Schroders starts trading new Asian frontier markets

UK-based Schroder Investment Management now trades 13 equity markets in Asia, having recently moved into frontier markets Bangladesh, Pakistan and Sri Lanka.

The firm’s nine-strong regional trading team was already covering all the region's main markets, including Indonesia and the Philippines, but started trading the aforementioned frontier markets at the end of last year, says Jacqueline Loh, Asia head of trading at Schroders in Singapore.

This preceded the launch of the Schroder ISF1 Frontier Markets Equity fund in January, managed by Allan Conway, head of emerging-market equities, and Rami Sidani, head of MENA.

Meanwhile, in more developed markets such as Hong Kong, Japan and Singapore, algorithms are growing more sophisticated and becoming an increasingly big part of trading in Asia, she says during an interview that will appear in the May issue of AsianInvestor magazine.

For example, algos are starting to take into account more than one variable. She sees this trend, together with longer trading hours, as leading to more algo usage in Asian markets.

That said, algos need to be adapted to changes in trading hours in the region. The exchange in Hong Kong, for example, lengthened its hours last month, while Japan and Singapore have also flagged upcoming changes.

“A lot of volume-dependent algos in Hong Kong weren’t specifically changed to take into account the longer trading hours, so we still don’t have a lot of volume between 9:30 and 10am,” notes Loh. “But that will change.”

Another interesting trend in the past 18 months has been the increasing number of brokers, both execution-only and full service, she says.

Loh also notes that consultants are doing a growing amount of trading cost analysis. The result is that traders are looking more at benchmarks and trade-performance measurement tools, which she says is no bad thing. Enhancement of benchmarks and improved tools to measure performance can help in product differentiation across high- and low-touch execution, she adds.

Moreover, Schroders itself is considering implementing a strategy whereby a specialist block trader will work on any trades in excess of a few days’ volume, with a view to reducing impact costs.

Some £50 billion ($80 billion) of Schroders’ £197 billion ($322 billion) in assets under management is sourced from Asia-Pacific.