China Investors Prefer CICC Trading Platform

Money management firms that acquire Chinese equities research from multiple providers have voted China International Capital Corp. to the summit of Institutional Investor’s first All-China Trading Team ranking. UBS lands in the No. 2 spot, followed by Bank of America Merrill Lynch at No. 3.

“CICC was the first among Chinese securities firms to develop algorithmic trading software — it’s widely used and rivals most of its overseas competitors’,” proclaims one fan.

One Beijing-based portfolio manager notes that “CICC’s project-execution capability is strong, and its professional team is talented. They have their own worldwide network and a strong distribution system.”

The 47-member squad — 23 of whom are headquartered in mainland China, with the remaining 24 working out of offices in Hong Kong, London, New York and Singapore — is directed by Hong Liang, Hong Kong–based co-head of sales and trading.

“CICC offers the full spectrum of trading capabilities of A shares, B shares and H shares — we’re a one-stop shop for clients who engage in these markets,” Liang says. In September the firm upgraded its front-end trading platform in Hong Kong, “while our domestic order-management system has added trading capabilities in futures,” she notes.

That last point wins special praise from one South Korea–based backer. “They provide some functions that their competitors don’t, such as reverse-trade checks, and they are improving very fast,” this money manager says. “They’ve brought global standards to mainland China.”

Clients similarly praise the UBS team for providing “excellent service,” being “very responsive to requests” and having “great insight into the market.”

The Swiss bank opened its first office on the mainland in Beijing in 1994, and nine years later was among the first to be granted a license under China’s qualified foreign institutional investor program, which was created to allow overseas investors to trade renminbi-denominated A shares on the Shanghai and Shenzhen exchanges. Since then many other firms have obtained this license — nearly 150 as of late February — but UBS remains the program’s largest quota holder, with $800 million. The bank now has offices in four mainland locations, including Guangzhou, Shanghai and Shenzhen.

“In China we are a full-service provider, offering sales, sales trading, research and execution across both high-touch and low-touch channels, and we service both domestic clients and foreign investors,” explains Laurent Combalot, Hong Kong–based head of Asia-Pacific equity client trading and execution. “Our diverse client base — ranging from local clients and wealth managers to retail brokers and international clients — means we have a unique liquidity pool that offers breadth and depth second to none.”

Investors agree. “Liquidity is never a problem, not even for the smaller names,” says one U.S.-based customer. “Execution is prompt and risk pricing, competitive. And their reporting is always reliable.”

Adds another buy-side enthusiast: “They’re very helpful in overall execution, and they stand behind their work. That’s important.”

One fan of BofA Merrill echoes that sentiment about his preferred trading partner. “They’re reliable and pro-active — they come to me with ideas and suggestions that show they understand the market.”

Collaboration is the key to the team’s success, according to Ryan Holsheimer, head of Asia-Pacific equity execution services in Hong Kong. “We have focused on expanding our facilitation trading desk and integrating facilitation traders into our client coverage teams,” he says. That means sales traders are equipped to consult across all product lines — stocks, futures, derivatives and more — and identify viable block transactions. “The platform is fully integrated,” Holsheimer adds.

The team members’ “input is very valuable,” attests one supporter. “They are true professionals and provide great service, and they’re always very quick to respond to any questions or data requests.”

II invited participants in the 2012 All-China Research Team survey to name up to four firms whose trading services they consider exemplary. Approximately 880 buy-siders at some 460 firms that collectively manage an estimated $660 billion in Chinese equity assets responded to this question; that’s about 43 percent of the people who cast votes in the research team survey, representing 65 percent of the participating institutions.