UBS Tops Trading Roster For Second Year

Among brokerages providing trading services to money managers that invest in Asia ex-Japan equities, no firm does a better job than UBS, according to participants in Institutional Investor’s second annual All-Asia Trading Team survey. Bank of America Merrill Lynch repeats in second place, followed by Morgan Stanley in third. Credit Suisse is the lone gainer among the top ten outfits, jumping from No. 6 to No. 4.

UBS “has the most experienced sales traders, and their technology is second to none,” proclaims one Hong Kong–based client. (The names of the investors surveyed and the firms they work for are kept confidential to ensure their continuing cooperation.)

The market environment remains challenging; although stocks are surging, trading volume is still low by historic standards, for the most part. “We have seen in some locations where prices have been soaring accompanied by a big pickup in volume — Thailand is a good example,” observes Laurent Combalot, head of Asia-Pacific equity client trading and execution at UBS in Hong Kong. “Overall it comes down to risk appetite. We should see a change as risk appetite rises.”

Many investors are still anxious about the macroeconomic issues, including the European Union’s deepening sovereign debt crisis and fears that China’s economy would crash-land, that spooked global markets last year.

“We’re not out of the woods yet,” he notes. “The biggest risks still are U.S. debt dynamics, regulatory risks in China [related to wealth management products] and a rebound in inflation in Asia.” In addition, the fact that signs of a strong global economic recovery have yet to emerge “has kept investors somewhat on the sidelines or focused on defensives and safety,” he adds.

Stephen Haggerty, director of Asia-Pacific research at BofA Merrill in Hong Kong, believes that a shift is on the way. “Trading volumes should pick up as macroeconomic factors become less dominant and single stocks become a more attractive way to generate portfolio performance,” he says. “We expect the Great Rotation into equities to play out in the coming years.”

His firm recently conducted a survey of fund managers to determine which issues are weighing most heavily on their minds. “Participants identified EU sovereign default as the biggest risk, followed by a broad category grouped as Other and then lingering concern about a China hard landing,” Haggerty reports. “So there is still concern among investors and certainly a fair amount of skepticism in terms of the sustainability of the recent equity market rallies. Right now, however, we’d say there is more skepticism than concern.”

Over the past year, UBS has introduced a number of products and services to assist its Asian equities trading clients, including Quant on Demand, a tablet application that allows investors to collaborate with UBS’s algorithmic trading team to develop and simulate various execution strategies, and Swoop, an algorithm that identifies the best venues for trading illiquid stocks, according to Combalot.

UBS Cross, a crossing network “developed to be a source of nondisplayed liquidity across the Asia-Pacific region,” was introduced in Australia and Hong Kong earlier this year, he notes.

Clients can expect more changes in the months ahead. “We are constantly innovating and introducing new tools and products to our platform,” Combalot says.

That’s what one buy-side supporter likes best about the firm’s trading services. “They’re always ahead of the curve — and that enables me to say ahead of the curve,” this buy-sider says.

II asked participants in the 2013 All-Asia Research Team survey to rank the brokerages they use on the quality of trading services provided. Some 1,500 investment professionals at approximately 720 buy-side firms that collectively manage an estimated $1.27 trillion in Asia ex-Japan equity assets responded to this question — that’s about 48 percent of the people who cast votes in the broader research team survey, and they represent 73 percent of the participating buy-side institutions.