Buy- and sell-side firms agree that efforts to harmonise equity trading in the Association of South East Asian Nations (ASEAN) will encourage more investment and faster technological evolution in the region, according to the latest study from research firm TABB Group.
Five ASEAN countries – Indonesia, Malaysia, Philippines, Thailand and Singapore – agreed to create an electronic linkage between their exchanges in February 2009 for the trading of equities. A sixth nation, Vietnam, joined the initiative in September.
According to TABB’s survey of European and US buy- and sell-side firms, 84% of the sell-side and 64% of buy-side firms expressed an interest in the linkage, with buy-side demand for access to the region expected to grow as liquidity and trading opportunities increase. The linkage is also expected to ease the regulatory restrictions imposed when trading in ASEAN countries directly.
However, 71% of sell-side firms questioned noted that client demand for trading in ASEAN markets is currently low, with 53% of buy-side investors commenting that a lack of liquidity and investment opportunities were potential roadblocks to investing there at the moment.
Buy-side respondents contended that robust technology would be a key factor in the exchange linkage’s success because it would lower trading costs and increase liquidity. To be comfortable trading in ASEAN countries, buy-side firms expect no outages, seamless connectivity and consistent data dissemination. Furthermore, sell-side firms considered the provision of real-time market data to power electronic trading as crucial for executing in ASEAN.
“More seamless access will drive brokers already operating in other parts of Asia to begin trading in the ASEAN markets, with the sell-side set to benefit most from that seamless access,” said Kevin McPartland, senior analyst at TABB Group and author of the report. “High costs and time zones do tend to limit buy-side market data usage outside of the region.”