FiNETIK – Asia and Latin America – Market News Network

Asia and Latin America News Network focusing on Financial Markets, Energy, Environment, Commodity and Risk, Trading and Data Management

November 13, 2011 • 7:26 am 2

London & Delhi Stock Exchanges in Trading System Deal for Equity, Derivatives and FX.

London Stock Exchange Group (‘the Group’) today announced that MillenniumIT, a wholly owned subsidiary, has signed a contract with the Delhi Stock Exchange (‘DSE’) to provide the Indian Exchange with trading technology. The deal will see MillenniumIT provide solutions for equity, derivatives and FX trading as well as clearing technology.

Millennium Exchange is an ultra low latency, highly scalable trading platform offering low-cost solutions to exchange businesses around the world.

Tony Weeresinghe, CEO of MillenniumIT and Director of Global Development at London Stock Exchange Group said:”We are delighted to have been chosen to provide trading and clearing technology solutions to the Delhi Stock Exchange. India is a dynamic and fast developing market and we look forward to working with the Delhi Stock Exchange to introduce a high-speed, low-cost trading solution to the Indian market.”  A time table for implementation will be announced in due course.

Source: MondoVision, 11.11.2011

Filed under: Exchanges, India, News, Trading Technology, , , , , , ,

October 19, 2011 • 9:16 am 0

Brazil: BM&FBOVESPA – News October 2011 – Nr.21

BRIC exchanges announce alliance

The exchanges of the BRIC emerging markets bloc announced a joint initiative on October 12, during the 51st AGM of the World Federation of Exchanges (WFE) in Johannesburg, to offer investors access to their dynamic economies. Initially the exchanges – which accounted for over 18% of all exchange-listed derivative contracts traded by volume worldwide as of June this year – will cross-list benchmark equity index derivatives on the boards of other alliance members. Following this, the alliance will develop innovative products to track the BRIC exchanges.

The seven exchanges are:

  • BM&FBOVESPA – Brazil
  • MICEX – Russia
  • RTS – Russia
  • Hong Kong Exchanges and Clearing Limited (HKEx) – China
  • Johannesburg Stock Exchange (JSE) – South Africa
  • The National Stock Exchange of India (NSE) – India
  • BSE Ltd (formerly known as Bombay Stock Exchange) – India

These seven exchanges represent a combined listed market capitalization of USD9.02 trillion, equitymarket trading value/month of USD422 billion and 9,481 companies listed.

BM&FBOVESPA new trading hours

In view of the start of daylight saving time on October 16, 2011, since October 17, 2011, the new trading hours (Brasília Time) for the BM&FBOVESPA markets – BOVESPA and BM&F segments – will be as follows:

Regular session: 11:00 a.m. – 6:00 p.m.

- After-Market: 6:30 p.m. – 7:30 p.m. (pre-opening phase to trading phase);

- Blocking / Exercise on the stock options market
Days prior to expiration: 11:00 a.m. – 5:00 p.m. (exercise of holder position).
Expiration date: 11:00a.m. – 12:30 p.m. – trading of the expired series to the offset of the position, that is, the sale for the holder of the position and purchase for blocking for the writer of the position / 12:30 p.m. – 2:00 p.m.: exercise of the holder position;

- Blocking / Exercise on the Index Options Market:
Days prior to expiration: 11:00 a.m. – 2:00 p.m. (exercise of holder position).
Expiration date: 11:00 a.m. – 2:00 p.m. – trading of the expired series to the offset of the position, that is sale for the holder of the position and purchase for blocking for the writer of the position / After 6:00 p.m. – automatic exercise of the expired series which fit the following situations: call option (settlement index higher than the exercise price; and put option (settlement index lower than the exercise price).

- Over-the-Counter Market: 11:00 a.m. – 6:00 p.m.

> Complete information of the new trading hours (Circular Letters 009-2011-DO-Ofício Circular)

The trading hours for the BOVESPA and BM&F segments are available at this link

Market Makers for Options on the Stock of Banco Bradesco, Gerdau and Banco do Brasil

BM&FBOVESPA announced on August 3rd the start of the bidding process to select up to three market makers for options on stock of Banco Bradesco S.A. (BBDC4), Gerdau S.A. (GGBR4) and Banco do Brasil S.A. (BBAS3). This is the third stage of the Competitive Bidding Process to select market makers in equity options and BOVESPA Index (Ibovespa) options, developed by BM&FBOVESPA. The institutions (including nonresident) that wish to participate have until November 29, 2011 to deliver proposals and the winners will be announced on December 14, 2011.

> More info

Market Makers for Options on Ibovespa and on Stocks of BM&FBOVESPA and Usiminas

BM&FBOVESPA announced on October 11 the winning institutions in the second selection process for market makers for options on stocks and on the BOVESPA Index (Ibovespa). The market maker obligation shall last twelve (12) months as of December 12, 2011. Banco Citigroup Global Markets Limited, Banco Itaú BBA S.A. and Timber Hill LLC shall be market makers for options on the BOVESPA Index (IBOV), complying with a maximum volatility spread of half a percentage point (0.5%). The institutions selected for options on stocks in BM&FBOVESPA S.A. (BVMF3) were Citadel Securities LLC, Citigroup Global Markets Limited and Morgan Stanley Uruguay Ltda, which shall be market makers complying with a maximum volatility spread of four percent (4%). Meanwhile, the institutions selected for options on stocks in Usinas Siderúrgicas de Minas Gerais S.A. (USIM5) were Banco BTG Pactual S.A. and Morgan Stanley Uruguay Ltda, which shall be market makers complying with a maximum volatility spread of twenty percent (20%).

> More info

Options on OGX Petróleo and Itaú Unibanco rise with Market Maker activity

The trading volume for options on the stocks of OGX Petróleo and Itaú Unibanco rose significantly in September, strongly influenced by the fact that they have had Market Makers since September 9. The Exchange launched the Market Maker program for stocks this year in order to encourage trading in options and increase their liquidity, as well as to stimulate longer expiries on these contracts. Options on the stocks of OGX Petróleo and Itaú Unibanco now have three Market Makers.

Comparing the average daily volume in September to that of January to August, there were the following increases: OGX Petróleo ON 51.9% (BRL 13.7 million against BRL 20.8 million) and Itaú Unibanco PN 205.6% (BRL 1.7 million against BRL 5.1 million).

ETF financial volume more than doubles in the past two months

BM&FBOVESPA Exchange Traded Funds (ETFs) reached BRL 1.4 billion financial volume in August and September, at 78,809 and 75,740 trades respectively. This is more than double the BRL 668 million financial volume and 31,997 trades in July.

Common Shares in Desenvix Energias Renováveis start trading on BOVESPA MAIS

The shares of electricity company Desenvix Energias Renováveis S.A. begin to be traded on October 3 on the BOVESPA MAIS segment of the BM&FBOVESPA Organized OTC Market, under the DVIX3M ticker symbol.

USD11 billion in public offerings and follow-ons in 2011

In the year to October, 15, BM&FBOVESPA registered USD11 billion in public offerings and follow-ons. There were eleven Initial Public Offerings (IPOs) in 2011: AREZZO&CO (ARZZ3), SIERRA BRASIL (SSBR3), AUTOMETAL (AUTM3), QGEP PART (QGEP3), IMC HOLDING (IMCH3), TIME FOR FUN (SHOW3), MAGAZINE LUIZA (MGLU3), BR PHARMA (BPHA3), QUALICORP (QUAL3), TECHNOS (TECN3) and ABRIL EDUCAÇÃO (ABRE11).

BM&FBOVESPA on Twitter

BM&FBOVESPA launched its Twitter account in English last week. Please access this link

2011 EVENTS

 The World Cup of ETFs and Indexing Latin America

BM&FBOVESPA is lending its support to the World Research Group’s “World Cup of ETFs and Indexing Latin America.” The event aims at providing attendees with the best practices for ETF use, as well as a comprehensive analysis of market structure, regulations and current and future opportunities. The expected audience includes pension funds, hedge fund managers and investors, investment advisors, financial consultants, and other market participants. A BM&FBOVESPA representative will talk about the Exchange’s ETF products.

Location: São Paulo (TBC)
Date: October 17-18, 2011.
> Full Agenda and Registration

2nd FX Growth Markets Series: Brazil – Profit & Loss

BM&FBOVESPA will join the Profit & Loss FX Growth Markets conference on October 20, 2011 at the Tivoli Hotel in São Paulo. Profit & Loss has been operating its highly successful series of Forex Network and FX Growth Markets conferences for more than 10 years, with regular annual events held in London, New York, Chicago, Singapore, Brazil, Mexico, Colombia, Chile, Shanghai and Toronto, and comes to Brazil for the second time. A BM&FBOVESPA representative will talk at the event.

Location: Tivoli Hotel São Paulo, São Paulo, Brazil
Date: October 20, 2011.
> Full Agenda

2nd Brazil–China Capital Markets Forum

BM&FBOVESPA and the Shanghai Stock Exchange are coordinating the Second Brazil–China Capital Markets Forum. This event follows the First Brazil–China Capital Markets Forum, which occurred in February in São Paulo, Brazil. At the event, the Shanghai Stock Exchange shall bring 300 to 500 Chinese asset and insurance managers and representatives of listed companies.

Location: Xijiao State Guest House Shanghai, China
Date: October 27, 2011.

Volumes and trades by Direct Market Access (DMA)

BM&F Segment
In September, BM&F* market segment transactions carried out through order routing via Direct Market Access (DMA) registered 35,144,357 contracts traded and 4,311,865 trades. In August, the volume reached 41,417,494 contracts traded and 4,431,750 trades.

The volumes registered by each access modality in the BM&F segment were as follows:

  • Traditional DMA – 12,583,334 contracts traded, in 1,366,264 trades, in comparison to 17,540,231 contracts and 1,306,241 trades in August;
  • Via DMA provider (including orders routed via the Globex System) – 13,976,949 contracts traded, in 374,992 trades, compared to 14,088,756 contracts and 435,281 trades in August;
  • DMA via direct connection – 2,636 contracts traded in 447 trades, against 4,210 contracts and 830 trades in August;
  • DMA via co-location – 8,581,438 contracts traded, in 2,570,162 trades, compared to 9,784,297 contracts and 2,689,398 trades in August.

In September, transactions carried out by foreign investors presented by CME to BVMF (who use the Globex-GTS order routing system or access BVMF markets via co-location) totaled 4,685,186 contracts traded, in 1,164,510 trades, compared to 5,308,308 contracts and 1,235,349 trades in August.

BOVESPA Segment
In September, order routing via DMA in the BOVESPA* segment totaled BRL 111.41 billion and 14,298,483 trades, from BRL 138.52 billion and 17,021,408 trades the previous month.

Trading volumes per type of DMA in the BOVESPA segment:

  • Traditional DMA – Volume of BRL 95.77 billion and 11,763,618 trades from BRL 120.45 billion and 14,098,638 in August;
  • DMA via co-location – Volume of BRL 14.29 billion and 2,357,270 trades from BRL 16.69 billion and 2,755,498 in August;
  • DMA via provider – Volume of BRL 1.34 billion and 177,044 trades from BRL 1.37 billion and 167,272 in August.

* Direct access to the BM&FBOVESPA market segments is carried out through DMA models 1, 2, 3 and 4. In model 1 or traditional DMA, the client accesses the GTS or Mega Bolsa through technological intermediation of a brokerage house. In model 2 or via DMA provider, the client does not use the technological intermediation of a brokerage house, but rather connects to the system through an authorized access provider. DMA via order routing with CME Globex is also a form of DMA model 2. In model 3, the client connects to the system through a direct connection. In model 4 or via co-location, the client installs its own computer within the Exchange’s facilities.

Notes:

The volumes registered by access modality include both buy and sell sides of a trade.

The volumes by access modality for both the BM&F and the BOVESPA market segments have been reported in a consolidated manner in the BM&FBOVESPA statements since May 2009.

MARKET RESULTS

BM&F Segment September 2011

Derivatives markets in the BM&F segment (including financial and commodities derivatives) totaled 59,365,524 contracts and BRL 4.35 trillion in volume in September, compared to 78,606,873 contracts and BRL 5.23 trillion in August. The daily average of contracts traded in the derivatives markets in September was 2,826,930, in contrast to 3,417,690 in August. Open interest contracts ended the last trading day of September with 36,620,797 positions, compared to 37,821,302 in August.

BOVESPA Segment September 2011

In September 2011, the equity markets (BOVESPA segment) financial volume totaled BRL 131.437 billion, in 13,551,487 trades, with daily averages of BRL 6.25 billion and 645,309 trades. In August, financial volume totaled BRL 177.906 billion, the total number of trades 16,234,673, and the daily averages BRL 7.73 billion and 705,855 trades respectively.

Source: BM&FBOVESPA, 18.10.2011

Filed under: BM&FBOVESPA, Brazil, China, Events, Exchanges, Hong Kong, India, Risk Management, , , , , , , , , , , , , , , , , , , , , , , , , ,

October 15, 2011 • 11:03 pm 0

Brazil: BRIC exchanges form alliance

The exchanges of the Brics emerging markets bloc have announced plans to form an alliance in cross-listing and to expose foreign investors to their dynamic economies and to increase the liquidity of their trading venues (Brazil, Russia, India, Hong Kong (China), South Africa)

This initiative was announced at the 51st AGM of the World Federation of Exchanges (WFE) in Johannesburg.

The initiative brings together BM&FBOVESPA from Brazil, MICEX from Russia (currently merging with RTS Stock Exchange), Hong Kong Exchanges and Clearing Limited (HKEx, China) and Johannesburg Stock Exchange (JSE) from South Africa. The National Stock Exchange of India (NSE) and the BSE Ltd (India) have signed letters of support and will join the alliance after finalizing outstanding requirements.

At the first stage of this project the exchanges will begin cross-listing of financial derivatives on their benchmark equity indices. It is planned to launch cross-listed products by June 2012.

“Global investors are increasingly seeking exposure to leading developing markets,” says Ronald Arculli, chairman of HKEx and of the WFE. “Thanks to this alliance, investors will gain easier access to major equity index derivatives of the BRICS markets which will now be offered in local currency on the alliance exchanges”.

This is an important milestone in the history of developing countries, continues Mr Arculli. “The alliance enables more investors to gain exposure to the emerging economies of the BRICS group whose economic power is on the rise. From a global perspective this alliance highlights the growing significance of the BRICS economies and financial markets for the coming decade, and further underlines the importance of enhancing cooperation between the BRICS members”.

At the second stage of the project members of the alliance plan to jointly develop new products for cross-listing on their exchanges. “In addition to measuring market performance, equity indices may be used as underlying assets to create new products, which can be the next step in the alliance development”, says Russell Loubser, CEO of the JSE.

“The products designed at the second stage would then be cross listed and traded in local currencies,” says Edemir Pinto, CEO of BM&F BOVESPA. “They will also ensure easy access for investors to other emerging markets through locally listed products.”

The third stage may include further cooperation in joint products design and new services development.

“Apart from cross-listing products, there are other opportunities for growth and development within this alliance. For example, creation of joint products combining various underliers which will facilitate liquidity growth in the BRICS markets and improve the understanding of other developing markets by local investors,” says Ruben Aganbegyan, President of MICEX.

All the partnering exchanges estimate the potential for cooperation created by this alliance very positively.

“The BRICS exchanges alliance has a great potential as it will create avenues for Indian investors to diversify their portfolios and expand into other emerging markets. It will also provide unique opportunities to investors in other BRICS nations to participate and contribute in India’s growth. BSE will actively work towards bringing world-class products to India as well as developing new products for other BRICS markets.” says Madhu Kannan, CEO of BSE Ltd.

Interest towards the BRICS markets is supported by the above-average growth forecast for these regions, as well as the rising consumer power generated by growing middle classes in each of the participating economies” says Ravi Narain, MD of the National Stock Exchange of India.

According to the WFE these six exchanges represent a combined market capitalization of USD 9.02 trillion, the number of their ussuer companies totals 9.5 thousand.

As per the research by the Futures Industry Association these six exchanges accounted for 18% of the global turnover in financial derivatives in H1 of 2011.

Source: BM&FBOVESPA, FinExtra, 12.10.2011

Filed under: BM&FBOVESPA, Brazil, China, Exchanges, Hong Kong, India, News, , , , , , , , , , , , , , ,

August 2, 2011 • 10:08 am 0

NYSE Euronext Accelerates Growth in Asia with Strategic Acquisition of Metabit, a Leading Provider of Market Access Products

– Strategically complements NYSE Technologies’ product portfolio and Asian offerings

– Addresses growing customer interest and expanding Asian financial marketplace

– In-line with NYSE Technologies’ strategy of building a global liquidity network

 New York and Tokyo – August 1, 2011 – NYSE Euronext (NYX) announced today it has entered into a definitive agreement to acquire Metabit, a leading Tokyo-based provider of high performance market access products throughout Japan and Asia. Metabit will operate as a product line within the NYSE Technologies portfolio. The transaction is expected to close in third quarter of 2011. Terms of the acquisition were not disclosed.

Skilled with in-depth experience and understanding of financial markets in Asia, Metabit specializes in streamlined, low-latency technology solutions that enable industry-leading access to financial markets across Asia. Metabit’s products connect buy-side order flow with sell-side exchange participants and are designed exclusively for low latency direct market access (DMA) and exchange connectivity to markets through-out Asia. The company is headquartered in Tokyo, with offices in Australia and Hong Kong. Metabit has built a trading community of more than 140 trading firms in Asia.

“Metabit’s products are built in Asia for Asia, and this combination fits our strategy, our connectivity business and our customer interests,” said Stanley Young, CEO of NYSE Technologies. “Metabit has a highly experienced and respected management team, and we recognize and value the success Metabit has had in Asia, especially in Japan. We will continue the further development of this local focus while also maximizing the value of the NYSE Euronext brand and relationships.”

Mr. Young continued: “Furthermore, Japan and Asia are priorities for NYSE Euronext and we believe this is absolutely the right time to further invest in the region. We fully expect this transaction to accelerate our efforts as a leading technology provider across the Asia-Pacific region. We look forward to welcoming Metabit and its customers to NYSE Euronext, and to delivering the benefits of Metabit to our customer community.”

Daniel Burgin, CEO of Metabit, said: “Our combination with NYSE Technologies will be highly beneficial to delivering innovative solutions to our customers and to accelerate achieving our long-term business goals. We remain committed to our local business focus and service quality in Japan and throughout Asia, whilst being strengthened by NYSE Technologies’ product suite that is highly synergetic to our local solutions. The people and products of our combined companies will provide significant expertise and scale to NYSE Technologies’ business in the region. Joining forces represents a truly exceptional opportunity to build on our local success in order to increase our value proposition to our Japan and Asia customer base. We now have the opportunity to leverage our assets with NYSE Technologies and move to the next level. For the benefit of Asia-based customers, we will now expand our reach and capabilities globally.”

 Metabit’s Asia franchise has seen excellent growth as a result of a persistent product and client strategy and investments into Asia. Today, Metabit covers all DMA sectors outside Japan, ranging from China (“B” shares), India, Hong Kong, Korea, Singapore, Taiwan, Thailand, Philippines, Malaysia, Indonesia, Pakistan, Australia and New Zealand. Metabit’s products, being built in Asia for Asia, focus to connect the local broker community in each country, in combination with the traditional group of global trading firms. Metabit will continue to resell and provide support to users of CameronFIX as they have since 2002.

 Upon closing, Mr. Burgin will head the NYSE Technologies Asia business and report to Mr. Young. Peter Tierney, Managing Director of NYSE Technologies will become the Chief Operating Officer of the combined business in Asia, and together they will lead the business operations.

Source; NYSE Tech, 01.08.2011

Filed under: Asia, Australia, China, FIX Connectivity, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, News, Trading Technology, , , , , , , , , , , , , , , , , , , , , , , , , , , ,

March 30, 2011 • 9:45 pm 0

Metabit Expands Asian Trade Connectivity

Tokyo/Hong Kong, 29 March 2011: In the past year, Tokyo-based Metabit has concentrated on building its connectivity across Asia.  The company aims to be the local face of execution destinations in Asia and over the past eight months, it has added an extra 13 domestic DMA destinations, expanding domestic and cross-border access to Asian markets.

“Metabit is at the heart of  connectivity in Asia” comments Daniel Burgin, CEO of Metabit, “not just for providing access to Asia for global players, but also in particular for the local and domestic  industry in this region.”

“For example, in India we have 20 execution destinations of which 10 are domestic Indian brokers.  We are similarly successful with increased connectivity in other countries such as Korea and Taiwan.”

Overall, Metabit’s trading access has been extended to many markets ranging from Indonesia to Pakistan and Mainland China to Australia.  The company now has access to over 250 execution destinations, across all active DMA markets in Asia, including Japan.

“We want to maximise connectivity to and within Asia for our client base, who can directly access all execution destinations across the major and emerging markets in Asia either through Metabit’s intuitive XiliX trading platform, or through our MLH via a single FIX connection.”

Burgin adds a final comment, “Situated where we are in Tokyo, with offices in Hong Kong, Dalian and Sydney, we understand the needs of Asia market players, whether they want to trade globally or locally. You could say the mindset of Asia is in our blood – we think Asia, so our clients can trade Asia.”

About Metabit

Uniquely placed in Asia, with global experience and a real knowledge of Asian markets, Metabit provides the technology and support to help clients trade and connect effortlessly and efficiently.  The company delivers an intuitive trading platform that encompasses a well-established trading community and unrivalled exchange connectivity solutions.

Metabit provides ultra low latency DMA trading solutions for Asian markets, serving buy side and sell side clients.  It specialises in comprehensive compliance controls, whilst reducing transaction times and facilitating trading opportunities across all major markets across 14 Asian countries, including Japan.

Metabit’s flagship solutions are XiliX intuitive buy side trading platform and MLH a vendor neutral Market Liquidity Hub.  Alpha provides ultra-low latency exchange connectivity and Exsim simulates Asian and Japanese exchanges.  All Metabit’s products are powered by the CameronFIX engine.

Source: Metabit, 29.03.2011

Filed under: Asia, Australia, China, FIX Connectivity, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, News, Singapore, Thailand, Trading Technology, , , , , , , , , , , , , , , , , , , , , , , , , , , ,

March 12, 2011 • 1:58 am 0

ETF Landscape: Industry Highlights de February/Febrero 2011 – En/Sp – BlackRock

ETF – 02.2011 Report/Reporte

English

At the end of February 2011, the global ETF industry had 2,557 ETFs with 5,802 listings and assets of US$1,367.4 Bn, from 140 providers on 48 exchanges around the world. This compares to 2,091 ETFs with 3,998 listings and assets of US$1,001.9 Bn from 115 providers on 40  exchanges, at the end of February 2010.

We expect global AUM in ETFs and ETPs1to increase by 20–30% annually over the next three years, taking the global ETF/ETP industry to approximately US$2 trillion in AUM by early 2012. Considering ETFs separately, AUM should reach US$2 trillion globally by the end of 2012, US$1 trillion in the United States in 2011 and US$500 billion inEurope in 2013.

Taking ETFs and ETPs together, United States AUM should reach US$2 trillion in 2013, with European AUM reaching US$500 billion in 2012.

In Latin America, the ETF sector remains with 26 ETFs, 365 listings and assets of USD $10.2 billion of four providers on three Exchanges. Compares 20 ETS, 223 listings and assests of USD$ 9.3 billions and three providers  at three exchanges in february 2010.

Español:

El reporte ETF Landscape: Industry Highlights da a conocer la situación de los Exchange Traded Funds (ETFs) y Exchange Traded Products (ETPs) en el mes de febrero.

Se espera que los activos globales bajo administración de los ETFs y ETPs se incrementen de 20 a 30% anualmente durante los próximos tres años, llegando a aproximadamente USD $2 billones (trillion dollars) a principios de 2012.  A escala global, el sector de ETFs tuvo 2,557 ETFs con 5,802 listados y activos por USD $1,367.4 millones, de 140 proveedores en 48 mercados bursátiles en el mundo a finales de febrero de 2011, comparado con 2,091 ETFs con 3,998 listados y activos por USD $1,001.9 millones de 115 proveedores en 40 mercados a fines del mismo periodo del año pasado.

En Latinoamérica el sector de ETFs permanece con 26 ETFs, 365 listados y activos por USD $10.2 mil millones, de cuatro proveedores en tres bolsas, comparado con 20 ETFs, 223 listados y activos por USD$9.3 mil millones de tres proveedores en tres mercados a fines de febrero de 2010.

Source:BlackRock, March 10, 2011

Filed under: Asia, Australia, Brazil, Chile, China, Exchanges, Hong Kong, India, Indonesia, Japan, Korea, Latin America, Malaysia, Mexico, News, Services, Singapore, , , , , , , , , , ,

January 5, 2011 • 11:31 pm 0

2010 Top 10 Developments in Asia’s Electronic Trading Industry;Asia E-Trading

2010 was the year that Asia’s electronic trading industry focused on competition and services in what have traditionally been anti-competitive market places. We recorded over 1000 separate news items this year in Asia alone. We recognize that some of the developments that made our list will not be relevant to everyone but as a neutral third party observer we have come up with a list that we feel are the Top 10 Developments in Asia’s Electronic Trading Industry in 2010.

Original Article: Asia E-Trading 2010 Top Developments

10) The US CFTC now allows Malaysian futures brokers to deal directly with US customer. Perhaps individually not a Top 10 item as other brokers in Asia have been given the nod by the US regulator too. But when taken together with the recent Bursa Malaysia exchange technology upgrades in both the equity and futures segments, migration to the CME Globex platform and the record prices in the Crude Palm Oil contract Malaysia is now poised to take its place as a south-east Asian trading center. It will become a key anchor in the ASEAN link planned in the coming years.

9) China’s Index future launched April 16 after many years of delay was an important development not only for electronic trading but also for China’s budding algorithmic and hedge fund industry. The index has quickly become one of the largest index futures now traded in Asia. Though the back month doesn’t trade as much as it should it will only be a matter of time before that open interest picks up too. It shouldn’t be long before we see index options and an interest rate future for China as well.

8 ) Singapore Mercantile Exchange launched in late August this year. Asia is demanding more and more commodities as wealth and consumption grow around the zone. Generally, in Asia, commodity exchanges tend to offer just one product but the Singapore Merc is offering a basket of commodities to trade both physical and cash contracts. Trading is available in WTI crude, currency, gold and black pepper to name a few. Interestingly, though, is that the SMX is owned entirely by Financial Technologies Group (FTIL) an India based company that will see its exchange compete head on with SICOM, the SGXs commodities arm. Expect to hear more from the SMX this year.

7) The Japan Securities Clearing Corporation (JSCC) began clearing trades for Proprietary Trading Systems (PTS) in August substantially reducing the costs in the post trade for alternatives in Japan. While the playing field still isn’t level with the Primary exchanges, this development at the JSCC was a boost for Japanese PTSs. SBI Japannext, a consortium PTS, has regularly traded 1 percent of daily volume on its venue as a result of this change. We expect fragmentation to accelerate in 2011 in Japan which is already around 3 to 5%.

6) The launch of Chi-east. The joint venture between the Singapore Exchange and Chi-X called Chi-east made it to our list of top 10 developments in Asia electronic trading industry in 2010. The venture is a big step for Singapore in terms of spurring exchange competition and becoming a regional one-stop-shop for trading in Asia. Chi-East is a broker to broker alternative that will offer off-shore crossing using different clearing facilities around Asia.

5) China is now the largest agricultural commodity market in the world with the Dalian Commodity Exchange seeing record volumes in Corn and the Soybean complex. Coupled with the Shanghai Futures Exchange and its metal products the opportunities and future for the electronic trading industry vertical in China and the rest of the world are huge.

4) Exchange competition in Australia. On March 31 the Australian government announced its support for Exchange competition in Australia. While we are still waiting the promise of competition is compelling. The Australian Securities Exchange (ASX) has long held a monopoly over the industry with poor service and high trading fees (explicit and implicit). The ASX passed its supervisory duties to the Australian Securities and Investments Commission (ASIC) August 1 and with the Market Integrity Rules being finalized it shouldn’t be long before trading in Australia is much cheaper and better served. The ASX SGX merger could put a spanner in the works, however.

3) Smart Order Routing in India – SEBI finally permitted Smart Order Routing in India in August of this year much to the National Stock Exchanges chagrin. The Bombay Stock Exchange promptly offered this service to its customers in a bid to take market share from its larger rival. India has the tightest spreads in Asia of around 6bps and with SORs on offer we can expect spreads to tighten even further and volumes to shoot up. This long overdue regulation puts India on the road to offering best execution far ahead of its BRIC peer China. Deutesche equities was the first FII to receive approval for using SORs to both the NSE and BSE.

2) SGX / ASX Merger – We have seen it in the US and Europe and it has finally come to Asia, exchange consolidation. While the news of this reverberated around the world like a tsunami the reality, in AsiaEtrading’s view, is that this is a merger of survival. Both exchanges are very small and in aggregate are still quite small but would command the largest futures market in Asia (not including China’s commodities of course). The announcement is further evidence that Asia is moving to a more competitive industry and should be a wake-up call to the rest of the region. Our webinar on the topic had the panelists agreeing that the merger won’t happen. We’ll wait and see if this merger does indeed take place.

1) We ranked the Tokyo Stock Exchange Arrowhead upgrade as the most important development in Asia’s Electronic Trading industry in 2010. This was a significant and crucial development for one of the top exchanges in the world. Previously, order round trips were around 4 seconds and orders per second were on par with a Starbucks barista. The improved matching engine performance has tightened spreads, increased trading volumes and reduced order sizes. This in turn has attracted more sophisticated traders, reduced implicit trading costs and has generally benefited the Japanese trading industry significantly. Not only that, having come out of 2009 and the aftermath of the GFC, the successful upgrade was the turning point for what was a very activity business in 2010. To us it was the catalyst for the entire industry in Asia.

Source: www.asiaetrading.com, 02.01.2011

Filed under: Australia, China, Exchanges, Hong Kong, India, Japan, Malaysia, News, Singapore, Trading Technology, , , , , , , , , , , , , , , , ,

June 1, 2010 • 1:43 am 0

Brazil’s economy may be overheating: Roubini

Nouriel Roubini, the New York University professor who predicted the global financial crisis, said the Brazilian, Chinese and Indian economies may be overheating and developing asset bubbles.

The outlook for Brazil’s economy is “very positive,” though the crisis in the Eurozone countries and a slow “u- shaped” recovery globally could dent the country’s growth, Roubini said today at an event in Sao Paulo. “In Brazil, like in many other emerging market economies, there is now evidence of overheating of the economy,” Roubini said. “Expected and actual inflation is starting to rise, and that implies that over the next few quarters there has to be a tightening of monetary policy, gradually but progressively, in order to make sure that inflation expectations remain anchored.” Roubini recommended that Brazilian policy makers take steps to limit the appreciation of the real, including the “judicious” use of capital controls.

Source: IXE, 31.05.2010

Filed under: Asia, Brazil, China, India, Latin America, News, Risk Management, , , , , , , ,

May 19, 2010 • 2:47 am 0

MetaBit Trading Technology and Services opens Hong Kong Office

Tokyo/Hong Kong, 18 May 2010 – Specialist DMA and exchange connectivity solution provider MetaBit opens its Hong Kong office in May 2010 as part of its business expansion in Asia.
 
The new Hong Kong office represents a further strategic milestone for MetaBit to accelerate the expansion of its rapidly growing Asian client base and support its strategic objective to service Asia’s financial markets with localized and low latency trading solutions.  The Hong Kong office will promote and support institutional DMA, algo and manual trading across fourteen Asian markets.
 
MetaBit have also announced the appointment of Claus Kwon as managing director for the Asia Pacific ex-Japan business.
 
“I am very pleased to have Claus Kwon taking responsibility to further expand MetaBit’s business outside Japan” says Daniel Burgin, CEO at MetaBit.  “With Mr Kwon’s appointment, MetaBit continues to proactively build on its success and reputation earned through the quality of its technology and MetaBit’s continuous efforts in helping its clients achieve greater trading efficiency. Headquartered in Tokyo, our company is firmly rooted in Asia.  The addition of the Hong Kong office strengthens MetaBit’s ability to deliver the best solution with service catered for local needs.”
 
“I am excited to be joining MetaBit as their business expands in the region and as electronic trading continues to develop at an incredible rate in Asia,” says Mr Kwon. “MetaBit has a history of delivering innovative electronic trading solutions to both global and local clients in the Asia markets. Whilst MetaBit’s solutions are global by underlying technology, their unique infrastructure supports businesses that are serious about their Asia operations and want to stay competitive in this market.”
 
Today, MetaBit covers all of Asia’s DMA and Algo markets through its flagship trading platform XiliX, its vendor neutral FIX hub MLH (Market Liquidity Hub), and Alpha, its ultra-low latency exchange connectivity solution.
With the opening of a Hong Kong office, MetaBit – a pro-active promoter of the FIX Protocol – has formally joined the FPL.
 
About MetaBit –
 
MetaBit is a specialist low latency DMA trading solution provider in Asia reducing transaction processing times and  increasing trading opportunities by providing FIX enabled DMA and algorithmic trading access to market liquidity across fourteen Asia’s markets, including Japan.
 
MetaBit’s flagship products are the XiliX™ intuitive buy side DMA trading platform and MLH, a vendor neutral Market Liquidity Hub. Other products are Alpha, ultra-low latency exchange connectivity to Japan’s exchanges and EXSiM – Japan exchange simulators.  All of MetaBit’s products are powered by the CameronFIX Engine.

Source: Metabit, 18.05.2010

Koji Ito
+81-3-3664-4160
sales@meta-bit.com

Filed under: Asia, Australia, FIX Connectivity, Hong Kong, India, Japan, Korea, News, Singapore, Trading Technology, , , , , , , , , , , , , , ,

February 27, 2010 • 8:27 am 2

India: Co-location services at BSE premises

Bombay Stock Exchange permits DMA and Automated trading. Since Both DMA and Automated trading make use of strategies that exploit short-lived market opportunities and have a high dependence on speed of execution, the co-location facility will facilitate faster trade execution required for DMA and Automated trading. This Co- location Facility will be extended to members to host their servers near to BSE’s trading platform within BSE premises.

In this regard Trading Members may please note the following:

-   In view of limited availability, racks will be allotted on first come first basis based on the receipt of complete application along with the payment. However, if there is more demand than the availability, additional space will be made available.
-   The minimum period for which the racks are allotted will be one year and any renewal would require an advance notice of 30 days.
Format of the Application form for applying for usage of Co-location facility is enclosed Annexure-1
The racks will be allotted on 1 rack basis. No partial rack would be allotted.
Members may take private leased lines to the co located rack(s) for ongoing system administration of their servers. These lines can be availed from Airtel / MTNL / Reliance / Tata

-  Due to security reasons,  Physical access to co-location data centre will be restricted only to the initial set up and access for periodic or urgent maintenance if any would be only with prior permission from BSE and that such permission will be allowed only after Exchange trading hours.

-  The Exchange would not be responsible for insuring the member assets at the co-location premises.
-  The co location facility will be Tier3 grade with following specifications: -

  • Standard 19 Rack(s) with 3KVA power.
  • Uplink ports to BSE Campus LAN for BSE connectivity.

-    The Exchange will provide co-location facility on best efforts basis and it will not be responsible for any direct / indirect / consequential, harm / loss / damage of any kind for whatsoever reason including but not limited to power failure, air conditioning failure, system failure and loss of connectivity. Further, the Exchange shall not be liable for any stoppage in co-location facility owing to legal or regulatory requirement.

Format of the Application form for applying for usage of Co-location facility is enclosed in Annexure -1.

Further you can avail Co-location facilities offered by Third Party Providers. The charges and facilities offered through Third Party Providers will be intimated to the members in due course.

For further technical clarification and queries kindly contact Mr. Jitendra Choudhari on telephone number +91 22 22728301 and email on jitendra.choudhari@bseindia.com

Source: BSE, 26.02.2010

Filed under: Asia, Exchanges, India, News, Trading Technology, , , , , , ,

December 11, 2009 • 8:28 am 0

ETF: BlackRock ETF Landscape Industry Review November 2009

BlackRock has just published the November 2009 edition of its monthly ETF Landscape Industry Review. This report is a review of the Exchange Traded Funds (ETFs) and Exchange Traded Products (ETPs) industry through the end of October 2009.

At the end of October 2009 the global ETF industry had 1,859 ETFs with 3,327 listings and assets of US$941.85, from 97 providers on 40 exchanges around the world.

Download report hereBlack Rock ETF Lamdscape November 2009

Source: MondoVisione, 11.12.2009

Filed under: Argentina, Asia, Brazil, China, Hong Kong, India, Indonesia, Japan, Korea, Latin America, Library, Malaysia, Mexico, News, Risk Management, Singapore, Thailand, , , , , , , , , , , , ,

November 25, 2009 • 10:28 pm 0

BSE launches new access platform and terminal: Fastrade

Mumbai, Nov 24 (PTI) The Bombay Stock Exchange today launched its new market access platform–Fastrade. Fastrade is a terminal and Internet-based market access solution developed by Marketplace Technologies, a group firm of the BSE, the exchange said in a circular.

However, the current market access solution–BSE On-line Trading BOLT)–provided by the exchange will continue to function on as is basis, the circular added. “Fastrade is being offered in addition to the BOLT. The BOLT will continue to be supported by the BSE,” the bourse said.

For trading on the BSE cash and derivatives segment, the new market access platform will be provided free of cost to all members of the exchange, it added.

Source: Yahoo India, 24.11.2009

Filed under: Asia, Exchanges, India, News, Trading Technology, , , ,

November 19, 2009 • 9:56 am 0

Asia:NPLs and SMEs to provide distressed opportunities

Distressed specialists define their terminology and give their take on the market at the second AsianInvestor/FinanceAsia Distressed and Troubled Asset Investing Summit, held in Tokyo.

“What exactly is distress?” reflected AsianInvestor editor Jame DiBiasio at a panel he moderated on Monday at the Tokyo Distressed and Troubled Asset Investing Summit. “Is it a good asset from a distressed seller, or an asset itself that is in bad shape?”

The panel of distressed experts plumped for the former — they want good assets that are being flogged off by an imperilled owner.

“We prefer something that requires re-engineering, assuming that there is some enterprise value left,” said Steve Moyer, a portfolio manager at Pimco. “Banks couldn’t afford to take the losses on clearing portfolios of loans until they rebuild capital. That accomplished, they can begin the process.”

Edwin Wong, a former distressed-investing managing director at Lehman Brothers, and regarded by some in those halcyon days as the finest exponent of distressed investing practice in the hemisphere, recently started his own fund management company, SSG Capital Management.

“Unlike the Asian crisis of the late 1990s, in which all sizes of companies went bankrupt, we’re not seeing it this time around so much with the big companies,” he said. “However, private companies and smaller corporates have built up a lot of leverage, and that’s where we see the main opportunity in China, India and Indonesia.”

In answer to the old conundrum ‘what is the most famous thing that Belgium has ever produced?’, perhaps Michel Lowy will be a contender, if his new firm SC Lowy succeeds.

Lowy says distressed investors have been sharpening their pencils for the past 18 months, expecting lots of deals, only to be disappointed by the available opportunities. He hopes that will change as commercial banks finally bite the bullet and sell off non-performing portfolios.

He also perceives differences geographically in the structure of opportunities on offer. “In North Asia and other sophisticated Asian economies, there is a weighting towards public companies,” Lowy says. “Elsewhere in Asia, there are more family-owned companies. The latter are often in places where the creditor has more limited rights. It’s going to be harder to gain control of a company there by converting debt to equity.”

Source: AsianInvestor.net, 18.11.2009

Filed under: Asia, Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, News, Risk Management, Services, Singapore, Thailand, Vietnam, , , , , ,

November 17, 2009 • 9:14 am 0

China and India – Himalayas, Water and growing conflicts

The brewing disputes and growing concerns of the Himalayan Region by worlds two most populus nations, is a further indication of increasing dangers of latent resource wars, particularly on water. The continuing desertification in China and migration to coastal region increase pressure. While planned deviation of water ways to Chinese low lands could severely affect South- and South East Asia, see also

Political Hands across the Himalayas, FT, 15.11.2009

Excerpt: India and China are touted as white knights coming to the rescue of the world economy. Considerable hope rests on these two countries, with fast-paced growth, developing domestic markets and high savings rates, reviving demand and leading other languishing parts of the world out of recession.

The two rising powers, however, may yet be clashing knights. For in New Delhi it is fear of Beijing, rather than partnership, that all too frequently characterises the trans-Himalayan relationship. While some size up trade balances and growth trajectories, others are measuring missile ranges and comparing military parades.

Mr Mishra advised Atul Behari Vajpayee, the former premier. His views, albeit hawkish, are respected by the current Congress party-led government and carry weight with the diplomatic community.

So his recent forecast that India might face a second military front within five years turned heads. The former intelligence chief predicted that India could find itself locked in an armed stand-off simultaneously with Beijing and Pakistan, the traditional rival.

Mr Mishra’s suspicions of China have been newly aroused by Beijing’s warm relationship with Islamabad and its supply of military hardware to Pakistan’s army.

They have also been stoked by territorial claims to Arunachal Pradesh, a north-eastern Indian state, and predictions on Chinese websites that India, a country of huge diversity, is doomed to fall apart.

Mr Mishra says China’s stridency in its territorial ambitions has grown over the past two years to a level not seen since the early 1960s. Moreover, he accuses China of trying to bring into question India’s sovereignty over the state at the international level.

Military strategists interpret China’s policies as a regional power play. They say that tying India up within its own borders prevents it from projecting itself in the region and rivalling China.

In spite of the fighting talk in India, the relationship between India and China holds much more potential than antagonism. China’s impressive record of infrastructure development and lifting people out of poverty holds lessons for India. Likewise, India’s democratic credentials and inclusiveness are instructive to China.

Read full article hear:  15.11. 2009 by James Lamont in New Delhi

The high stakes of melting Himalayan glaciers, CNN 05.10.2009

Execerpt – The glaciers in the Himalayas are receding quicker than those in other parts of the world and could disappear altogether by 2035 according to the 2007 Intergovernmental Panel on Climate Change (IPCC) report. The result of this deglaciation could be conflict as Himalayan glacial runoff has an essential role in the economies, agriculture and even religions of the regions countries.

Satellite data from the Indian Space Applications Center, in Ahmedabad, India, indicates that from 1962 to 2004, more than 1,000 Himalayan glaciers have retreated by around 16 percent. According to the Chinese Academy of Sciences, China’s glaciers have shrunk by 5 percent since 1950s.

Dr. Vandana Shiva, an environmental activist, physicist and leader in the International Forum on Globalization, has just returned from a “Climate Yatra,” a research journey to the Himalayas to study the impact of climate change and the glacial melt upon communities in Asia.

“Himalayan rivers support nearly half of humanity,” Dr. Shiva told CNN. “Everyone who depends on water from the Himalayas will be affected.”

Both India and China are exploring opportunities to harness Himalayan waters for hydroelectric power projects, and while the initial melt promises to provide plenty of water for both sides, the loss of glaciers could lead to water shortages further in the future.

Water-related conflicts have already been witnessed in other parts of the globe such as in the West Bank and in Darfur.

According to Himanshu Thakkar of the South Asia Network on Dams, Rivers and People, almost 70 percent of the non-monsoon flows in almost all the Himalayan rivers come from glacier melt.

International water security issues within Asia could be likely since the waters of the Indus, Ganges and the Brahmaptura basins flow into China in the upstream, and are shared across South Asia in the downstream.

Dr. Shiva believes the situation will render major security issues, between India and China particularly, as flows reduce and demands intensify.

Read full article here: CNN, 05.10.2009


In retreat: the roof of the world is experiencing rapid summer melting.

 

Filed under: Asia, China, India, Malaysia, News, Risk Management, Singapore, Thailand, Vietnam, , , , , , , , , , , , , ,

November 14, 2009 • 11:53 pm 2

Mexico the NEW China ?

When it comes to global manufacturing, Mexico is quickly emerging as the “new” China.

According to corporate consultant AlixPartners, Mexico has leapfrogged China to be ranked as the cheapest country in the world for companies looking to manufacture products for the U.S. market. India is now No. 2, followed by China and then Brazil.

In fact, Mexico’s cost advantages and has become so cheap that even Chinese companies are moving there to capitalize on the trade advantages that come from geographic proximity.

The influx of Chinese manufacturers began early in the decade, as China-based firms in the cellular telephone, television, textile and automobile sectors began to establish maquiladora operations in Mexico. By 2005, there were 20-25 Chinese manufacturers operating in such Mexican states Chihuahua, Tamaulipas and Baja.

The investments were generally small, but the operations had managed to create nearly 4,000 jobs, Enrique Castro Septien, president of the Consejo Nacional de la Industria Maquiladora de Exportacion (CNIME), told the SourceMex news portal in a 2005 interview.

China’s push into Mexico became more concentrated, with China-based automakers Zhongxing Automobile Co., First Automotive Works (in partnership with Mexican retail/media heavyweight Grupo Salinas), Geely Automobile Holdings (PINK: GELYF) and ChangAn Automobile Group Co. Ltd. (the Chinese partner of Ford Motor Co. (NYSE: F) and Suzuki Motor Corp.), all announced plans to place automaking factories in Mexico.

Not all the plans would come to fruition. But Geely’s plan called for a three-phase project that would ultimately involve a $270 million investment and have a total annual capacity of 300,000 vehicles. ChangAn wants to churn out 50,000 vehicles a year. Both companies are taking these steps with the ultimate goal of selling cars to U.S. consumers.

Mexico’s allure as a production site that can serve the U.S. market isn’t limited to China-based suitors. U.S. companies are increasingly realizing that Mexico is a better option than China. Analysts are calling it “nearshoring” or “reverse globalization.” But the reality is this: With wages on the rise in China, ongoing worries about whipsaw energy and commodity prices, and a dollar-yuan relationship that’s destined to get much uglier before it has a chance of improving, manufacturers with an eye on the American market are increasingly realizing that Mexico trumps China in virtually every equation the producers run.

“China was like a recent graduate, hitting the job market for the first time and willing to work for next to nothing,” Mexico-manufacturing consultant German Dominguez told the Christian Science Monitor in an interview last year. But now China is experiencing “the perfect storm … it’s making Mexico – a country that had been the ugly duckling when it came to costs – look a lot better.”

The real eye opener was a 2008 speculative frenzy that sent crude oil prices up to a record level in excess of $147 a barrel – an escalation that caused shipping prices to soar. Suddenly, the labor cost advantage China enjoyed wasn’t enough to overcome the costs of shipping finished goods thousands of miles from Asia to North America. And that reality kick-started the concept of “nearshoring,” concluded an investment research report by Canadian investment bank CIBC World Markets Inc. (NYSE: CM)

“In a world of triple-digit oil prices, distance costs money,” the CIBC research analysts wrote. “And while trade liberalization and technology may have flattened the world, rising transport prices will once again make it rounder.”

Indeed, four factors are at work here.

Mexico’s “Fab Four”

  • The U.S.-Mexico Connection: There’s no question that China’s role in the post-financial-crisis world economy will continue to grow in importance. But contrary to the conventional wisdom, U.S. firms still export three times as much to Mexico as they do to China. Mexico gets 75% of its foreign direct investment from the United States, and sends 85% of its exports back across U.S. borders. As China’s cost and currency advantages dissipate, the fact that the United States and Mexico are right next to one another makes it logical to keep the factories in this hemisphere – if for no other reason that to shorten the supply chain and to hold down shipping costs. This is particularly important for companies like Johnson & Johnson (NYSE: JNJ), Whirlpool Corp. (NYSE: WHR) and even the beleaguered auto parts maker Delphi Corp. (PINK: DPHIQ) which are involved in just-in-time manufacturing that requires parts be delivered only as fast as they are needed.
  • The Lost Cost Advantage: A decade or more ago, in any discussion of manufactured product costs, Asia was hands-down the low-cost producer. That’s a given no more. Recent reports – including the analysis by AlixPartners – show that Asia’s production costs are 15% or 20% higher than they were just four years ago. A U.S. Bureau of Labor Statistics report from March reaches the same conclusion. Compensation costs in East Asia – a region that includes China but excludes Japan – rose from 32% of U.S. wages in 2002 to 43% in 2007, the most recent statistics available. And since wages are advancing at a rate of 8% to 9% a year, and many types of taxes are escalating, too, East Asia’s overall costs have no doubt escalated even more in the two years since the BLS figures were reported.
  • The Creeping Currency Crisis: For the past few years, U.S. elected officials and corporate executives alike have groused that China keeps its currency artificially low to boost its exports, while also reducing U.S. imports. The U.S. trade deficit with China has soared, growing by $20.2 billion in August alone to reach $143 billion so far this year. The currency debate will be part of the discussion when U.S. President Barack Obama visits China starting Monday. Because China’s yuan has strengthened so much, goods made in China may not be the bargain they once were. Those currency crosscurrents aren’t a problem with the U.S. and Mexico, however. As of Monday, the dollar was down about 15% from its March 2009 high. At the same time, however, the Mexican peso had dropped 20% versus the dollar. So while the yuan was getting stronger as the dollar got cheaper, the peso was getting even cheaper versus the dollar.
  • Trade Alliance Central: Everyone’s familiar with the North American Free Trade Agreement (NAFTA).  But not everyone understands the impact that NAFTA has had. It isn’t just window-dressing: Mexico’s trade with the United States and Canada has tripled since NAFTA was enacted in 1994. What’s more, Mexico has 12 free-trade agreements that involve more than 40 countries – more than any other country and enough to cover more than 90% of the country’s foreign trade. Its goods can be exported – duty-free – to the United States, Canada, the European Union, most of Central and Latin America, and to Japan.

In the global scheme of things, what I am telling you here probably won’t be a game-changer when it comes to China. That country is an economic juggernaut and is a market that U.S. investors cannot afford to ignore.  Given China’s emerging strength and its increasingly dominant financial position, it’s going to have its own consumer markets to service for decades to come.

Two Profit Play Candidates

From a regional standpoint, these developments all show that we’re in the earliest stages of what could be an even-closer Mexican/American relationship – enhancing the existing trade partnership in ways that benefit companies on both sides of the border (even companies that hail from other parts of the world).

In the meantime, we’ll be watching for signs of a resurgent Mexican manufacturing industry that’s ultimately driven by Chinese companies – because we know the American companies doing business with them will enjoy the fruits of their labor.

Since this is an early stage opportunity best for investors capable of stomaching some serious volatility, we’ll be watching for those Mexican companies likely to benefit from the capital that’s being newly deployed in their backyard.

Two of my favorite choices include:

  • Wal Mart de Mexico SAB de CV (OTC ADR: WMMVY): Also known as “Walmex,” this retailer has all the advantages of investing in its U.S. counterpart – albeit with a couple of twists. Walmex’s third-quarter profits were up 18% and the company just started accepting bank deposits, a service that should boost store traffic. And while the U.S. retail market is highly saturated – which limits growth opportunities – there are still plenty of places to build Walmex stores south of the border. After all, somebody has to sell products to all those thousands of workers likely to be involved in the growing maquiladora sector.
  • Coca-Cola FEMSA SAB de CV (NYSE ADR: KOF): Things truly do go better with Coke – especially higher wages and an improved lifestyle. According to Reuters, Mexicans now consume more Coca-Cola beverages per capita than any other nation in the world. The company just posted a 25% jump in its third-quarter net earnings, aided by a strong 21% jump in revenue. Coca-Cola FEMSA continues to experience strong growth from its Oxxo convenience stores, and strong beer sales, too. And all three product groups are logical beneficiaries of strong maquiladora development and the growing incomes and rising family wealth that will translate into higher consumer spending in the immediately surrounding areas.

Source: Money Morning, 13.11.2009 by Keith Fitz-Gerald, Chief Investment Strategist,  Money Morning/The Money Map Report

Filed under: Brazil, China, Countries, India, Latin America, Mexico, News, , , , , , , , , , , , , , , , ,

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