Greenwich Associates Announces 2013 Share and Quality Leaders

The Asian equity market is attracting fierce competition from a large and diverse group of brokers. As institutions pick up the pace of their trading activity in a revived Japanese equity market, they are calling on the services of a brokerage industry that changed significantly during the market’s extended lull.

“What is most notable about the Asian market is the tight grouping of brokers not just among a small handful of firms, but down to the top 10 brokers,” says Greenwich Associates consultant Jay Bennett.   

The Asian market supports this large and evenly matched universe of brokers due to the heterogeneous nature of the region. Institutions in Asia use an average of 20 brokers for research covering individual country markets, the many small-and mid-cap names that make up each market, and the sectors that span the region. From the perspective of the sell-side, this diversity provides brokers with opportunities to carve out specialized niches in sectors, regions and countries.
 
Over the past several years, some of the large foreign banks that compete in Japan’s equity market cut back on the resources they commit to this business. During much of this time the leading domestic Japanese brokers moved in the opposite direction by investing in their equities business and expanding their own coverage teams.

This bet has paid off with the resurgence in trading activity brought on by the Abe stimulus plan over the past year. The top five domestic Japanese equity brokers increased their aggregate vote share in research and advisory services by 8.5 percentage points over the 12-month period; Mizuho Securities and SMBC Nikko Securities each gained four percentage points or more.  “For one firm to win four points of share in a single year in any market is unusual,” says Greenwich Associates consultant John Feng. “For two firms to do it is nearly unprecedented.”

Cash Equities
Bank of America Merrill Lynch, CLSA and Deutsche Bank are tied as the top research providers in Asian equities, with each firm capturing a vote share of 8.6–8.9%. Morgan Stanley and Credit Suisse are next, tied with vote shares of 7.7–8.3%. As in research, Bank of America Merrill Lynch and CLSA each claim a share of the market lead in trading with trading shares of approximately 9.0%. Credit Suisse, Morgan Stanley and UBS tie for the next spot, with trading shares of 8.2–8.6%.

In research and advisory services domestic firms dominate. Nomura Securities leads all competitors with a 13.8% vote share, followed by Daiwa Securities at 9.6% and Mizuho Securities and SMBC Nikko Securities, which are statistically tied with vote shares of 8.4–8.8%. Nomura Securities is also the clear leader in cash equity trading, with a trading share of 10.8%. Second is Daiwa Securities at 9.0%, followed by Morgan Stanley, UBS and Mitsubishi UFJ Morgan Stanley Securities, which are statistically tied with trading shares of 7.3–7.6%.

In Asia, CLSA is the 2013 Greenwich Quality Leader in Equity Sales, Research & Analyst Service and Trading. Bank of America Merrill Lynch joins CLSA in Equity Sales Quality, while Morgan Stanley joins CLSA in Equity Trading Quality. In Japan, Nomura is the 2013 Greenwich Quality Leader in Equity Sales, Research & Analyst Quality and Trading.

Equity Derivatives
Institutions in Asia most often use Morgan Stanley, Goldman Sachs and Bank of America Merrill Lynch as brokers on trades of Asian Equity Options and Volatility Products, followed by Deutsche Bank and then four firms tied for the next spot: Citi, Bank of America Merrill Lynch, Credit Suisse, UBS and Nomura Securities. These firms are the 2013 Greenwich Share Leaders in Asian Equity Option and Volatility Product Coverage.  The 2013 Greenwich Quality Leaders in these products are Morgan Stanley, Nomura Securities, and UBS.

In Japan, three firms tie for the lead spot in market penetration—Goldman Sachs, Morgan Stanley and Nomura Securities—and three firms tie for second place—Bank of America Merrill Lynch, Deutsche Bank and J.P. Morgan. These firms are the 2013 Greenwich Share Leaders in Japanese Equity Options and Volatility Product Coverage. The 2013 Greenwich Quality Leaders are Bank of America Merrill Lynch, BNP Paribas and Morgan Stanley.