Asia is full of small and medium-sized trading businesses and while the use of spot foreign exchange (FX) is increasingly universal, engagement with hedging products such as FX options and forward FX is currently less widespread, says East & Partners.
In its first
Asian Small Business FX Markets review
, the firm interviews 1,400 businesses across four jurisdictions: Hong Kong, Malaysia, Singapore and the Philippines. The programme focuses on two critical smaller business segments: micro businesses turning over between US$1m-5m annually and small and medium-sized enterprises (SMEs) with annual revenues of US$5m-20m. These two segments represent by far the largest proportion of all business enterprises in the region.
The research shows that while 100% of the businesses are using spot FX products, only 19.4% are using FX options and 21.0% forward FX. The average product cross sell ratio was 1.4, meaning that the average micro or SME business in Asia is engaging with 1.4 FX products.
In terms of product penetration, businesses in Singapore and Hong Kong tended to be more engaged with these products. Singapore, for example, accounts for 30.3% of forward FX product penetration of the four jurisdictions, and 30.9% of FX options trading. Malaysian businesses are the least engaged, with penetration of around 18.0% for both products, although the report also delivers evidence that some Malaysian businesses are using Singapore as their FX hub.
Global and Local Players
The report also looks at the market share of the major providers, and while there are several global banks which are prominent across all four markets, each market has a number of local players taking significant market share.
Boutique providers AMEX and Western Union have a presence across the region and while their market shares are both in the single digits their customer satisfaction levels are high, although their ‘mind share’ – the number of businesses which recall them first in association with FX products – is still at a low base. Also of interest is the performance of Australia’s ANZ, which is five years into its ‘Pan Asian’ strategy and is building regional business both organically, and off the back of its 2009 purchase of some Royal Bank of Scotland (RBS) assets.
Although not strongly focused on these small business segments and whilst ANZ has a patchy market share performance in Spot FX across the four markets, it does have a much stronger foothold in both FX options and forward FX on a regional basis.
The report notes that not only is its market share in these products encouraging, but it enjoys market leading wallet share. This means that customers doing their FX options and forwards trading with ANZ are spreading their wallets much less than customers of other risk solutions.
Cash-flow based metrics now feature prominently alongside traditional revenue measures of business performance in the key figures or financial summary pages of any public company.
The US money market fund reforms came into effect in 2016 and are already dramatically shaping US fund industry with investors flooding out of prime funds and into government securities. While the reforms are similar, they are not the same. GTNews interviews Yeng Bulter, global head of the cash business at State Street Global Advisors on the differences.
Far and away, the largest financial market on the planet is the foreign exchange currencies market, where on average individuals and organisations trade more than $5 trillion daily. In the FX world, the ability to master the market isn't considered a luxury for treasury officers–it's a necessity.
With the end of 2017 fast approaching, many finance professionals might be counting down the days with some degree of dread. Year End is just around the corner and with it comes the many long hours accountants will spend going over balance sheets and profit and loss accounts, investigating account irregularities and chasing sign offs.