart,
Xi Jinping, agreed to launch a two-way foreign exchange market that
can fuel trade and reduce losses caused by using the U.S. dollar as the
medium of trade.
Several South Korean and Chinese businesses and institutions signed
agreements aimed at expanding commerce and trade. POSCO,
the world’s fourth-largest steelmaker, signed a memorandum of
understanding (“MOU”) with China’s Chongqing Iron & Steel Co. on
building a steel mill in China.
RMB 80 billion made available for Korean domiciled RQFII funds
Chinese authorities have issued an RMB 80 billion (US$12.9 billion)
quota to South Korea under the renminbi qualified foreign institutional
investor (“RQFII”) scheme.
Both countries’ central banks have agreed to designate clearing banks
making the won directly exchangeable for the renminbi in Shanghai
following the MOU signed earlier this month.
FSC plans to relax regulation overseas investment caps for
domestic securities houses
To allow local houses flexibility and expand into overseas markets,
the FSC plans to remove the overseas investment cap for securities
companies that meet the capital adequacy ratio of 200%.
Current rules limit overseas investment by local securities firms to 40% of
their net worth. The commission would not only lift the 40% restriction,
but would also allow the parent to act as financial guarantee for their
overseas subsidiaries and permit cross-funding among indirectly owned
units across countries, FSC chairman William Tseng said.
Venue News
Chinese investors pour into Korean stock market as regulations
ease
Over first six months of 2014, Chinese investment added up to 1.42
trillion won (US$1.38Bn) into South Korean stock market. Chinese
investments are backed by ample liquidity and eased offshore
investment regulations. Chinese investors are now the largest foreign
net buyers of local Korean shares.
REGAL
M&M
Consumer
Auto/Truck
Fig 4: IPO Performance
0%
20%
40%
60%
80%
100%
Source: Dealogic
Fig 8: IPO Performance
# of IPO
1 day
1 month
Current
Apr-14
1
35%
30%
56%
May-14
1
51%
63%
59%
Jun-14
1
0%
0%
0%
Source: Dealogic
MarkitSERV now live in Korea for Interest Rate Swaps clearing
Markit’s first global electronic trade processing service for over-theSource: Thomson
Reuters
counter
derivatives,
MarkitSERV, is now connected to the KRX. The
exchange started clearing interest rates swaps in March 2014, with
mandatory clearing of interest rate swaps denominated in Korean won
(KRW) beginning June 30th.
MarkitSERV’s connectivity to KRX will allow partner banks with the
ability to connect to a global network of counterparties, clearinghouses,
trade repositories and other market infrastructure. MarkitSERV platform
also connects to derivatives clearing services run by the Australian
Securities Exchange (“ASX”), Hong Kong Exchanges and Clearing
Limited (“HKEx”), Japan Securities Clearing Corporation (“JSCC”) and
the Singapore Exchange (“SGX”).
Relaxed IPO listing rules became effective from 30th June
The FSC and KRX had together unveiled a plan in April to ease regulation
on filing and disclosing corporate financial information to remove
hurdles to stock listing in Korea.
Under the relaxed rules capital requirement for a company hoping to
be listed on the KOSDAQ will be cut to 1 billion won (US$977,000)
from the current 1.5 billion won, and the lock-up period for the largest
shareholder of a firm that debuts on the secondary KOSDAQ market will
be cut to six months from the current 12 months.
The KRX hopes to see a growth in IPOs as relaxed rules give them a
chance to raise money by issuing debt or equity with lower thresholds
which should help expand their business by attracting investments.
25
Global Market Structure
South Korea
KRX plans to launch an index to draw attention to its venture
based Korea New Exchange (KONEX)
KRX plans to launch an index for the venture-focused KONEX exchange
in July, paving the way for the newly established market to draw more
attention from investors and develop related financial products.
KONEX was launched last year on 1st July to provide an easier market
for business start-ups and venture firms to raise funds via stock sales
instead of having to borrow from banks. 52 firms are now listed on
KONEX compared to 21 when it started, doubling exchange’s market
capitalization to 1Tnwon (US$979 million) from 469 billion won.
Similar to KOSPI and Kosdaq indexes, the KONEX index will be
calculated based on market capitalization, according to the officials.
20 years of Kospi200 Index
Korea’s benchmark index Korea Composite Stock Price Index 200
completed 20 years last month.
Sources:
english.yonhapnews.co.kr
www.koreatimes.co.kr
nwww.koreaherald.com
www.globalpost.com
www.ignitesasia.com
www.moneymanagement.com.au
www.risk.net
www.tradersmagazine.com
Contact
Email: Tel: 26
global.marketstructure@list.db.com
+852 2203 5710
Deutsche Bank
Equities
Global Market Structure
Australia
Global Market Structure
Australia Newsletter Issue 34, 2014
Australia
Fig 1: Turnover Velocity
80%
The previously reported new regulatory data requirements that the
Australian Securities and Investments Commission (“ASIC”) introduced
went live on 28th July. From that date onwards, market participants
are required to provide to market operators a number of data fields
including:
60%
to be ‘principal’).
——Origin of order.
——Intermediary ID (relevant for firms holding an Australian Financial
Budget and headcount cuts at ASIC
ASIC funding is being cut by A$120 million over the next 5 years by
the Government with an initial A$44 million reduction for 2014/2015
(representing approximately 12%). Similarly headcount for 2014/2015 is
expected to fall by 12% from 1,782 to 1,573. ASIC are likely to continue
discussions on moving towards a ‘user pays’ funding model whereby
costs are recovered from parties who either engage in regulated
activities or who benefit from the well-regulated market.
The functions of ASIC continue to be subject to review. The National
Commission of Audit has already recommended that ASIC’s registry
functions, financial literacy functions and consumer protection
functions either cease or be transferred to other organisations.
Potentially overlapping functions between ASIC and the Australian
Competition and Consumer Commission (“ACCC”) and the Australian
Prudential Regulation Authority (“APRA”) are also being considered with
inquiry reports expected later this year.
The Government stated that: “ASIC will adjust its priorities to ensure it
continues to meet its statutory objectives”.
ASIC release report on Regulating Complex Products
In January of this year ASIC sought feedback on Report 384 ‘Regulating
complex products’. That feedback has since been collated and reviewed
and in July the ASIC released their response in Report 400 ‘Responses
to feedback on REP 384 Regulating complex products’.
Turnover Velocity (%)
$20
10%
$0
0%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Fig 2: Equities(Cash), Futures and ETFs Monthly ADV
$6
EQUITY
20
ETFS
FUTURES
$5
15
$4
10
$3
$2
5
$1
$0
Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14
0
Source: Thomson Reuters
Fig 2. ETFs and Futures trading has kept steady volumes all year as investors tread
cautiously in Australia given slow growth in commodities market.
Fig 3: Market Share by Venue
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Jan-12
ASX 0.72%
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
ChiX 0.72%
Jan-14
Apr-14 Jun-14
Source: Thomson Reuters
Fig. 3 Dark and alternate trading volumes have been on the rise in Aus despite
regulation tightening earlier this year which made price improvement mandatory
for trading at dark pools.
Chi-X market share is up to 16% in June 2014 versus 11% in June 2013.
Fig 4: Average Index Spread and Trade Sizes
13.5
Avg Trade Size
Average Spread (BPS)
2000
13.0
1500
12.5
Avg Spread (BPS)
flexible approach with consideration given to ‘relative complexity’
(being an assessment of complexity in the context of how complex
the investors perceive the product to be). The report highlights
concern that higher risk exists when complex products are perceived
by investors to be simple.
20%
Source: Thomson Reuters
The report focuses only on the key issues highlighted in the original
responses including:
——Definition of complex products – ASIC intend to continue using a
$40
30%
Fig 1. Australian equities trading turnover during H1 2014 reached US$482Bn, down
8.6% from same period last year.
Full year average - 2014: 67%, 2013: 93%, 2012: 113%
Equities & Futures (US$Billions)
http://www.asic.gov.au/asic/asic.nsf/byheadline/ASIC-Market-SupervisionUpdate-Issue-44?openDocument
$60
40%
%
Details of these previously announced requirements (including FAQs)
are available in the following ASIC market supervision update:
$80
50%
Jan
Services license).
——Directed wholesale indicator.
$100
70%
ETFs (US$ Millions)
——Execution venue (required for off-order book transactions).
——Capacity of participant (note that hedging swap trades is considered
$120
Turnover (Billions USD)
ASIC regulatory data requirements go live
2012 Velocity
2013 Velocity
2014 Velocity
2012 Turnover
2013 Turnover
2014 Turnover
90%
12.0
1000
11.5
500
11.0
10.5
Jan-14
May-14
Jun-14
0
Avg Trade Size
Market Structure
Source: Thomson Reuters
——Product development – ASIC looking to the industry to enhance
development standards for complex products rather than issuing
27
Global Market Structure
Australia
guidance themselves.
Fig 5: MoM Index Price Change
——Product distribution – similar to product development, ASIC looking
18
16
14
12
10
8
6
4
2
0
-2
-4
%
to the industry to lead the development of distribution standards
for complex products though they do note other options to reduce
risk include: the provision of pre-sale advice, enforcing certain
distribution channels or marketing types, and requiring suitability
testing.
——Disclosures – ASIC to continue with their risk based approach
FY2013
Jan-14
Feb-14
Mar-14
Apr-14
May-14
to complex product disclosure surveillance. Suggestions that
presentation could be improved by changing the scale and format of
the information provided and also by utilising new media.
Jun-14
Source: Thomson Reuters
Fig 5. ASX Index reached its 5-year high level in the month of May this year, up 16% YoY.
Fig 6: Large and Mid Cap Index movers
Market Movers - Large Cap
Stock
Price
Return
Market Movers - Mid Cap
Volume traded
(US$)
20D/
100D
ADT
Stock
Price
Return
Volume traded
(US$)
20D/
100D
ADT
358,020,700
1.01
EGP.AX
10%
367,529,900
1.11
831,717,900
0.82
SKT.AX
7%
52,062,290
0.70
266,376,200
1.23
ALZ.AX
6%
848,148,200
1.99
336,752,600
0.99
CSR.AX
5%
131,938,900
0.66
258,638,600
0.90
IOF.AX
4%
131,891,300
1.03
217,460,500
0.85
FXJ.AX
-11%
222,132,400
0.83
1,982,716,000
1.04
MND.AX
-13%
131,249,300
1.03
302,931,400
0.76
VED.AX
-13%
52,660,290
0.69
472,084,600
0.85
MFG.AX
-13%
114,062,800
1.05
615,996,600
Jan-14
1.57
Feb-14
DOW.AX
Mar-14
-16%
Apr-14
339,578,300
May-14
1.75
Jun-14
Fig 5: MoM Index Price Change
18
WOR.AX
8%
16
NCM.AX
8%
14
12
TTS.AX
7%
10
IPL.AX
4%
8
CGF.AX
4%
6
TPM.AX
-7%
4
WOW.AX
-7%
2
0
AWC.AX
-8%
-2
SEK.AX
-8%
%
-4
FLT.AX
-12%
FY2013
——Advertising – ASIC acknowledge that investors can be heavily
influenced by advertising but at this time do not intend to revise
the existing guidance which includes the Regulatory Guide 234 –
Advertising financial products and services (including credit): Good
practice guidance.
——Access to independent information – ASIC will continue to promote
their MoneySmart website as a means of providing investors with
independent information on complex products.
——Financial advice – ASIC are not currently changing their risk based
approach to the surveillance of advice but they are interested in the
potential voluntary development of investor self-assessment tools by
the complex product issuers.
——Post-sale information – ASIC are looking to the industry to develop
standards relating to the provision of ongoing complex product
information to investors.
Report 400 is available in full here:
Source: Thomson Reuters
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rep400-published-11July-2014.pdf/$file/rep400-published-11-July-2014.pdf
Fee and cost disclosure inconsistencies identified by ASIC
Fig 7: Avg Monthly IPO size and Exchange Market Cap
Average Monthly IPO
Volume (US$m)
2,500
Exchange Market
Cap (US$Trillion)
1.4
2,000
1.36
1.34
IPO Volume (US$ m)
1,500
1.32
1,000
1.3
1.28
500
1.26
0
1.24
FY 13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Market Cap (US$ trillion)
1.38
Jun-14
Fig 7. Australian exchange has added over US $3 billion in new listings so far this year
that is more than five times the amount generated in the same period last year. Australia
could be the biggest IPO market in APAC this year.
Fig 8: IPO Sector Distribution
Jan-May 2014
Jun 2014
Industrials
Healthcare
Auto/Truck
20%
40%
60%
80%
100%
Source: Dealogic
——Incorrectly disclosing fees net of tax;
——Inconsistent disclosure of performance fees.
——Statement of ASIC’s view on these disclosure issues.
——Details of further work ASIC will perform in this space.
ASIC commissioner Greg Tanzer said, “It is crucial for super and
managed fund issuers to disclose fees and costs on a consistent
and comparable basis in order for consumers to make meaningful
comparisons between products”.
Australian Government invite comments on Tax Treaty
Negotiation Program
The Australian Government are inviting interested parties to comment
on their tax treaty negotiation program. They are specifically interested
to hear:
Fig 9: IPO Performance
# of IPO
1 day
1 month
Current
Mar-14
3
23%
22%
27%
Apr-14
2
20%
32%
76%
May-14
8
5%
132%
7%
Jun-14
6
-2%
0%
3%
Source: Thomson Reuters
——Non-disclosure of fees and costs relating to investments in
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rep398-published-8July-2014.pdf/$file/rep398-published-8-July-2014.pdf
Consumer
28
For example:
To review Report 398 in full see here:
FIG
Source: Dealogic
——Details on where inconsistent and incorrect disclosures do occur.
underlying investment vehicles;
Source: Dealogic
Fig 4: IPO Performance
0%
On 8th July ASIC published Report 398 ‘Fee and cost disclosure:
Superannuation and managed investment products’. The intention
was to identify instances where underreporting of fees and costs could
occur in the superannuation and managed investment industry. Key
components of the report include:
——Suggestions of which countries should be prioritised for tax treaty
negotiations or updates.
——Suggestions of key objectives for these negotiations.
Information on how to submit comments (including a link to details of
Australia’s existing tax treaties) are available here:
http://www.treasury.gov.au/ConsultationsandReviews/Consultations/2014/
Australias-Tax-Treaty-Negotiation-Program
Global Market Structure
Australia
Venue News
ASX trading changes go live
On 14th July a number of enhancements to ASX Trade went live. The
changes included the following items:
——Non mid-tick prices available in Centre Point. (Note that trades will
require at least half a tick of price improvement to the NBBO).
——Single fill minimum acceptable quantity (“MAQ”) available in Centre
Point.
——ASX OUCH supports access to AXS Centre Point and ASX Sweep.
——Price field precision increased to two decimal places in Centre Point.
——ASX supports ASIC’s real time short selling reporting requirements
(with flexibility to combine short and long sells in a single market
order).
See the following ASX notice for further details:
https://www.asxonline.com/intradoc-cgi/groups/trading_and_market_information/
documents/communications/asx_039978.pdf
Chi-X sets new records in market share and hidden liquidity,
suffers trading outage
On 9th July Chi-X Australia’s daily total market share was 29.86%
beating their previous record of 29.57% which was set on 18th June.
Chi-X Australia also set a new record for hidden liquidity daily value
traded in July. The new record of A$174 million was set on 18th July
(exceeding their previous daily record of A$131 million by a significant
margin).
Trading was stopped at Chi-X Australia on 16th June due to a technical
issue. Trading ceased at 11:08am and remained out until the following
trading day.
Shortening the Equities Settlement Cycle Consultation Paper
feedback published by ASX
The feedback period for the ASX’s consultation paper ‘Shortening the
Settlement Cycle in Australia: Transitioning to T+2 for Cash Equities’
closed in April. In May the ASX published the non-confidential
responses on their website. All feedback will be considered by the ASX
advisory forum with further announcements expected.
Generally the publically published respondents were supportive of the
proposed transition from a T+3 equity settlement cycle to T+2 with
most noting several key benefits including:
——Reduction in counterparty risk and overall systemic risk.
——Increased harmonisation with other global equity markets.
——Reduced cash market margin and liquid capital requirements.
——Post trade cost efficiencies.
To review the full published feedback see the ASX public consultation
release dated 15th May here:
——Shift of emphasis from competition within Australia to
competitiveness of Australia on the world stage including the
possibility that a higher degree of market concentration might be
appropriate for a relatively small country such as Australia.
——Support for self-regulation as a mechanism for driving competitivetype behaviours (particularly in more concentrated markets).
The ASX’s full submission is available here:
http://www.asx.com.au/documents/public-consultations/Competition_Policy_
Review.pdf
Derivatives Account Segregation and Portability Consultation
Paper released
On 14th July the ASX released a consultation paper called ‘Derivatives
Account Segregation and Portability – Enhanced Client Protection
Structures’. The objective is to increase collateral protection for clients
by enhancing the Client Clearing Service account structure that the ASX
uses for its ASX 24 Exchange Traded Derivatives and OTC Interest Rate
Derivatives.
This paper seeks feedback on a number of proposed treatments
designed to increase protection of excess collateral posted by clearing
participants. Towards the end of this year, after feedback to this paper
has been considered, it is expected that the ASX will release a second
consultation paper detailing the proposed account structure and the
related rules framework.
The deadline for feedback submissions from interested parties is
22nd August. The full consultation paper (including details of how to
respond) is available here:
http://www.asx.com.au/documents/public-consultations/Derivatives_Account_
Segregation_and_Portability_-_Enhanced_Client_Protection_Structures_rev1.pdf
Personnel News
Wayne Byres appointed as chairman of APRA
In July Wayne Byres took over as chairman of the Australian Prudential
Regulation Authority (“APRA”) having previously served as APRA’s
executive general manager of supervision and secretary general to the
Basel Committee on Banking Supervision.
Mr Byres made his opening statement as chairman in a presentation to
the House of Representatives Standing Committee on Economics. In
his speech he confirmed that APRA would continue with their approach
of combining both supervision and enforcement but with more
emphasis on pre-emptive supervision rather than reactive enforcement:
“Our observation is that the supervision-led approach seemed to be a
common feature of jurisdictions that emerged relatively unscathed from
the financial crisis. The APRA members therefore see little reason to
change that philosophy, and it is very consistent with the government’s
recent statement of ex pectations for APRA”.
http://www.asx.com.au/regulation/public-consultations.htm
ASX submit their input to the Government’s Competition Policy
Review
In June the ASX submitted their comments to the Government’s
Competition Policy Review. Titled ‘Driving efficiency in competitive
settings for the Australian economy’ the paper highlights several areas
of suggested focus including:
Sources:
http://www.asx.com.au/
http://www.complinet.com/
http://www.asxonline.com/
http://www.chi-x.com/
http://www.asic.gov.au/
http://www.theadvisor.com.au/
http://www.treasury.gov.au/
http://www.herbertsmithfreehills.com/
http://www.apra.gov.au/
http://www.bloomberg.com/
——Stressing the importance of competition policy as a driver of an
efficient economy.
——Refocusing of competition approach to reflect increasing
Contact
——Balancing the need to support Australian firms who compete
Email: Tel: globalisation and advancements of technology and regulation.
globally with the need to protect consumers and small businesses.
global.marketstructure@list.db.com
+852 2203 5710
29
Global Market Structure
Thailand
Deutsche Bank
Equities
Global Market Structure
Thailand Newsletter Issue 34, 2014
Thailand
—
Fig—1: Equities(Cash), Futures and ETFs Monthly ADV
——FTSE ASEAN All-Share Index. Representing the performance of
large, mid and small cap ASEAN companies, the index consists of
constituents of the FTSE ASEAN Indonesia All-Share Index, the FTSE
ASEAN Philippines All-Share Index, the FTSE ASEAN Vietnam AllShare Index, the FTSE Bursa Malaysia EMAS Index, the FTSE SET
All-Share Index and the FTSE ST All-Share Index.
performance of all the ex Developed countries in the FTSE ASEAN
All-Share Index. The index consists of the constituents of the FTSE
Bursa Malaysia EMAS Index, FTSE ASEAN Indonesia All-Share
Index, the FTSE ASEAN Philippines All-Share Index, the FTSE SET
All-Share Index and the FTSE ASEAN Vietnam All-Share Index.
Thailand enters into regulatory cooperation pact with Cambodia
The Securities and Exchange Commission of Thailand (“SEC”) and
the Securities and Exchange Commission of Cambodia have signed
a memorandum of understanding (“MoU”) bolstering regulatory
cooperation between the neighbouring markets. The two countries
will be sharing information on daily trends, trades and general market
information according to the agreement.
Thailand looks to beef up foreign investments by local
companies
The SEC has proposed to the Bank of Thailand to increase the limit
of securities investment abroad from the present US$50 billion to at
least US$100billion. The central bank has also been requested to grant
foreign exchange licences to local securities companies in order to
increase their competitiveness.
Local investors have been increasingly allocating a higher portion of
their portfolios to foreign markets amid the ongoing political unrest and
instability in the local markets.
“We have to prepare lifting the global investment amount after
seeing demand increasing since last year and expect the new ceiling
will be approved by the second half of this year as investors take this
opportunity to reap higher returns and manage risks.” Charuphan
Intararoong, executive director for intermediary supervision and
development, SEC said.
30
$2.0
0.8
$1.5
0.6
$1.0
0.4
$0.5
0.2
$0.0
0.0
Source: Thomson Reuters
Fig 1. Thailand stocks, ETFs and Futures flourish under new military government.
Currency is strengthening as peace returns and GDP is up 1% as of Q2 2014. Foreign
investment is expected to grow in coming months.
Fig 2: Avg Monthly IPO size and Exchange Market Cap
Average Monthly IPO Volume (US$m)
Exchange Market Cap (US$Trillion)
600
IPO Volume (US$ m)
——FTSE ASEAN All-Share Ex-Developed Index. Represents the
1.0
ETFS
FUTURES
Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14
——FTSE ASEAN Stars Index. Comprises the 30 most exciting
companies of each ASEAN country as ranked by investability in
terms of market capitalisation and liquidity, with the exception of
Vietnam where 15 companies are selected from the Ho Chi Minh
and Hanoi Stock Exchanges respectively.
EQUITY
ETFs (US$ Millions)
The ASEAN Exchanges announced the introduction of three new
tradable ASEAN indices to expand the FTSE ASEAN Index Series (the
FTSE ASEAN All-Share Index, FTSE ASEAN Stars Index and FTSE
ASEAN All Share Ex-Developed Index) which cover the growing ASEAN
equity markets more extensively. The expanded suite of indices include
constituents from Vietnam and create a larger universe of stocks for all
ASEAN markets.
Equities & Futures (US$Billions)
$3.0
ASEAN Exchanges introduce three ASEAN Indices
17.5
500
17
400
16.5
300
16
200
15.5
100
15
0
14.5
FY 13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Market Cap (US$ trillion)
Market Structure
Jun-14
Source: Dealogic
Fig 2. Following the recent rally on SET Index, Thailand IPO market is expected to
prosper as well. There have been 17IPOs in first half of the year so far and exchange
expects about 30 new listings in rest half of the year to raise atleast US $3.1Bn.
Fig 3: IPO Sector Distribution
Jan-May 2014
TMT
Jun 2014
Industrials
FIG
Consumer
Construction/
Building
Auto/Truck
Fig 4: IPO Performance
0%
10%
20%
30%
40%
50%
60%
70%
80%
Source: Dealogic
Fig 4: IPO Performance
# of IPO
1 day
1 month
Mar-14
-
-
-
-
Apr-14
4
34%
63%
67%
May-14
1
180%
0%
116%
Jun-14
4
79%
0%
71%
Source: Dealogic
Source: Thomson Reuters
Current
Global Market Structure
Thailand
Venue News
SET considering to levy a capital gains tax
The Stock Exchange of Thailand (“SET”) may levy a capital gains tax of
5% on short term investments (positions held for less than 6 months or
a year). A study is currently being undertaken to ascertain the feasibility
of the levy. However, SET chairman Sathit Limpongpan is not in favor
of implementing the tax at the moment and said that “A capital gains
tax should not be implemented while Thailand was restoring investor
confidence.”
SET signs MoU with Cambodia Stock Exchange
The SET signed a memorandum of understanding MoU with Cambodia
Stock Exchange (“CSX”) to jointly to promote development of capital
market in Cambodia and Thailand. SET will extend its help in the areas
of human resource training, professional training, information sharing
and promoting capital market business opportunities between the two
exchanges under the agreement.
“The MoU between SET and CSX is a good starting point for our
concrete collaboration on capital market development between two
countries. We look forward to the continued development of the fruitful
relationship with CSX.” said SET President Charamporn Jotikasthira.
Sources:
http://www.marketwatch.com
http://www.bangkokpost.com
https://www.asia-first.com
http://online.wsj.com
http://www.nationmultimedia.com
http://www.phnompenhpost.com
Contact
Email: Tel: global.marketstructure@list.db.com
+852 2203 5710
31
Global Market Structure
SIngapore
Deutsche Bank
Equities
Global Market Structure
Singapore Newsletter Issue 34, 2014
Singapore
The Monetary Authority of Singapore (“MAS”) has released a public
consultation proposing an enhanced framework of regulations for
safeguarding investors investing in non-conventional and OTC products.
Major proposals include
——Extending the regulatory safeguards currently available to retail
investors to the investors in non-conventional investment products
(which have features similar to the regulated capital market products)
EQUITY
$1.2
ETFS
FUTURES
2.5
$1.0
ETFs (US$ Millions)
Monetary Authority of Singapore proposes more safeguards for
investors
Fig 1: Equities(Cash), Futures and ETFs Monthly ADV
Equities & Futures (US$Billions)
Market Structure
2.0
$0.8
1.5
$0.6
1.0
$0.4
0.5
$0.2
$0.0
0.0
Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14
Source: Thomson Reuters
Fig 1. Singapore Equities turnover is down 17% YoY while Futures and ETFs trading
volumes are down 25% YoY
——Requiring all investment products (including non-conventional
products) to be rated for complexity and risks, and for these ratings
to be disclosed to the investors
Fig 2: Avg Monthly IPO size and Exchange Market Cap
them to avail the complete range of safeguards applicable to retail
investors
http://www.mas.gov.sg/news-and-publications/media-releases/2014/masproposes-stronger-safeguards-for-investors.aspx
http://www.mas.gov.sg/news-and-publications/consultation-paper/2014/
consultation-on-proposals-to-enhance-regulatory-safeguards-for-investors-in-thecapital-markets.aspx
Venue News
3.1
3.08
300
250
3.06
200
3.04
150
100
3.02
50
3
0
FY 13
Jan-14
Feb-14
Mar-14
Apr-14
The Singapore Exchange (“SGX”) is planning to implement the
reduction in board lot sizes for all counters trading above SG$0.50 from
29th September subject to acquiring all regulatory approvals
May-14
Jun-14
Source: Dealogic
Fig 2. Singapore IPO market is down 72% in first half of this year compared to last year
reflecting subdued growth in equities market.
US$ 302Mn raised in IPOs in month of June this year. Biggest IPO so far has been PACC
Offshore Service Holdings that took place earlier in the year.
Fig 3: IPO Sector Distribution
Jan-May 2014
TMT
Singapore Exchange looking to reduce board lot sizes from 29th
September
3.12
350
IPO Volume (US$ m)
The consultation will be open until 1st September and can be accessed
here -
Exchange Market
Cap (US$Trillion)
400
——Regulating the schemes which have elements of a regulated
collective investment scheme but do not pool investors’
contributions under the umbrella of ‘Collective Investment Scheme
Regulations’
Average Monthly IPO
Volume (US$m)
450
Market Cap (US$ trillion)
——Providing an option to the Accredited Investors (AIs) enabling
Jun 2014
REGAL
Oil & Gas
Healthcare
Consumer
Auto/Truck
——All stocks trading above SG$0.50 as at end of June will be in scope
for the board lot reduction
0%
Fig 4: IPO Performance
20%
40%
60%
80%
100%
Source: Dealogic
——The board lot size for such stocks will be reduced to 100 from 1000
currently
——Around 250 stock will be migrated to the new smaller board lot size
——All markets participants should update their respective trading and
order management applications to be able to display the applicable
order lot size for all scrips
——All pending long dated orders will be purged by SGX automatically
Fig 4: IPO Performance
# of IPO
1 day
1 month
Current
Apr-14
2
11%
22%
39%
May-14
-
-
-
-
Jun-14
3
-1%
0%
-1%
Source: Dealogic
before launch, therefore all trading members should review their long
dated orders and purge accordingly
32
Source: Dealogic
Global Market Structure
SIngapore
Singapore proposes relaxations in Secondary Listing norms
The Singapore Exchange (“SGX”) has proposed the following changes
to the regulatory framework for secondary listed companies on the
exchange.
——Clarifications on the regulatory oversight SGX has on secondary
listings and the extent to which it will rely on the regulator of the
company’s home exchange (primary listing).
——Clarifications on methodology applied for regulatory review of
secondary listing applicants.
——Classification of a secondary listing applicant into either a company
from a Developed market or from a Developing market based on
classification by both MSCI and FTSE.
SGX developing a collateral facility in partnership with
Clearstream
SGX and Clearstream (a subsidiary of Deutsche Börse) have partnered
to develop a collateral facility for Singapore based institutional investors
which will allow stocks and bonds held at SGX’s CDP securities
depository as collateral for their trades. This will reduce their dependency
on using cash as collateral. The system is expected to be ready in 1 to 1.5
years and is expected to boost liquidity in the financial markets.
“The system really looks at the mobilisation of assets that are currently
under utilised or not utilised at all in the Singapore market.” Nico
Torchetti, Senior Vice President and Head of Post-trade Services at SGX,
said.
——No additional continuing listing obligations for companies having
primary listing in a developed market.
——Certain additional continuing listing obligations may be imposed
to enhance shareholder protection and corporate governance
standards for companies having primary listing in a developing
market.
——Make it easier for investors to identify primary and secondary listings
by enhancing the information available on the stock exchange.
The consultation paper is available here:
http://www.sgx.com/wps/wcm/connect/sgx_en/home/higlights/news_releases/
sgx-proposes-regulatory-framework-for-secondary-listings
June 2014 SGX performance snapshot
SGX reported that its securities trading continued to decline in June.
Major highlights below:
——Total value of securities traded was $20.5 billion, down 37%
compared to last year.
——Turnover for Chinese-listed companies on SGX however increased
18% year-on-year to $1.5 billion.
——Securities daily average value declined to $978 million down 40%
year-on-year
——Derivatives volume declined 20% year-on-year to 8.6 million
contracts.
——Open interest at end-June remained flat year-on-year at 3.2 million
contracts.
——China A50 futures volume rose 32% to 2.3 million contracts.
——MSCI Taiwan futures trading fell 2% to 1.5 million contracts.
——Nikkei 225 futures volumes fell 54% to 2.1 million contracts.
——Indian Nifty futures trading increased 6% to 1.6 million contracts.
Sources:
SGX to implement new financial reporting standard
http://www.ft.com
http://www.todayonline.com
http://www.tax-news.com
http://www.reuters.com
The SGX and the Singapore Accounting Standards Council (“ASC”)
released a joint statement on 29th May requiring the listed companies
to implement the new financial reporting framework for their respective
annual reporting requirements latest by 1st January 2018. The new
financial reporting framework is identical to the International Financial
Reporting Standards (“IFRS”).
http://sbr.com.sg
http://www.theasset.com
http://www.channelnewsasia.com
http://www.shanghaidaily.com
http://www.legalbusinessonline.com
http://www.hedgeweek.com
http://www.automatedtrader.net
http://www.businessweek.com
“Singapore has long been an advocate of a single global financial
reporting language. Taking the final leap towards full convergence
with IFRS for our capital market is a decisive step towards cementing
Singapore’s standing as a trusted international financial and business
centre,” said ASC Chairman Mr Michael Lim.
Contact
Email: Tel: global.marketstructure@list.db.com
+852 2203 5710
33
Global Market Structure
Philippines
Deutsche Bank
Equities
Global Market Structure
Philippines Newsletter Issue 34, 2014
Philippines
Market Structure
Fig 1: Equities(Cash), Futures and ETFs Monthly ADV
The Securities and Exchange Commission in Philippines has tightened
certain corporate governance norms aiming to boost transparency
around businesses.
——All listed companies are now required to post all their disclosures on
their websites.
——The regulator has also proposed a website template for listed
companies which should be considered as a minimum requirement
while designing the web portals.
Equities & Futures (US$Billions)
$0.25
Philippines tightens Corporate Governance norms
EQUITY
FUTURES
ETFS
$0.20
$0.15
$0.10
$0.05
$0.00
Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14
Source: Thomson Reuters
Fig 1. Philippines stock exchange index reached its peak since 11months in month of
June, as Philippines peso finished its best quarter since 2010.
——Listed companies have also been directed to post all their periodic
report within the stipulated timelines.
—— Detailed guidelines have also been issued for listed companies to
meet new tax rules requiring regular reporting of information on
employees and payees.
Venue News
PSE reaches record levels
The Philippine Stock Exchange (“PSE”) on 4th July reached the 6962.2
mark, its highest levels for the year driven by strong foreign buying in
the local markets. Philippine foreign portfolio investments registered a
net inflow of US$545.08 million in May after 4 months continuous of
net outflows.
PSE ties up with NASDAQ OMX tech
The PSE has entered into an agreement with NASDAQ OMX whereby
NASDAQ OMX will help in implementation of its trading technology
X-stream Trading at PSE. The new platform is expected to be rolled out
in mid 2015.
“We are delighted to partner with NASDAQ OMX for this important
undertaking. As the operator of the stock market, we need to ensure
that we continue to provide the best and most responsive technology
for all our stakeholders and we believe the solution provided by
NASDAQ OMX is consistent with this objective.” said Hans B. Sicat,
PSE President and CEO.
PSE on track to raise P200bn through IPOs
The PSE announced that it has already raised P75bn through issuances
in the local markets and is well on track to meet its year-end target of
P200bn.
“The second half of the year would see more companies raising capital,
hitching a ride on the country’s growing economy. There is tremendous
liquidity here at home and this would help boost the stock market’s
performance.” PSE President and CEO Hans Sicat said.
PSE board reelected
The PSE announced that its entire board was reelected for a 4th term
and assured that continuity will be preserved in the bourse’s strategy as
it upgrades its technology in preparation to join the ASEAN Trading Link.
34
Sources:
http://www.interaksyon.com
http://manilastandardtoday.com
http://www.philstar.com
http://www.themalaymailonline.com
http://www.bworldonline.com
Contact
Email: Tel: global.marketstructure@list.db.com
+852 2203 5710
Deutsche Bank
Equities
Global Market Structure
Indonesia
Global Market Structure
Indonesia Newsletter Issue 34, 2014
Indonesia
Fig 1: Equities(Cash), Futures and ETFs Monthly ADV
OJK tightens share buyback norms
OJK, the local Financial Services Authority in Indonesia, has
announced the termination of policies governing the share buyback
mechanism that were announced last year due to weak economic
conditions. The policies were eased to allow the listed companies
to conduct buyback offers without the regulator’s approval in cases
of large market fluctuations after the Jakarta Composite Index fell
23.91% in the space of three months. All buyback offers going forward
will therefore require the regulator’s pre-approval.
“The regional and national economic condition points to growth
and more positive development trends. Indonesia needs more
companies listing their shares on the local bourse in order to make the
stock market more liquid and attract even more funds from foreign
investors.” OJK said in a statement.
Equities & Futures (US$Billions)
$0.8
EQUITY
FUTURES
ETFS
20
$0.6
15
$0.4
10
$0.2
5
$0.0
Futures (US$ Millions)
Market Structure
0
Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14
Source: Thomson Reuters
Fig 1. Indonesia futures market rallied over presidential candidate speculation and
trading momentum continues post results.
Venue News
Indonesian stocks rise to 11 month high levels
The Indonesian Jakarta Composite Index rose 0.7% to hit its highest in
the past 11 months on 16th May as it closed on 5031.6.
Sources:
http://business.inquirer.net
http://www.bangkokpost.com
http://www.marketwatch.com
http://www.thejakartapost.com
Contact
Email: Tel: global.marketstructure@list.db.com
+852 2203 5710
35
Global Market Structure
Malaysia
Deutsche Bank
Equities
Global Market Structure
Malaysia Newsletter Issue 34, 2014
Malaysia
Fig 1: Equities(Cash), Futures and ETFs Monthly ADV
The Securities Commission, Malaysia (“SC”) has released an updated
list of securities compliant with Shariah principles which has been
approved by its Shariah Advisory Council. The updated list consists of
a total of 665 Shariah-compliant securities (from a total of 905 listings)
and came into effect on 30th May 2014. 28 stocks have been added to
the list while 9 have been removed from the earlier list.
Equities & Futures (US$Billions)
$0.7
SC releases updated list of Shariah compliant securities
EQUITY
FUTURES
ETFS
0.5
$0.6
0.4
$0.5
0.3
$0.4
$0.3
0.2
$0.2
0.1
$0.1
$0.0
Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14
ETFs (US$ Millions)
Market Structure
0
Source: Thomson Reuters
Venue News
Fig 1. Malaysia’s benchmark index has had the world’s longest bull run in equities.
Index has gained 0.8% this year, but is up overall 127% since 2008.
Bursa Malaysia scales a new life-time high
On YTD basis foreign investors have been net sellers of Malaysian stocks this year
which could be an indicator of an upcoming trend reversal.
Fig 2: Avg Monthly IPO size and Exchange Market Cap
Exchange Market
Cap (US$Trillion)
1.78
700
1.76
600
1.74
500
1.72
400
1.7
300
1.68
200
1.66
100
1.64
0
FY 13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Source: Dealogic
Fig 3: IPO Sector Distribution
Jan-May 2014
Jun 2014
Industrials
Consumer
Construction/
Building
Auto/Truck
0%
20%
40%
60%
Source: Dealogic
Sources:
http://www.freemalaysiatoday.com
http://www.nst.com.my
http://www.arabianbusiness.com
Contact
Email: Tel: 36
global.marketstructure@list.db.com
+852 2203 5710
80%
100%
Market Cap (US$ trillion)
Average Monthly IPO
Volume (US$m)
800
IPO Volume (US$ m)
Bursa Malaysia reached its all time high levels of 1892.3 on 24th June
buoyed by encouraging manufacturing data from China, Japan, and the
United States that pointed to a recovery in global economic growth. The
last high was achieved on 19th May when the growth in economy in the
first quarter of the year was announced by the central bank. Malaysia
registered a strong growth of 6.2% in the Q1 2014 compared with 5.1%
registered in the fourth quarter of 2013, driven by a stronger expansion
in domestic demand and a turnaround in net exports.
Deutsche Bank
Equities
Global Market Structure
Indonesia
Global Market Structure
Newsletter Issue 34, 2014
Chart Definitions
Volatility: Standard deviation of index price returns over last
Average Trade Size: Bid/Ask size of primary index constituent
Market Share: Percentage distribution of total value traded
Index Price Change: Monthly percent change in country’s
30 day period
(USD) on the exchange/venue year to data
Estimated Cost of Trading: Expected arrival price impact
averaged over the day, across constituents
primary index level benchmarked to beginning of the year
level
calculated using Deutsche Bank’s internal market impact
model for all index constituents, weighted average
Market Movers: Stock constituents of the primary index with
Turnover Velocity: Ratio of USD volume traded on the
Total IPO Volume: Aggregated US$ size of all new equity
exchange versus exchange market cap for the given month,
annualized
ETF Volume: Total traded value (USD) of listed equity ETFs for
biggest change in price levels in the given month
listings in the given month
Exchange Market Cap: Aggregated US$ market capitalization
the given month, average
value of all individual equity instruments listed on the
exchange
Futures Volume: Total traded value (USD) of equity index
IPO Performance: Percentage change in price level from day
futures for the given month, average
Equities Volume: Total traded value (USD) of listed stocks on
equity exchanges in respective country for the given month,
average
of listing of the equity instrument, until the close of next
following day (1day), month (1month) and last trading day of
previous month (current)
Primary Index* Spread: Primary index bid/ask spread,
averaged over the trading day
*List of primary indices by country:
Australia China
Singapore
Hong Kong
Indonesia
Malaysia
Korea
India
Philippines
Thailand
Japan Taiwan
United States
Europe S&P/ASX 200 Index
Shanghai Shenzhen CSI 300 Index
FTSE Straits Times Index
Hang Seng Index
Jakarta SE Composite Index
FTSE Bursa Malaysia KLCI Index
Korea SE Kospi 200 Index
CNX Nifty Index
Philippine SE Composite Index
SET 50 Index
TOPIX Stock Price Index
Taiwan SE Weighted Index
S&P 500 Index
Europe 600 EUR Price Index
37
Global Market Structure
Indonesia
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