Asia Pacific equities investors navigate challenges and opportunities

Accelerated trading activity in Asia has left investors looking to maximize and diversify their partnerships with global banks.

Equities have traditionally enjoyed prime position for investors in Asia Pacific. The region’s rapidly expanding economies are a constant source of opportunity for those seeking high-growth stocks – whether they are global institutional investors or local retail traders.

Trading activity has accelerated in recent years, especially as investors flocked to technology stocks in the wake of the Covid-19 outbreak. In Hong Kong, for example, average daily turnover reached US$21.5 billion in 2021, up 29% from 2020.

But the equities landscape has also become more complex. Rising geopolitical tensions are presenting new risks for investors, and threatening to drive a rift between East and West. Issuers and investors who had enjoyed easy access to global equity markets are increasingly finding that they must choose between Greater China and the US. Regulation in individual markets is stricter than ever, and the compliance burden is rising as sustainability enters the disclosure rulebook.

Servicing clients in this increasingly complicated arena requires significant investment, commitment and scale. Several global banks have retreated from Asian equities in the past few years, no longer able – or willing – to compete with the global market leaders and growing number of local and regional players.

The consolidation of service providers shows just how complex this market has become. Nowhere is this more true than in Asia Pacific, where global clients need a committed, stable partner to help them navigate a myriad of different markets and regulations.

Brian McCappin, Head of Institutional Sales, BNP Paribas Asia Pacific
A world of opportunities

Asia is already an important driver of global growth, and the region’s growing savings pool is deepening the opportunities for equities.

Boston Consulting Group estimates financial wealth in Asia, excluding Japan, will grow by US$22 trillion between 2020 and 2025, rising at a faster rate than in any other region.

As more of those assets make their way into the hands of professional managers, demand for more sophisticated services such as prime brokerage and securities lending can be expected to rise in tandem. Major institutions also often prefer to work with more than one prime broker to diversify their exposure.

Securities lending in Asia Pacific is also growing faster than other regions. Lender-to-broker revenue rose 29.7% in 2021, beating 22.3% for Americas and 1% for EMEA, according to DataLend. The importance of hedging long portfolios due to market dynamics and policy, plus the lifting of South Korea’s ban on short sales in May 2021, all helped drive demand for stock borrow.

Asia Pacific is important in our aspiration to be a leading player in equities globally. Many of our clients see continued opportunities in Asia Pacific and we are committed to supporting them.

Jason Yates, Head of Cash Equities, BNP Paribas Asia Pacific

Enhanced expertise in a global franchise

BNP Paribas’s recent investments in equities infrastructure leave it well placed to service this growing demand. The Bank completed a significant upgrade of its technology platform in 2021, integrating prime broking and electronic equities trading capabilities from Deutsche Bank and improving execution across all product streams. 

BNP Paribas successfully completed the transfer of Deutsche Bank’s Global Prime Finance and Electronic Equities business on schedule at the end of 2021. The two-year transition added around 900 staff globally and several dozen institutional clients in APAC.

Also in 2021, BNP Paribas completed the acquisition of Exane, a leader in European cash equities, equity research and equity derivatives. By increasing its stake to 100% after a 17-year partnership, BNP Paribas is bringing specialist equities expertise in-house with approximately 700 staff in Exane who are now part of the BNP Paribas Group.

BNP Paribas also signed a Memorandum of Understanding in November 2021 with Credit Suisse, which has agreed to refer prime services and derivatives clearing clients to BNP Paribas as it winds down its own prime business.

These moves are part of BNP Paribas’s long-term strategy to enhance earnings from equities. Equity trading was a highlight in 2021, with revenues up 79.3% in the third quarter.

“Asia Pacific is important in our aspiration to be a leading player in equities globally. Many of our clients see continued opportunities in Asia Pacific and we are committed to supporting them,” said Jason Yates, Head of Cash Equities for Asia Pacific at BNP Paribas.

Strategic hires included Ashley Wilson, who moved from Deutsche Bank to become global head of prime services in July 2021. In Asia Pacific, Jason Yates joined in a newly created role as head of cash equities Asia Pacific. James Scully, who had run Credit Suisse’s prime services sales business in Asia Pacific since 2018, rejoined BNP Paribas in November as Head of Prime and Synthetic sales for Asia Pacific, another new role.

“These investments position BNP Paribas as a real alternative to the leading US banks that are dominant in prime services and equities trading,” said Yates. “We are excited to bring these capabilities to our clients in Asia Pacific.”

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