Asian corporates continue to use multiple providers for their foreign exchange (FX) business, with the wallet share of primary FX providers eroding rapidly across the region, reports East & Partners Asia.
The latest Asian Business Foreign Exchange Markets (ABFX) report, from the research and analysis firm that Asian corporates in four key markets have significantly decreased the percentage of the FX business they do with nominated primary providers.
Spot FX wallet share in Hong Kong, Singapore, the Philippines and Malaysia has fallen in each bi-annual research round since E&P Asia began the programme in August 2013. In ong Kong, for example, average spot FX wallet share for primary providers fell over the two years to August 2105 from 27.1% to 22.1%.
Primary providers have the thinnest wallet shares in the competitive Singapore market, where the average fell from 21.9% to 18.6% over the same two year period.
The ABFX report also measures, on a regional basis, wallet share for FX options and forwards. While primary providers are winning a greater share of their client’s wallets for these products than for FX, wallet share has also eroded. For options, average wallet share fell from 58.3% to 52.9% in the past two years, while for forwards the decline has been from 46.8% to 41.8%.
The wallet share erosion has occurred in the context of significant traction for non-bank FX providers in Asia, who have made market share and wallet share gains. Research conducted by East for Western Union Business Services, indicates two major drivers for corporates to use non-bank providers – service and price.
Asked to nominate reasons for choosing non-bank FX providers, 36.2% of corporates nominated quicker service and response times and 34.4% cited better rates and spreads.
Jonathan Chng, senior analyst at E&P Asia, said the firm’s research across a range of markets had identified FX as the most frequently “banked away” financial product for corporates, adding that the trend had fresh momentum.
“A combination of new agile technology and increased cross border trade has created a fertile environment for fresh competition in the Asian FX markets,” said Chng. “In this context, we see the specialist providers offering easy to use products with good rates, and this is helping them build good traction.
“Banks will continue to be under pressure in Asia’s FX markets, as this trend still has some way to play out.”
Regional foreign exchange dealers have become more prevalent, while the top four have lost market share year-on-year.
As the first anniversary approaches of the UK’s decision to leave the European Union, Thomson Reuters has assessed the impact over the past year on investment banking.
The decision by MSCI to include China shares in its Emerging Markets Index is called “a pivotal moment for global investment”.