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Global Market Structure Asia Pacific Newsletter Special Edition - Issue 41, 2016

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Global Market Structure Asia Pacific Newsletter Special Edition - Issue 41, 2016 Deutsche Bank March 2016 Equities Global Market Structure Asia Pacific Newsletter Special Edition - Issue 41, 2016 2016 Year of the Monkey 2 Global Market Structure Issue 41, 2016 Contents APAC and ASEAN Summary 4 Hong Kong 8 China 17 Taiwan 26 Japan 30 India 35 South Korea 41 Australia 46 Thailand 52 Singapore 54 Philippines 58 Indonesia 60 Malaysia 62 Chart Definitions 64 Editor Jessica Morrison, Head of APAC Market Structure [email protected] Quantitative Content Winnie Khattar, Head of APAC Analytics [email protected] Contributors Kirsten Yam, Nithin Nath, Shailendra Kumar, Gyanendra Agrawal, Amy-ZW Zhang, Wesley Wise 3 Global Market Structure APAC and ASEAN Summary Welcome to 2015-16 Special Edition Newsletter which provides a summary of APAC macro and micro market structure developments in 2015, and a forward looking 2016 review. 2015 was a tumultuous year with China market seeing a 47% rise to the peak of 12th June followed by a fall of 43% within 12 weeks. Reforms were a combination of required evolution with the new Margin Trading and Stock Borrow Lending rules and SDR inclusion being the most prominent example - to more reactionary such as the reduction of new positions in the CSI300 to 10 lots. China continues the opening measures in 2016 by relaxing the QFII rules, and new CSRC chief Liu has confirmed Shenzhen Connect must go forward this year with IPO reform, new listing and delisting rules and the potential introduction of electronic trading (“Program Trading”) rules. In Hong Kong, the Connect programme is seeing buying from mainland investors. Per Ashley Alder, SFC CEO, Connect has changed the character of HK and an investor level ID system is likely to come. South Korea in comparison is moving away from IDs as it looks to attain MSCI DM status. Blockchain, cyber security are focus points for ASX and TSE, after ASX bought stake in a company and TSE starts testing Blockchain. Japan is also looking into electronic trading, sending questionnaires to brokers around HFT, pre trade controls and dark pools. It is likely the market will see some new rules in this area. India continues to consider off shore tax routes with GAAR implementation coming in 2017. We may see the listing of NSE, BSE as well as KRX. We look forward to working with you in 2016, any further thoughts or questions, please do get in touch. Fig 1: APAC Volatility (30 day index return volatility) 70% 12 USA 60% Europe Fig 1: APAC Volatility (30 day index return volatility) Australia 50% China 70% 40% 12 HongUSA Kong Fig60% 1: APAC Volatility (30 day index return volatility) IndiaEurope 30% JapanAustralia 50%70% USA 20% 12 SouthChina Korea 40%60% TaiwanHongEurope Kong 10% IndiaAustralia 50% 30% JapanChina 0% 20%40% SouthHong KongKorea Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-14 Dec-14 Jan-16 IndiaTaiwan 30% Source:10% T homson Reuters Japan South Korea APAC0%20% Volatility Jan-15 Jan-16 YoY% 1. New year started with very volatile markets in 2. Japanese Yen has been the most volatile currencyTaiwan Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-14 Dec-14 Jan-16 Australia10% 18% 16% 12% China as index hit its newly created index circuit in the past 6 months, fuelling the impact to equities China 37% 36% 1% Source:0% Thomson Reuters Hong Kong 19% 16% 22% breaker twice in one week, by dropping over 7%. markets as well. Japan benchmark index futures India Jan-15 14%Feb-15 17%Mar-15 -14%Apr-15The circuitMay-15 breakerJun-15 mechanismJul-15 hasAug-15 since Sep-15been turnoverOct-15 surpassedNov-14 allDec-14 of APACJan-16 markets for the first JapanSource: Thomson Reuters 24% 19% 31% removed. time since last year. SouthFig 2: KoreaASEAN Volatility15% (30 day index13% return16% volatility) Taiwan 15% 13% 18% 40% USA 1 Europe Fig30% 2: ASEAN Volatility (30 day index return volatility) Indonesia 40% Malaysia PhilippinesUSA 1 Fig20% 2: ASEAN Volatility (30 day index return volatility) ThailandEurope 40%30% SingaporeIndonesia MalaysiaUSA 10% 1 PhilippinesEurope 30%20% ThailandIndonesia 0% SingaporeMalaysia Philippines 10% Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-14 Dec-14 Jan-16 20% Thailand Source: Thomson Reuters Singapore 0%10% Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-14 Dec-14 Jan-16 Source:0% Thomson Reuters ASEAN VolatilityJan-15 Jan-15Feb-15 Jan-16Mar-15 YoY%Apr-151. In 2015May-15 FDI investmentsJun-15 Jul-15 in the ASEANAug-15 regionSep-15 Oct-15 Nov-14 Dec-14 Jan-16 ThailandSource: Thomson Reuters 21% 20% 3% accounted for 24% of total trading in the region, SingaporeFig 3: APAC Market Share17% Distribution13% 29% Fig 4: ASEAN Market Share Distribution Malaysia 12% 14% -9% this has been steadily on increase since 2008 Indonesia 16 23% 13% 72% and ASEAN markets now put together is 7th16 Philippines 22% 17% 32% 15 15 Fig 3: APAC Market Share Distribution largest in the world. Fig 4: ASEAN Market Share Distribution 14 14 16 16 Fig 3: APAC Market15 Share Distribution Fig 4: ASEAN Market15 Share Distribution 2014 2015 2016 14 14 16 Australia 5% 3% 5% 16 15 China 49% 75% 61% 15 Hong Kong 6% 4% 5% 2014 2015 2016 14 14 India 20143% 20151% 20162% Indonesia 19% 15% 13% JapanAustralia 24%5% 11%3% 18%5% Malaysia 18% 16% 15% SouthChina Korea 49%5% 75%3% 61%5% Philippines 6% 6% 4% TaiwanHong Kong 20144%6% 20151%4% 20162%5% Singapore 201420% 201523% 201625% ASEANIndiaAustralia 3%5% 1%3% 2%5% ThailandIndonesia 38%19% 40%15% 42%13% JapanChina 24%49% 11%75% 18%61% Malaysia 18% 16% 15% Source: Thomson Reuters SouthHong KongKorea 5%6% 3%4% 5% Source: Thomson Reuters Philippines 20146% 20156% 20164% TaiwanIndia 4%3% 1% 2% SingaporeIndonesia 20%19% 23%15% 25%13% ASEANJapan 24%3% 11%1% 18%2% ThailandMalaysia 38%18% 40%16% 42%15% South Korea 5% 3% 5% Philippines 6% 6% 4% Source: Thomson Reuters Taiwan 4% 1% 2% Source: Thomson Reuters Singapore 20% 23% 25% Fig.5 Impact Cost Estimate ASEAN 3% 1% 2% Fig.5a Impact cost trend by time (5% ADVThailand order size)38% 40% 42% Source: Thomson Reuters Source: Thomson Reuters 60 Hang Seng 60 Composite Taiwan TAIEX 50 50 Fig.5 Impact Cost Estimate S&P/ASX 200 Fig.5a Impact cost trend by time (5% ADV order size) 4 Straits Times 40 40 60 NikkeiHang Seng 225 60 NSEComposite S&P Nifty Fig.530 Impact Cost Estimate Taiwan TAIEX Fig.5a30 Impact cost trend by time (5% ADV order size) 50 Kospi 200 50 S&P/ASX 200 Hang Seng 2060 Straits Times 2060 40 Composite 40 Nikkei 225 Taiwan TAIEX 50 NSE S&P Nifty 50 10 S&P/ASX 200 10 30 Kospi 200 30 Straits Times 0%40 0%40 Impact Cost Estimates (bps) 20 Nikkei 225 Expected Impact Cost (bps) 20 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% TradeNSE size S&P(%ADV) Nifty Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-14 Dec-14 Jan-16 30 Kospi 200 30 10 10 Source: Thomson Reuters 20 20 0% 0% Impact Cost Estimates (bps) Expected Impact Cost (bps) 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% Trade size (%ADV) Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-14 Dec-14 Jan-16 10 10 Source:0% Thomson Reuters 0% Impact Cost Estimates (bps) Expected Impact Cost (bps) 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% Trade size (%ADV) Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-14 Dec-14 Jan-16 Source: Thomson Reuters Fig.7 Primary Futures Turnover vs Open Interest $ 70 Avg Turnover (US$ Bn) $60 Open Interest (US$ Bn) Fig.7 Primary Futures Turnover vs Open Interest $50 $ 70 $40 Avg Turnover (US$ Bn) Fig.7$60 Primary Futures Turnover vs Open Interest Open Interest (US$ Bn) $30 $50$ 70 $20 Avg Turnover (US$ Bn) $40$60 Open Interest (US$ Bn) $10 $30$50 $0 Billions $20$40 Japan South Korea Hong Kong China Taiwan India Singapore Thailand Malaysia $10$30 Source: Thomson Reuters $20$0 Billions $10 Japan South Korea Hong Kong China Taiwan India Singapore Thailand Malaysia Source:$0 Thomson Reuters Billions Japan South Korea Hong Kong China Taiwan India Singapore Thailand Malaysia Source: Thomson Reuters Fig.6 Turnover Velocity 300% 250% Fig.6 Turnover Velocity 215% 200% 198% 300% 150% Fig.6250% Turnover Velocity 215% 100%300% 92% 200% 198% 74% 57% 50%250% 45% 45% 150% 215% 31% 28% 27% 23% 11% 0%200% 198% 100% 92% 74% 150% CHINA JAPAN SOUTH KOREA TAIWAN AUSTRALI57% A THAILAND INDIA INDONESIA MALAYSIA HONG KONG SINGAPORE PHILIPPINES 50% 45% 45% Source: Thomson Reuters 31% 28% 27% 23% 100% 92% 11% 0% 74% 57% 50% CHINA JAPAN SOUTH KOREA TAIWAN AUSTRALIA THAILAND45% INDIA45% INDONESIA MALAYSIA HONG KONG SINGAPORE PHILIPPINES 31% 28% 27% 23% 11% Source:0% Thomson Reuters CHINA JAPAN SOUTH KOREA TAIWAN AUSTRALIA THAILAND INDIA INDONESIA MALAYSIA HONG KONG SINGAPORE PHILIPPINES Source: Thomson Reuters Fig 1: APAC Volatility (30 day index return volatility) 70% 12 USA 60% Europe Australia 50% China 40% Hong Kong India 30% Japan 20% South Korea Taiwan 10% 0% Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-14 Dec-14 Jan-16 Source: Thomson Reuters Fig 2: ASEAN Volatility (30 day index return volatility) 40% USA 1 Fig 1: APAC Volatility (30 day index return volatility) Europe 30% Indonesia Malaysia 70% USA 12 Philippines 60% Europe 20% Thailand Australia Singapore 50% China 40%10% Hong Kong India 30% Japan 0% 20% South Korea Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-14 Dec-14 Jan-16 Taiwan 10% Source: Thomson Reuters 0% Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-14 Dec-14 Jan-16 Source: Thomson Reuters Fig 1: APAC Volatility (30 day index return volatility)
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