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Serious Looking bad, so its time to buy?

uvwxyz

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Asset
Trading Floors Go Quiet Across Asia as Equity Desks Face the Ax
2016-06-12 21:00:01.0 GMT


By Cathy Chan
(Bloomberg) -- Even by the boom-bust standards of Asia’s equity business, it’s been a turbulent 12 months.
At this time last year, the industry was riding high as China’s stock market soared, volumes jumped to records and some of the biggest names in finance boosted hiring. Now, turnover is shrinking at the fastest pace since at least 2006 and banks are under growing pressure to either downsize their Asian equity desks, or exit parts of the business altogether.
Investors and issuers are retrenching after Chinese shares crashed, the Federal Reserve tightened monetary policy and divisive political debates from the U.S. to Britain weighed on sentiment. Revenue from trading stocks in China and Hong Kong could fall 30 percent to 50 percent in the first half from a year earlier, according to senior executives at four firms who spoke on condition of anonymity. Equity derivatives sales in Asia are on track to drop at least 50 percent, while prime brokerage is down roughly 20 percent, two of the executives said.
"Because overall revenue is down, further cuts are likely across the industry,” said Taichi Takahashi, Asia-Pacific head of equities at UBS Group AG in Hong Kong. “Some second-tier players will throw in the towel because their market share is shrinking."

Sinking Turnover

Asian equities units could be facing their worst year since 2012, when the European credit crisis roiled markets, according to two of the executives interviewed for this story, who asked not to be identified because global banks don’t break out results for regional equities operations.
Revenue for the industry in Asia slumped 32 percent to $2.6 billion in the first quarter from a year earlier, compared with a 20 percent drop worldwide, according to estimates from Coalition, a banking research firm. Regional equities headcount dropped by about 300, or 6 percent, Coalition figures show.
Turnover on Asia’s 10 biggest exchanges has declined 69 percent from last year’s peak in May, the deepest slump over any period of the same length since Bloomberg began tracking the data in 2006. Equity capital markets deals have also slowed, with Asia playing host to just two billion-dollar initial public offerings this year.
Investment banks geared to Asian stocks, including UBS, Societe Generale SA and Credit Suisse Group AG, will probably underperform, JPMorgan Chase & Co. analysts led by Kian Abouhossein wrote in a May 19 research note.

Multiple Threats

It’s hard to blame traders for pulling back. China’s economy shows few signs of recovering from the weakest annual expansion since 1990, while analysts predict the Fed will boost borrowing costs again this year after lifting rates in December.
Britain’s June 23 referendum may lead to the country’s exit from the European Union, just months before a U.S. presidential election that could put former reality-TV star Donald Trump in the White House.
"Right now, it’s very difficult to have any strong conviction on where the market is heading," said Ali Naqvi, co- head of global markets for Asia-Pacific at Credit Suisse. "A lot of hedge funds are sitting on 20 to 40 percent cash,” he said, calling such reluctance to take risk “unheard of."
Banks’ equities operations in Japan have fared better, in part because Prime Minister Shinzo Abe’s efforts to encourage banks to unwind cross-shareholdings have stimulated trading, two of the executives said. Turnover in the Topix index has dropped about 24 percent over the past year, versus 61 percent in Hong Kong and 82 percent in Shanghai, data compiled by Bloomberg show.

China Bets

The prospect of Chinese stocks winning inclusion in MSCI Inc.’s global indexes could spur a rebound in volumes, UBS’s Takahashi said. A decision will be announced Tuesday.
"Many of our clients are already out there preparing for it,” he said. “So when it happens, there will be massive inflows."
Industry executives were bullish on China in the first half of last year, too. As the nation’s stock market approached record highs, banks including HSBC Holdings Plc, Morgan Stanley and Credit Suisse added staff to their research departments in anticipation of increased trading. Flows through the Shanghai- Hong Kong exchange link, which opened in November 2014, helped fuel the optimism.
But the boom didn’t last long. After peaking on June 12, 2015, the Shanghai Composite Index began a dizzying descent that erased as much as $5 trillion of equity value, roiled global markets and caused China’s government to respond with a much- criticized raft of measures to prop up the market. Purchases of mainland shares through the exchange link peaked last July, with international investors using up less than half their quota as of last week.
China and Hong Kong together account for 30 percent to 50 percent of banks’ cash equities revenues in Asia, three executives said.

Barclays Exit

Some banks have already started retrenching, with Barclays Plc announcing in January that it would close its Asian cash equities operations. BNP Paribas SA and Macquarie Group Ltd. are among other banks cutting equities jobs, according to people familiar with the firms’ moves.
Among senior departures is Lee Cook, who was head of cash equities for Asia-Pacific at BNP and is leaving to “pursue new opportunities outside the industry,” according to a June 3 internal memo.
The rising cost of operating in Asia means smaller competitors may get squeezed out in a prolonged downturn. Annual expenses for running a full-service equities operation in the region can run from $800 million to $1 billion including spending on compliance and technology -- up from about $300 million a little over a decade ago, according to one of the executives.
Cash markets account for about 30 percent of regional equities revenue at the biggest banks, three of the executives said. For smaller firms that focus less on derivatives and prime brokerage, that share can rise to 80 percent to 90 percent, two of them said.
"The operating environment is challenging for most firms, particularly those who don’t have sufficient scale, or geographical or product breadth," Vincent Chui, Morgan Stanley’s head of Asia institutional equity distribution and private wealth management, said in an e-mail. "Those who rely predominantly on their Hong Kong/China business in the region probably face more headwind than others."

To contact the reporter on this story:
Cathy Chan in Hong Kong at [email protected] To contact the editors responsible for this story:
Marcus Wright at [email protected] Philip Lagerkranser, Michael Patterson
 

SNTCK

Alfrescian
Loyal
i not sure how the future/prospect for comfort delgro.

will Uber and Grab really able to beat comfort delgro?
 

uvwxyz

Alfrescian (Inf)
Asset
i not sure how the future/prospect for comfort delgro.

will Uber and Grab really able to beat comfort delgro?

I dont think can beat CDG but can take away business thats why CDG share prices falling even though oil prices low. CDG was falling even when the market was rising last week. Better not touch it at the moment.
 

SNTCK

Alfrescian
Loyal
i able to scoop sgx at Jan at 6.78 then sold at 8.05.

i am thinking to do 2nd round ice-cream scoop.

well. 7.3 is the support, wonder will it goes to that level?
 

SNTCK

Alfrescian
Loyal
I dont think can beat CDG but can take away business thats why CDG share prices falling even though oil prices low. CDG was falling even when the market was rising last week. Better not touch it at the moment.

i got 3 lot at 2.8

wonder should i buy somemore?
 

uvwxyz

Alfrescian (Inf)
Asset
i got 3 lot at 2.8

wonder should i buy somemore?

Better not even though OCBC rates it over $3 at the moment but I think they will review their outlook. Their dividend yield is not too bad but Keppel Reit is looking quite good too.
 

SNTCK

Alfrescian
Loyal
Better not even though OCBC rates it over $3 at the moment but I think they will review their outlook. Their dividend yield is not too bad but Keppel Reit is looking quite good too.

OCBC analyst report is suck.bo zhun
 

uvwxyz

Alfrescian (Inf)
Asset
If you have to ask you're obviously clueless and should stick to your day job.

The question was rhetorical. The fear is there , the headlines inducing fear are there so it is time to buy. Just a matter of what to buy.
 
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