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

UBS goes algo in Mexico

UBS today announced the launch of algorithmic trading for international clients trading equities on Bolsa Mexicana de Valores in Mexico.

The addition of algorithmic trading strategies enhances clients’ ability to access this major Latin American market center, and complements UBS’s existing Direct Market Access (DMA) offering in the country.

UBS is launching this offering in Mexico with a full suite of liquidity seeking, volume and price-sensitive strategies, including the award-winning UBS Tap. UBS clients can use these algorithmic trading strategies to efficiently interact with liquidity on Bolsa Mexicana, sending electronic orders directly to the exchange without passing through an intermediary.

In November 2010, UBS was the first international broker to launch DMA in Mexico, allowing clients to trade electronically directly on the exchange. UBS clients can now send both front-to-back DMA and algorithmic trading orders using most major execution management systems or order management systems, as well as the firm’s own UBS Pinpoint.

“Our experience offering DMA in this market has enabled us to tailor our trading strategies specifically to the market structure of Bolsa Mexicana, which means our international clients should have a seamless experience as they trade into Mexico” said Owain Self, Global Head of Algorithmic Trading at UBS.

“Offering an entire suite of algorithmic trading strategies for Mexico is another example of our commitment to a uniquely optimized Latin American offering,” said Damian Fraser, Head of Equities for Latin America. “Our clients have expressed great enthusiasm for even more sophisticated tools to access this growing, dynamic marketplace, and we are delighted to be able to meet those needs.”

UBS also provides DMA and algorithmic trading for international clients trading into Brazil, across the global emerging markets of Europe, Middle East, Africa and Asia, and over 90 markets and trading venues worldwide.

UBS Direct Execution is the firm’s global institutional electronic trading business. Direct Execution offers ultra-low latency Direct Market Access (DMA), a suite of award-winning advanced Algorithmic Trading strategies, a state-of-the-art analytics platform – offering Real-Time TCA – called UBS Fusion, and a multi-asset international execution management system called UBS Pinpoint.

Filed under: Brazil, Latin America, Mexico, Trading Technology, , , , , , ,

Hong Kong: First A-share Industry Sector ETFs to Debut on HKEx

Hong Kong’s Exchange Traded Fund (ETF) market further expands with a series of five Mainland A-share industry sector ETFs setting to debut on Wednesday, 18 November on the Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx).

The new Mainland A-share index ETFs are:

Stock Code Name of ETF Benchmark index
2846 iShares CSI 300 A-Share Index ETF CSI 300 Index
3050 iShares CSI A-Share Energy Index ETF CSI 300 Energy Index
3039 iShares CSI A-Share Materials Index ETF CSI 300 Materials Index
2829 iShares CSI A-Share Financials Index ETF CSI 300 Financials Index
3006 iShares CSI A-Share Infrastructure Index ETF CSI 300 Infrastructure Index

With the listing of these five new ETFs, there will be a total of eight ETFs on Mainland A-share indices listed on the Exchange, and HKEx will be the first exchange with Mainland A-share industry sector ETFs.

All ETFs listed on the Exchange, including these five new iShares listings, are designated for market making and for short selling with tick rule exemption.  The market makers for these five ETFs are Citigroup Global Markets Asia Limited, Credit Suisse Securities (Hong Kong) Limited and UBS Securities Hong Kong Limited.

On 18 November, the Exchange will have listed 42 ETFs.  There are eight ETFs on Mainland A-share indices, seven on Hong Kong equity indices, 22 on other regional and international equity indices, two on commodities and three on bonds and money markets.

The three other Mainland A-share index ETFs are:

Stock Code Name of ETF Benchmark index
2823 iShares FTSE/Xinhua A50 China Index ETF FTSE/Xinhua China A50 Index
2827 W.I.S.E. – CSI 300 China Tracker CSI 300 Index
3024 W.I.S.E. – SSE50 China Tracker SSE50 Index

Investors should note that all A-share ETFs use derivative instruments to synthetically replicate the performance of the underlying benchmarks.  These ETFs are subject to counterparty risk of the derivative instruments’ issuers and may suffer losses if such issuers default or fail to honour their contractual commitments. For a better understanding of the risks involved, investors are advised to read the ETFs’ prospectuses in full prior to making any investment decisions.  Information on the various risks of ETFs and their structures is available on the HKEx website.

Source: MondoVisione 17.11.2009

Filed under: News, Exchanges, Asia, China, Hong Kong, , , , , , , , , , ,

UBS launches international algo trading in Brazil

The global Equities business of UBS (NYSE: UBS) today announced the launch of algorithmic trading for international clients trading equities on the Bovespa stock exchange in Brazil.

UBS is among the first broker-dealers to offer non-Brazilian clients algorithmic trading in this major market.

UBS is launching this offering for international clients who trade Brazilian securities with three popular algorithms: Volume Weighted Average Price (VWAP); Time Weighted Average Price (TWAP); and Volume Inline, a strategy that enables an investor to execute an order correlated to available liquidity. Execution algorithms are complex quantitative electronic trading formulae that clients can use to manage and tailor their equities orders. UBS clients can use these algorithmic trading strategies to quickly and efficiently send their electronic orders directly to the Bovespa, without passing them through an intermediary.

In July 2008, UBS was among the first international brokers to launch Direct Market Access (DMA) in Brazil whereby non-Brazilian investors can trade electronically directly on the exchange. UBS clients can send front-to-back algorithmic trading orders directly from their desktop execution management system or order management system, including UBS’s own “Pinpoint.”

“We gained a tremendous amount of experience over the last year with our Direct Market Access offering in Brazil, and our intention has always been to add algorithmic trading,” said Owain Self, Head of Algorithmic Trading for EMEA and the Americas at UBS Investment Bank. “Our successful DMA platform provided the ideal knowledge base to build algorithmic strategies for the Bovespa in a truly custom way – specifically geared to the unique attributes of this market. This development is particularly exciting as our clients who trade stocks in Latin America have had an extremely positive response.”

Raul Esquivel, the Head of the UBS Investment Bank for Latin America, said, “The launch of algorithmic trading into Brazil is a perfect example of our ongoing commitment to the region. We are pleased to offer these sophisticated strategies to our international clients who wish to efficiently tap the abundant investment opportunities in this dynamic marketplace.”

Source: Finextra, 12.11.2009

Filed under: BM&FBOVESPA, Brazil, Exchanges, Latin America, Trading Technology, , , , , , , ,

China: Handling Bad Loans Badly

Beijing takes a lot of steps backward in cleaning up bank balance sheets.

China’s central bank will soon announce bank loan statistics for September, and there have already been press reports that new lending may be increasing again after a lull in July and August. On top of record new lending in the first half of the year, despite a global slowdown, this is provoking new fears of another nonperforming loan crisis on the horizon. The dilemma for Chinese policy makers will be how to deal with that problem.

This is a critical question because banks are the main intermediary of credit in China and nonperforming loans (NPLs) act as a drag on growth by weighing down bank balance sheets. As of July, the latest month for which figures are available, Chinese bank NPLs totaled approximately 500 billion yuan ($73 billion)—dwarfing those of all other Asian countries except Japan. Shedding these loans allows lenders to rebuild their balance sheets and recapitalize. This exercise is particularly important for Chinese banks, which are growing rapidly and are often capital-constrained—especially when Beijing forces them to lend, as the authorities did earlier this year to help stimulate growth and may well be doing again.

Regulators must first re-examine the structure of the China NPL market. In many parts of the world, banks can sell their NPLs directly to investors at a discount from the face value of the loans. But in China, with few exceptions, banks are only allowed to unload their bad loans to four asset management companies (AMCs) that were established by the government a decade ago as part of a master plan to restructure the nation’s banking system. These companies act as loan wholesalers, selling the NPLs they acquire to third-party investors.

This system has never worked particularly well in China. In establishing selling prices the AMCs focus on securing a price that will cover the cost they paid to the bank for the loans plus a small profit. Investors focus on the amount they’re likely to recover on the loans they buy and the amount of time they think it will take to collect on them. There isn’t often an equilibrium between these two values, so deals rarely get done. Many prominent investors, including Goldman Sachs and Morgan Stanley, quit investing in Chinese NPLs years ago.

Many of those who stayed have had trouble collecting debts through the court system. In late 2007, courts across the nation invoked a self-imposed “three suspension policy”: the suspension of filing of new NPL-related cases, obtaining judgments on existing cases and execution of decisions pending Supreme Court guidance. The move dealt a blow to investors hoping to use the courts to effect payment on their existing loans and has resulted in vastly reduced returns on portfolios as monies remain uncollected.

In March, investors took another major hit when the Supreme Court issued guidance instructing courts not to accept cases against state-owned or state-controlled enterprises if the debtor is in the midst of a reorganization, or against state-owned banks if an investor finds an undisclosed technical fault with a loan that hinders collection after the AMCs have sold the NPLs to the purchaser. The Court also ruled NPL sales can be invalidated for any number of reasons, including if the debtor or guarantor is a government body; if auction formats are not being properly followed, which is often the case; if necessary regulatory approvals haven’t been obtained; or in “any other situations involving national or public interest.” While this guidance served mainly to protect state interests, it was at least clear and investors could use it to price new portfolios.

The real trouble came in July, when the Supreme Court ruled against Swiss bank UBS in a case involving a state-owned enterprise guarantor. The Court’s March guidance clearly stated that when NPLs are transferred by the AMCs to investors, the underlying guarantees remain valid and the guarantor is not required to give its consent for the transfer of the loan. This meant that a valuable piece of land pledged as collateral by a guarantor would remain a prime source of recovery for investors, even if the guarantor didn’t like the fact that someone else now owned the underlying loan.

However, in the UBS decision, the Court cited a 2004 law that said the guarantor must provide consent for the transfer, and further, that the details of the guarantee must be registered with the local State Administration of Foreign Exchange bureau. The Court reasoned that since UBS hadn’t obtained such consent and had not registered the guarantee, the guarantee was invalid. Lawyers and investors believe this ruling is at odds with the law and with established market practice, but there is no sign yet of whether the Court might reconsider any time soon.

The ruling has huge implications. Most NPL investors derive a big source of their recoveries from collecting on guarantees, including collateral pledged by guarantors. If the UBS decision is followed by lower courts as expected, investors will not only have to provide details of guarantees when they register them with the government, but they must also get the consent of the guarantors for the guarantees to be effective. Many guarantees may simply disappear if guarantors won’t willingly consent to a transfer. And there’s the effect on the market of yet another instance of regulatory uncertainty. As one investor recently told me, “every time we think we understand the rules the authorities throw a new roadblock in our path.”

The impact is already being felt. This year to date, I am aware of only two portfolio sales to foreign investors by the AMCs: one to Shoreline Capital, and a 3.2 billion yuan portfolio sold by China Orient to KAMCO, which has yet to close. None of the major China NPL investors over the past few years—including Cargill, Distressed Assets Consulting, Avenue Capital, G.E. Capital, Bank of America, Société Générale and ING—appear to have any appetite for deals until the guarantee issue becomes clearer and the AMCs lower their asking prices.

Meanwhile, China’s pile of NPLs is growing, saddling banks with bad debts. Foreign investors can help solve this problem, if only Beijing will let them.

Mr. Osborn is a partner at PricewaterhouseCoopers Hong Kong/China specializing in debt restructurings and NPLs.

Source: WSJ 04.10.2009

Filed under: Asia, China, News, Risk Management, Services, , , , , ,

UBS SDIC introduces leveraged CSI 300 index fund to China

The funds JV is looking to tap into Chinese appetite for more exotic products; meanwhile, it also finds a new CIO.

Asian Investor

UBS SDIC, the Swiss bank’s 49:51 joint venture with the State Development and Investment Corp in China, plans to list its index-tracking CSI300 fund on the Shenzhen Stock Exchange. The fund is 95% benchmarked to the CSI300 index, which tracks prices of the 300 most active stocks listed on the Shanghai and Shenzhen bourses. The remaining 5% follows the local interbank interest rate benchmark.

Daily tracking error will be limited to under 0.35%, or 4% on an annualised basis. A level of 1.6x leverage is built into the fund giving investors magnified returns from the index’s movements.

The fund prospectus says calculation of the fund NAV will be performed annually. ICBC is the fund’s appointed custodian.

Wednesday marked the last day of the initial fund raising effort, but the result has yet to be announced. UBS SDIC is generating good media buzz in China for venturing into the land of exotics in an otherwise overdone product idea based on the CSI300. A dozen funds tracking the CSI300 already exist in the market.

Meanwhile, the JV has also found a new CIO after a year-long search. Marc Tan is a Singapore native who has previously served as an executive director at UBS AG; as assistant general manager at China Merchants Fund (a JV with ING Investment Management); CIO and interim general manager at OUB-Optimix; and senior fund manager in charge of China strategy at the Overseas Union Bank.

According to statistics provided by Z-Ben Advisors, as of end-August, UBS SDIC has a total AUM of Rmb25.5 billion ($3.74 billion) and a market share of 1.16%. It is the 29th largest firm in an industry of 60.

Source:AsianInvestor, 02.10.2009

Filed under: Asia, China, Exchanges, News, Services, , , , , , ,

HSBC in China JV talks with Industrial Securities

HONG KONG -(Dow Jones)- HSBC Holdings PLC (HBC) is in advanced talks to set up an investment banking joint venture in China with Industrial Securities Co., a person familiar with the situation said Wednesday.

The UK-listed HSBC, which already has a wide-reaching presence in China, is seeking to join the handful of foreign firms with a presence in the mainland’s lucrative underwriting and advisory markets.

The person familiar with the situation said it is difficult to say when HSBC and Industrial Securities will agree on a deal, and declined to elaborate.

Industrial Securities is a Fujian-based brokerage with a registered capital of CNY1.93 billion, according to its website. It provides a full-range of services in China, including broking, advisory, and new listing underwriting.

The Apple Daily reported Wednesday, citing unnamed sources, that the two sides may strike a deal by the end of this year to set up the venture, subject to agreeing on the terms and regulatory approval.

HSBC wants management rights over the entity, a model that UBS AG (UBS) and Goldman Sachs Group Inc. (GS) used when setting up their Sino-foreign brokerage joint ventures, according to the report in the Chinese-language newspaper. China has capped the maximum stake foreign banks can have in a Chinese brokerage venture at 33%, though a few of the tie-ups have accorded management control to the foreign firm.

If its venture is approved, HSBC would be joining a list of just a handful of foreign brokers that have set up shop in the mainland through joint ventures in recent years.

In December, the Chinese government ended an almost two-year moratorium on approving new joint ventures, as it shielded its domestic brokerages from foreign competition. Since then, China has approved ventures by Credit Suisse Group and Deutsche Bank AG (DB), though those tie-ups are only allowed to underwrite and sponsor deals domestic securities and debt deals, and not the trading of Chinese-listed shares.

But the list of foreign firms seeking entry is long, especially with China’s stock market being one of the world’s best performers this year. Many Shanghai-listings also registered gains of more than 90% on their first-day of trade.

Australia’s Macquarie Group Ltd. (MQG.AU) has signed a memorandum of understanding with Inner Mongolia-based Hengtai Securities Co. on setting up an investment banking joint venture, while South Korea’s Samsung Securities Co. (016360.SE) said earlier it was finalizing which domestic partner it is going to team up with.

Citigroup Inc. (C) and Morgan Stanley (MS) are also awaiting regulatory approval for their China joint ventures. Morgan Stanley has a stake in China International Capital Corp, but it is a passive financial investor.

“I’m not surprised to hear of more joint-venture acquisitions by HSBC in local financial institutions rather than in banks,” said Dominic Chan, an analyst at BNP Paribas.

“I think HSBC has been focusing on mainland China and Asia, and this deal is part of its ongoing program to divert effort and capital from Europe and America back to Asia,” he said.

A brokerage in China would add another crucial leg to the bank’s already dominant presence in the country. In China, HSBC has an 18.6% stake in Bank of Communications Co., the nation’s fifth-largest lender by assets; a 16.7% holding in Ping An Insurance (Group) Co. of China Ltd.; 8% ownership of Bank of Shanghai Co., and a 49% stake in HSBC Jintrust Co, a Shanghai-based fund company. HSBC’s 50-50 life insurance joint venture with Beijing-based financial services provider National Trust Ltd. was approved by regulators recently and is set to be up and running in the third quarter.

The lender has also hired investment bankers to advise it on listing on the Shanghai bourse next year, in potentially the country’s first listing by a foreign company. Although based in the U.K., HSBC made a quarter or around US$2.98 billion of its first-half pre-tax earnings from China.

Source: Dow-Jones, 19.08.2009

Filed under: Asia, Banking, China, News, Services, , , , , , , , , , , , , , , ,

Asia: Investment banking revenues down, but not out

Net revenue generated by banks from core investment banking transactions in the Asia-Pacific region is down 25% to $1.3 billion in the first quarter from $1.7 billion in the same period last year, according to preliminary data from Dealogic, which tracks financial activity.

The drop is less pronounced than the 32% fall in global net revenue to $8.1 billion, and the 45% decline in the Americas to $3.4 billion. Indeed, as the market share held by the US has declined, the Asia-Pacific has increased its share and now accounts for 16% of global core investment banking revenue — up from a 14% share in the first quarter 2008.

Nomura leads the Asia-Pacific core investment bank revenue ranking with a 14% share — the Japanese bank also ranked first in the corresponding period in 2008 with a 9% share. Banking revenues in Japan were up 5% to $542 million, accounting for a 42% share of the market.

The dull spot is China, with a mere $80 million in investment banking revenues year-to-date, down 83% from this time last year. The country’s share in Asia-Pacific is a tiny 6.3%, not much more than Singapore’s 6%. Hong Kong isn’t looking much better, with just $13 million in investment banking revenue in the first quarter, down 68% from the same period last year and representing just 1% of the regional pie.

In terms of products, it comes as no surprise that equity capital markets (ECM) are suffering, with revenues down 75% in Asia ex-Japan, underscoring how much issuance has slowed particularly in China, Hong Kong and India. ECM is down just 39% if you include Australia and Japan and look at Asia-Pacific as a whole.

Nor should it raise too many eyebrows that the good news is to be found in the debt capital markets (DCM), particularly in Australia. If you include Australia and Japan, DCM revenues are up 67% in the Asia-Pacific, and that number stays high — at 65% — if you exclude Japan.

Challenging Nomura on the overall IB front is UBS, which leads the Asia-Pacific (ex-Japan) and Asia (ex-Japan) revenue rankings.

Dealogic defines investment banking revenue as comprising DCM, ECM and M&A transactions, including Chinese A-Shares. When actual fees are not disclosed, Dealogic determines the revenues using what it calls “revenue analytics”. Industry experts we spoke to about these rankings say the figures on bank revenues are “directionally accurate”. As one banker put it: “Banks looks directionally right but the numbers are potentially distorted by one or two deals and mis-estimated methodologies.” While that’s a fair point, unless banks announce their revenues down to the penny (and why would they?) this is a useful benchmark and one used by the banks for marketing.

Origingal Article here

Source: FinanceAsia, 30.03.2009

Filed under: Asia, Australia, Banking, China, Hong Kong, India, Japan, Risk Management, Services, Singapore, Wealth Management, , , , , , , , , , , , , ,

Mexico Is UBS’s Favorite Latin American Equity Market (updated)


25.03.2009 Inca Cola    A UBS report dated March 25th  that includes the company’s call on Mexico and the transcript of a very interesting conference call between four Mexico sector experts (namely UBS Mexico economist Gabriel Casillas, Latin America FX strategist Marcos Mollica, Latin America fixed income strategist Alvaro Vivanco and Mexico equity strategist Tomas Lajous). Here’s an excerpt from the report to whet your appetite. It’s well worth reading the rest, so use that link (UBS Making Sense of Mexico_UBS_25march2009)
The main conclusions (of the conference call debate) are as follows: First, this will almost certainly continue to be a very weak year for Mexican growth, although we do look for stabilization by end-year and recovery in 2010. On the other hand, despite fears of widening current account deficit and external corporate debt, the Mexican foreign financing position actually looks well-supported – and this in turn means that although we don’t expect a sharp recovery in the level of the peso, we also don’t see sharp depreciation risks from here. With the surprise 75 basis-point cut by the central bank last Friday we are no longer taking strong positions in the domestic rates market, preferring to focus on external bonds and CDS. And finally, while the equity market has already fallen to very inexpensive levels, in light of ongoing earnings risks we prefer to wait for more visibility before jumping back in to buy stocks.
I think UBS has been calling Mexico really well recently and this paper just is more confirmation. There’s no need to fall for all the ‘failed state’ idiocy propagated by those who want to see that wall finished (Fox News et al)but on the other hand the big exposure the country has to the USA (traditionally the market for 80% of all exports)means that there are real economy woes still in the pipeline, so no need to exposure yet.


09.03.2009  Mexico replaced Brazil as UBS AG’s favorite equity market in Latin America because investors have already factored in a “severe” recession this year.

Declines this year means Mexican stocks are trading at the lowest valuations in at least the past 10 years, while the nation’s largest companies will probably be able to return to profit by raising prices, UBS strategists led by Damian Fraser wrote in a March 9 report. The slump is a “contrarian buying opportunity” for investors in the medium term, they added.

Mexico’s Bolsa Index has dropped 32 percent in dollar terms this year, outpacing a 3.6 percent retreat in Brazil’s Bovespa. The Mexican benchmark index is valued at 11 times reported earnings, compared with 8.7 times for the Brazilian stock index, according to data tracked by Bloomberg.

“For the first time in recent history, Mexico’s market multiples are in line with Brazil’s — despite comprising less cyclical, more defensive stocks,” the analysts wrote. “While a deep recession is now expected and priced into Mexican valuations, it is less priced into Brazil’s mainline stocks.”

America Movil SAB, Latin America’s largest wireless carrier, and Grupo Televisa SAB, the world’s biggest Spanish-language broadcaster, are among Mexican companies that make up UBS’s top 10 recommended stocks in Latin America, the brokerage said.

Mexican companies enjoy “substantial pricing power” and are less exposed to swings in global economic growth, the strategists wrote. Earnings this year are still expected to “materially disappoint” given the recession and a weak exchange rate, they said.

Peso’s Slump

The peso has dropped 32 percent in the past six months and plunged to a record low against the dollar yesterday on concern the U.S. recession is sapping demand for exports and slowing dollar inflows from remittances, tourism and foreign direct investment. It’s the worst performer among seven Latin American currencies tracked by Bloomberg.

The weakening peso is unlikely to cause fiscal or debt problems for Mexico because of the nation’s “small” holdings of dollar debt, the strategists said. The country continues to earn dollars from its oil exports, they added, and its largest companies also have “limited” foreign currency debt.

Brazil’s ‘Neutral’ Rating

UBS has an “overweight” recommendation for Mexico and rates Brazil “neutral.” The brokerage previously said on Dec. 3 Brazil was its favorite equity market in the region for 2009 because the shares are undervalued, the economy might expand faster than estimated and the central bank had room to lower interest rates.

A continued slump in economic growth will probably hurt Brazil’s largest companies more than those in Mexico, the analysts said in yesterday’s report. The companies in Brazil are in industries including mining, steel and oil that rely on global demand for commodities, they added.

Petroleo Brasileiro SA, Brazil’s state-controlled oil company, and Cia. Vale do Rio Doce, the world’s No. 1 iron-ore producer, account for almost a third of the nation’s benchmark index. Vale is among six Brazilian companies that make up the top 10 stocks recommended by UBS in the region.

Source: Bloomberg contact Shiyin Chen in Singapore 09.03.2009

Filed under: Banking, Brazil, Latin America, Mexico, News, , , , , , , , , ,