Singapore

What is a Convertible Bond (CB)? CBs are hybrid instruments combining a corporate bond and a buy option on the underlying share. They thus offer the best of both worlds: their equity component allows investors to participate in market upswings, while their bond component offers a protective buffer. Their performance is dictated by credit spreads and the performance of the underlying share. These traits have made this asset class the object of increasing interest, as reflected by the major inflows into dedicated directional funds over the past three years. A special dynamism is evident in the Asian CBs market – the only market of any discernible size among the emerging regions, with USD 20 billion of new issues this year as of November 30th 2011 (48% of 2011 total number of issues / 28% of the total volume). Attraction of Asian CB market? Ø Play Growth While Europe’s future remains uncertain and growth in the US is only gradually recovering, the emerging nations, although not immune to the global slowdown, are still growing healthily. Traditionally regarded as export-oriented economies, the countries of the Asia-Pacific region are establishing themselves as major drivers of global growth by virtue of their size and the pace of progression in their consumption and GDP. Ø Look for asymmetry Against this backdrop, CBs are a smart way for investors to expose themselves to Asian growth, enabling them to benefit considerably from equity market rallies with a “parachute” effect in the event of a decline. They offer an attractive rate of return (superior to their European or US counterparts for the same credit rating) and inexpensive options: the average options of Asian CBs today look cheap. It is worth mentioning that equity sensitivity is quite low in the universe at present. Lower deltas mean the credit component is stronger. Furthermore, it reacts with more volatility for a higher beta region. Ø Dynamism and Diversification With capitalization totalling USD 78 billion (according to UBS), the Asian CB market consists of about 600 securities and constitutes a dynamic and diversified market in which all sectors and major economies of the region are represented. However, roughly half of the pool is issued by Chinese and Indian companies. Even if nowadays about 60% of the pool is listed in USD, we are seeing an increasing number of bonds issued in local currencies (HKD, SGD, AUD, KRW, CNY). Another characteristic of this market is that a large proportion of the bonds issued are not rated, even if the issuing companies are, themselves, subject to a rating (S&P, Moody’s, Fitch). The absence of a rating is not, however, an indication of poor quality. Indeed, a number of issuers are blue chip regional companies. Ø Cheapness CBs are currently attractively valued in technical terms. This is especially true for Asian CBs. The attached chart compares the price of CBs with their valuation based on a sum-of-the-parts analysis (sum of the valuation of the bond component and the option). In other words: Participate in the region’s potential without assuming all the risks CBs thus currently offer an attractive risk/return profile and serve as a useful tool for boosting the performance of diversified portfolios. By virtue of their asymmetric profile, they allow investors to take advantage of the huge potential offered by the region without being exposed to all of the risks. Source: BoA Merrill Lynch

The next generation of cross-border electronic trading is gaining strong traction over the past few years in the global financial markets. Ironically, in some Asian markets, it can take seconds to execute an equities order. For algorithmic traders who use sophisticated algorithms to trade thousands of shares in mere milliseconds, any slowdown in the transactions can mean loss instead of profit. The spilt second is where traders’ enormous opportunities lie.In other words, slow trading speedscan be seen asthe result of hidden transaction costs. Yet, if financial institutions can deliver high speed capabilities while keeping costs down, they can gain a valuable competitive edge while elevating their game. High Frequency Trading (HFT) involves the use of computerized algorithms to generate short-term trading signals with a very short risk-holding period.In 2010, HFT accounts for 70% of the turnover of equity markets and over 50% of U.S. equity trade volume. In Asia, HFT drives 40% of market trading activity in Tokyo and around 10% to 30% in Asia Pacific. So what has been holding Asia’s financial markets back over the past few years? State regulations, opposition from entrenched interests and the lack of critical IT infrastructure are some of the key reasons. The current IT infrastructure of many financial exchanges and financial service institutions in Asia is to be enhanced to meet the anticipated demands for micro-second transactions.Many Asian financial institutions are wising up to this fact – local and regional investors, hedge fund managers and investment banks are exploring all possible means to step up for the IT arms race. Now, IT infrastructure has been widely regarded as a necessity to capture this spilt second advantage and compete with its peers. For most algorithmic traders, HFT means the need for high performance for cross-border electronic transactions. How can financial institutions improve their connections to key Asian financial markets? This calls for a new generation of sophisticated Financial Data Centres that provides proximity advantages and ultra-low latency solution. Proximity advantages, as the name suggested, means proximity to the financial exchange. In Hong Kong, for instance, the first Financial Data Centre, to be completed in 2013, is built next to the Hong Kong Exchange’s next generation data centre in Tseung Kwan O.This physical proximity of the trading systems will significantly matter on the latency networks.

Islamic Risk Management standards aim at enhancing and improving the current standards in the shariah compliant banking industry.

Everyone working within financial services agrees that the number and frequency of new regulations is increasing dramatically, resulting in a significant diversion of management attention and resources without improving operational effectiveness or firm performance.

CIMB Group will introduce new Islamic products in Indonesia and Singapore this year through its Islamic units in the two countries.

So loan growths are expected to moderate significantly in 2H12, but which bank remains a relative outperformer in uncertain times?

Guess who DBS selected as dealers under the programme?

This is Teradata’s first partner bid with Microgen.

And the outlooks on 79% of the banks in the region are stable under the new criteria.

Find out what Asia’s heads of business banking including HSBC’s Noel Quinn, UOB’s Eric Tham and Macquarie Securities' Ismael Pili have to say about the EU crisis and Asia’s banks.

The lender aims to take advantage of yuan's rise to become major offshore trader of the currency.

OCBC Bank launched of its new S$20 million account opening system at all 56 OCBC Bank branches in Singapore.

Singapore dollar lending in October grew a modest 0.3 percent to 406.5 billion Singapore dollars only.

“Now this is not the end. It is not even the beginning of the end, but it is, perhaps, the end of the beginning.” Winston Churchill, 10 November 1942 There is no doubt that regulation is a driving force in the payments industry and will be so for the foreseeable future. At the moment however, many minds are focused on the Single Euro Payments Area (SEPA) End Date regulation. Formally known as the European Commission’s proposal for a regulation establishing technical requirements for Credit Transfers and Direct Debits in Euros and amending regulation (EC) No 924/2009, the SEPA End Date regulation promises to deliver a clear deadline for migrating domestic payments instruments on to SEPA standards. This deadline is important because September 2011 migration rates are far from matching set expectations, with only 21% migration for SEPA Credit Transfers (SCTs) and just above 0.1% for SEPA Direct Debits (SDDs) having taken place so far. In the original proposal, full migration to SCTs will occur 12 months after the regulation goes into force and for SDDs, 24 months after enforcement. Member States are permitted to set earlier dates than those outlined in the proposal. Since the proposal was published and debate has taken place at the EU Parliament, most observers now believe a single migration End Date will be imposed, probably for the end of January 2014 for both SCT and SDD migration, that is 24 months after the regulation is voted upon. The next few weeks will still see debates around smaller issues regarding the obligations of end users, consumer protection, etc. The Regulation itself is bound to be voted upon and published beginning of next year. There is therefore not much time for reflection on next steps. Act Swiftly, Act Decisively Although the SEPA advent will hit Eurozone and European banks at first, side effects will be felt for Asian banks running operations in the SEPA zone or transacting in EUR with European banks. This At a time when the SEPA landscape is still being shaped with the forthcoming End Date Regulation, Asian banks should start assessing how they will be impacted now. Some steps to take include:

Imagine having instant and total control of your money. To spend, save, invest and pay whenever you need to just by tapping your finger or saying the word. Today, by and large, you still have to come to your financial service provider, be it online, on a mobile phone or in the branch. But mobile device sophistication, network speed and innovation are converging to place banking straight into your hands. For consumers these developments are good news as they will have greater control of their money than ever before. For banks, however, they represent one of the biggest and most fundamental shifts in the rules of engagement that we have seen in a lifetime. In the future the basis of competition for banks will not be products or channels, but how well they understand the needs of their customers. It will be about how much value they can add to people’s lives. We live differently now. Together, technology and customer demand are driving a complete transformation of how banking is done. There is a growing global tribe of consumers who want anytime anywhere access to services and banking is no exception. These consumers are looking for personalised experiences and they want to be treated as individuals, not aggregated together. The implication of this is that banks cannot continue as before and expect business to stay the same.Banks have to become not only innovators, but also proactive in coming up with solutions that meet customers’ needs, predicting those needs before customers know they have them. This means banks have to transform from utilities into service organisations that offer a great lifestyle experience. I believe that banks now face a choice. Either to continue as they are and see new competitors infringe upon their core business – or innovate and become market disruptive, expanding those same boundaries to take banking into new territory. There is real scope in the next few years for banking to evolve beyond the basics of savings and lending to a much broader set of services. One obvious example is unlocking data in order to offer customers personalised, value-added services – alerting them to nearby deals or new and better ways to grow their wealth. There is no point pretending a transformation on this scale is going to be easy. Banks are large and complex organisations not traditionally focused on innovation or speed-to-market. Today, many face issues getting the right technology for their customers. It is a long leap from there to the brave new world of banking. In the future, banks will have to become serial innovators, move with the urgency of start-ups and look for ideas everywhere. The task is not only to meet customers’ needs but to capture their imagination. It is a challenge but – in an increasingly digitised world – not one exclusively faced by banks. Going forward, the industry has to pay more attention to how banking fits into different contexts – what it lets people do. In many ways, we have only just scratched the surface of how banking is going to change. As the boundaries of consumer banking become increasingly blurred, banks will need to forge new partnerships to meet customer demand. Banks need to study not so much each other, but other industries more adept at engaging and inspiring consumers. They will need to be prepared to form strategic alliances outside of the traditional confines of banking to reach people in the spaces where life is now led.  

Blame it on supply and demand as more senior bankers now want to have Asia experience on their CV.