Asean Trading Link seeks to expand into ETFs, sukuk
Bourses in Malaysia, Singapore and Thailand are gauging investor interest in trading ETFs, structured products and Islamic bonds via the recently established Asean Trading Link.
Having gone live last September, the “Asean Exchanges” scheme sees the main bourses of six nations – also including the Philippines, Vietnam and Indonesia – connected via a fibre network.
Participating brokers are free to place orders and receive real-time market data from the Trading Link on about 180 blue-chip stocks – made up of the largest 30 listed equities by market cap in each country, known as Asean stars. Data such as the day’s top 30 gainers or losers can also be viewed on the “Asean Exchanges” website.
This contrasts to the past in which brokers had to bear the cost of establishing point-to-point connections with local peers in the market they wanted to trade in.
A press officer at Bursa Malaysia tells AsianInvestor that exchange representatives have been conducting roadshows to promote awareness and assess interest in accessing both stocks and structured products listed on these Asean exchanges.
“We have conducted a number of roadshows to actively engage investors, highlighting Asean stars in addition to promoting investment opportunities through stocks, exchange-traded bonds and sukuk, real estate investment trusts and other products across the region,” the officer says.
The Asean Trading Link went through years of testing since the idea was officially endorsed in the 12th Asean Summit in 2007. The original network vendor, NYSE Technologies, eventually dropped out of the project and was replaced through a new round of bidding by Sungard.
At present the Trading Link does not offer post-trade services, with all clearing and settlement of securities handled by participating brokers at their own exchange level.
Fabrice Oriol, regional sales director of Sungard's capital markets business for Southeast Asia, says that if the exchanges opted to explore establishing uniform clearing for all 180 stocks, the platform could be developed to support clearing of securities denominated in multiple currencies.
“If they want to allow participating brokers to trade listed derivatives through the Trading Link, it is possible technologically today,” says Oriol. “The exchanges would then have to discuss commercial terms with us [on expanding such trading capacity].”
When asked about trading volume through the link since it went live, both Bursa Malaysia and the Stock Exchange of Thailand (SET) declined to provide specifics.
However, industry players indicate that of the three bourses that joined the network, SET has seen the most significant pick-up in trading volume.
A spokesperson for the Asean Trading Link team at SET notes that since the exchange connected to the Link on October 15, trading activity had increased each month.
While the Trading Link primarily aims to serve retail investors in Asean nations, the spokesperson says it also offers foreign investors an alternative way to trade stocks listed in the six countries as the exchanges there promote Asean securities to global investors as an asset class on its own.
Oriol says he is seeing increasing block-trading volume going through the three exchanges that have already connected, indicating interest from institutional investors.
Oriol adds that smaller brokers are also key beneficiaries of the Trading Link in that it enables them to operate on a level playing field with larger brokers, sending cross-border trading orders to participating exchanges without having to invest in their own technology to do so.
At present 32 brokers from Malaysia, Singapore and Thailand, including regional players such as Maybank Kim Eng Securities and UOB Kay Hian, have signed up as participating brokers.
Four more exchanges – including both the Hanoi and Ho Chi Minh stock exchanges – are set to join the Trading Link, although it is unclear when they will get connected.
Together, the six countries in the Asean Exchanges scheme have a market cap of $2 trillion and account for more than 90% of the 10-country Asean region’s combined GDP.