Asia Pacific Market Structure Chartbook

Transcription

1 Q 7 AUTHOR Ofir Gefen Managing Director Co-Head of Execution Services ITG Asia Pacific ofir.gefen@itg.com Heath Mooney Director Senior Sales Trader ITG Asia Pacific heath.mooney@itg.com Bobby So Vice President Product Manager Algorithms ITG Asia Pacific bobby.so@itg.com Erin Stanton Managing Director Head of Analytical Products and Research ITG Asia Pacific erin.stanton@itg.com Clare Witts Director Head of Client Relationship Management ITG Asia Pacific clare.witts@itg.com CONTACT Asia Pacific Canada EMEA United States info@itg.com Asia Pacific Market Structure Chartbook PREPARING FOR MSCI Pakistan Moving to MSCI EM Index in June The move for Pakistan stocks from the MSCI Frontier Markets to its Emerging Markets Index has sparked increased client interest in trading and trade cost analysis of stocks listed on the Pakistan Stock Exchange (PSX). The inclusion reflects growing interest from international investors in Pakistan following strong performance of the KSE-, and the move is expected to trigger further inflows from foreign investors tracking the MSCI EM index. On a transaction cost basis, Pakistan still remains relatively expensive compared with other emerging market countries, averaging 8 against implementation shortfall in 6. Costs have come down from highs of. However, given the strong direction of the KSE during this time, institutional investors should pay attention to market direction, which has a significant impact on overall costs of entering and exiting investments. Average IS Costs for Pakistan Stocks Implementation Shortfall () Source: ITG Year Performance of KSE- 99. Source:

2 Q 7 REGIONAL TRADING COST SUMMARY Expected impact costs decreased across most countries in the region, driven by a combination of more favorable liquidity conditions and lower historical and intraday volatility. Malaysia was the only country to see a small increase in costs this quarter, where higher volatility counteracted the higher trading volumes. Expected Impact Costs for a US$mm Market-Level Portfolio Q 6 vs. Q Q 6 Q 7 Demand for Liquidity of a US$mm Market-Level Portfolio as of Q %MDV Note: The average order size in New Zealand was very large and was removed from this chart for scale purposes.

3 Q 7 POINTS OF INTEREST BY MARKET February and March proved to be an active trading period and increased volumes were observed in Hong Kong, Australia, Singapore, Taiwan, India and Malaysia. Intraday volatility decreased across most markets, resulting in more favorable trading conditions than those at the end of 6. Developed AUSTRALIA (p): The intraday volume curve remained relatively flat throughout the middle of the trading day, averaging between % and with more than % of total volume traded in the closing auction. February saw the second highest volume over the past months and was coupled with tighter spreads. HONG KONG (p6): Average daily volume traded was just over US$8 billion in March 7 as overall market capitalization continued to increase to just over $.7 trillion. Closing auction volume was around.% of daily volume for the second quarter in a row, and the utes prior to the auction continued to be the most active trading period of the day. JAPAN (p7): Volumes decreased from highs seen in November and December 6 while market cap remained around $6 trillion. Intraday volatility decreased significantly from Q with the open and pre- and post-lunch breaks showing the largest shifts. NEW ZEALAND (p8): Trading volumes were slower in January and February but rebounded in March, while closing auction volatility decreased. SINGAPORE (p9): More than a quarter of the day s volume was traded in the auctions and the utes following the open and preceding the close. Touch sizes continued to slowly rise in Q while February volumes reached a -month high. Semi-Developed KOREA (p): Volumes continued to be lower than the highs of Q 6 while intraday volatility decreased markedly from Q 6. TAIWAN (p): Value traded spiked to more than US$. billion per day in February which, when coupled with lower intraday volatility, created more favorable trading conditions in Q 7.

4 Q 7 Emerging CHINA (p): Daily volumes in January were at a -month low only US$. billion while average market capitalization continued to rise, reaching $7. trillion in March. INDIA (p): March volumes more than doubled from December 6 while touch sizes decreased throughout the first quarter. INDONESIA (p): Touch sizes remained elevated throughout the quarter, while February and March volumes picked up over the slowness of December and January. MALAYSIA (p): Trading volumes rose sharply in February and March, and intraday volatility remained consistent with Q 6. PHILIPPINES (p6): Touch sizes increased in Q 7 while intraday volatility decreased before and after the lunch break. THAILAND (p7): Over 9% of daily trading volume was executed in the closing auction, where intraday volatility increased to highs seen only immediately following market open.

5 Q 7 Developed Markets AUSTRALIA Volume Profile Q 7 Australia Intraday Volatility Q 6 vs. Q 7 Australia % st quartile Q 6 Q 7 % % % Market Cap-Weighted Spread by Month Australia 6 Typical Touch Size as a % of Daily Value Traded by Month Australia.%..%.%....%.%.%.%.%..% Average Daily Value Traded by Month Australia Average Market Cap by Month Australia

6 Q 7 Developed Markets 6 HONG KONG Volume Profile Q 7 Hong Kong % Intraday Volatility Q 6 vs. Q 7 Hong Kong 6 % st quartile Q 6 Q 7 % % Market Cap-Weighted Spread by Month Hong Kong Typical Touch Size as a % of Daily Value Traded by Month Hong Kong.%.%.%.%.%.%.%.% Average Daily Value Traded by Month Hong Kong 9 Average Market Cap by Month Hong Kong

7 Q 7 Developed Markets 7 JAPAN Volume Profile Q 7 Japan Intraday Volatility Q 6 vs. Q 7 Japan % 9% st quartile Q 6 Q 7 7% % % % % % Market Cap-Weighted Spread by Month Japan 7 Typical Touch Size as a % of Daily Value Traded by Month Japan. 6.7%..%..%.%.%.% Average Daily Value Traded by Month Japan Average Market Cap by Month Japan 7 6

8 Q 7 Developed Markets 8 NEW ZEALAND Volume Profile Q 7 New Zealand Intraday Volatility Q 6 vs. Q 7 New Zealand % st quartile Q 6 Q 7 % % % Market Cap-Weighted Spread by Month New Zealand 6 Typical Touch Size as a % of Daily Value Traded by Month New Zealand % % % % % % Average Daily Value Traded by Month New Zealand 6 Average Market Cap by Month New Zealand Billions Millions USD USD 8 6 Trillions

9 Q 7 Developed Markets 9 SINGAPORE Volume Profile Q 7 Singapore % Intraday Volatility Q 6 vs. Q 7 Singapore % st quartile Q 6 Q 7 % % Market Cap-Weighted Spread by Month Singapore Typical Touch Size as a % of Daily Value Traded by Month Singapore % % % % % Average Daily Value Traded by Month Singapore Average Market Cap by Month Singapore

10 Q 7 Semi-Developed Markets KOREA Volume Profile Q 7 Korea % Intraday Volatility Q 6 vs. Q 7 Korea 7 % st quartile 6 Q 6 Q 7 % % Market Cap-Weighted Spread by Month Korea Typical Touch Size as a % of Daily Value Traded by Month Korea..%.%....%.% Average Daily Value Traded by Month Korea Average Market Cap by Month Korea

11 Q 7 Semi-Developed Markets TAIWAN Volume Profile Q 7 Taiwan Intraday Volatility Q 6 vs. Q 7 Taiwan % st quartile Q 6 Q 7 % % % Market Cap-Weighted Spread by Month Taiwan Typical Touch Size as a % of Daily Value Traded by Month Taiwan.%.%.%.%.%.%.%.% Average Daily Value Traded by Month Taiwan Average Market Cap by Month Taiwan

12 Q 7 Emerging Markets CHINA Volume Profile Q 7 China Intraday Volatility Q 6 vs. Q 7 China % st quartile Q 6 Q 7 % % % Market Cap-Weighted Spread by Month China Typical Touch Size as a % of Daily Value Traded by Month China.%.% 8.% 6.%.%.%.%.% Average Daily Value Traded by Month China Average Market Cap by Month China

13 Q 7 Emerging Markets INDIA Volume Profile Q 7 India Intraday Volatility Q 6 vs. Q 7 India 7 % st quartile 6 Q 6 Q 7 % % % Market Cap-Weighted Spread by Month India 6 Typical Touch Size as a % of Daily Value Traded by Month India.%...%.%.%.%.%.%.% Average Daily Value Traded by Month India 7 Average Market Cap by Month India

14 Q 7 Emerging Markets INDONESIA Volume Profile Q 7 Indonesia % Intraday Volatility Q 6 vs. Q 7 Indonesia 7 % st quartile 6 Q 6 Q 7 % % Market Cap-Weighted Spread by Month Indonesia Typical Touch Size as a % of Daily Value Traded by Month Indonesia.%.%.%.%.%.%.% Average Daily Value Traded by Month Indonesia. Average Market Cap by Month Indonesia

15 Q 7 Emerging Markets MALAYSIA Volume Profile Q 7 Malaysia % Intraday Volatility Q 6 vs. Q 7 Malaysia % st quartile Q 6 Q 7 % % Market Cap-Weighted Spread by Month Malaysia Typical Touch Size as a % of Daily Value Traded by Month Malaysia.% 9.% 8.% 7.% 6.%.%.%.%.%.%.% Average Daily Value Traded by Month Malaysia.7 Average Market Cap by Month Malaysia

16 Q 7 Emerging Markets 6 PHILIPPINES Volume Profile Q 7 Philippines Intraday Volatility Q 6 vs. Q 7 Philippines 6 % st quartile Q 6 Q 7 % % % Market Cap-Weighted Spread by Month Philippines Typical Touch Size as a % of Daily Value Traded by Month Philippines...%.%....%.% Average Daily Value Traded by Month Philippines. Average Market Cap by Month Philippines

17 Q 7 Emerging Markets 7 THAILAND Volume Profile Q 7 Thailand % Intraday Volatility Q 6 vs. Q 7 Thailand 6 % st quartile Q 6 Q 7 % % Market Cap-Weighted Spread by Month Thailand 6 Typical Touch Size as a % of Daily Value Traded by Month Thailand.% 9.% 8.% 7.% 6.%.%.%.%.%.%.% Average Daily Value Traded by Month Thailand.8 Average Market Cap by Month Thailand

18 Q 7 8 GLOSSARY Expected costs for a US$mm market level portfolio Calculated using ITG s Agency Cost Estimator (ACE) model to estimate the market impact of investing a US$ million portfolio in the index of the different countries*. ACE is a pretrade cost model that estimates transaction costs using a historical framework and is most often used within TCA as a sophisticated measure of order difficulty that accounts for more than just liquidity. The model uses order-specific details, including order size and trading strategy, as well as stock-specific market data specifically -day daily volume, five-day time-weighted spread, and 6-day historical volatility and makes an important assumption of market neutrality. Demand for liquidity of a US$mm market-level portfolio ITG uses a -day daily volume to calculate the demand of liquidity for any given order size. Volume profile Median average of value traded in the index during the quarter, per -ute time bin. Intraday volatility Quarterly market cap-weighted calculation of change in total value of the index, per -ute time bin. Market cap-weighted spread Market cap-weighted bid-ask spread of the index. Shows range of mean, and levels. Typical touch size as a % of daily value traded Total bid and ask size as percentage of daily volume of all stocks in the market, turnover weighted. Average daily value traded Quarterly mean average daily value traded in the market. Average market cap Mean quarterly average market capitalization (calculated based on close price). * COUNTRY INDICES USED FOR ANALYSIS: AUS ASX KOR KOSPI CHN Shanghai Shenzhen CSI MYS Kuala Lumpur Composite Index HKG HSCI NZL NZX Index Gross IDN Jakarta LQ PHI PSEi Index IND NIFTY SGP Straits Times JPN TOPIX THA Thailand SET Index 7 Investment Technology Group, Inc. All rights reserved. Not to be reproduced or retransmitted without permission These materials are for informational purposes only, and are not intended to be used for trading or investment purposes or as an offer to sell or the solicitation of an offer to buy any security or financial product. The information contained herein has been taken from trade and statistical services and other sources we deem reliable but we do not represent that such information is accurate or complete and it should not be relied upon as such. No guarantee or warranty is made as to the reasonableness of the assumptions or the accuracy of the models or market data used by ITG or the actual results that may be achieved. These materials do not provide any form of advice (investment, tax or legal). ITG Inc. is not a registered investment adviser and does not provide investment advice or recommendations to buy or sell securities, to hire any investment adviser or to pursue any investment or trading strategy. All trademarks, service marks, and trade names not owned by ITG are the property of their respective owners. The positions taken in this document reflect the judgment of the individual author(s) and are not necessarily those of ITG. Broker-dealer products and services are offered by: in the U.S., ITG Inc., member FINRA, SIPC; in Canada, ITG Canada Corp., member Canadian Investor Protection Fund ( CIPF ) and Investment Industry Regulatory Organization of Canada ( IIROC ); in Europe, Investment Technology Group Limited, registered in Ireland No. 89 ( ITGL ) (the registered office of ITGL is Block A, Georges Quay, Dublin, Ireland). ITGL is authorized and regulated by the Central Bank of Ireland; in Asia, ITG Hong Kong Limited (SFC License No. AHD8), ITG Singapore Pte Limited (CMS License No. 8-), and ITG Australia Limited (AFS License No. 98). All of the above entities are subsidiaries of Investment Technology Group, Inc. MATCHNow is a product offering of TriAct Canada Marketplace LP ( TriAct ), member CIPF and IIROC. TriAct is a wholly owned subsidiary of ITG Canada Corp.