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Markets Media: Index Inclusion To Boost Asian Trading


Mark Dowd

Mark Dowd

The whole of Asia represents a significant opportunity as increasing investment flows are expected into the region and China has been included in the benchmark emerging markets index according to Tony Amicangioli, chief executive of trading infrastructure technologies provider Hyannis Port Research.

At the start of this month index provider MSCI incorporated 226 A-shares, which are traded on the Shanghai and Shenzhen stock exchanges in renminbi, into its mainstream emerging markets and world indices after four years of consultation. This is the first step in a process towards including 5% of eligible A-shares by September.

“Given the number of funds who track the index I think most investors assume these markets are going to become much more liquid, which obviously creates new trading opportunities,” he said.Amicangioli told Markets Media in an email that Hyannis Port Research has seen an increase in interest in accessing China due to the index inclusion. The inclusion has been in the planning phase for over a year and so many clients have been making preparations.

Chi Lo, Greater China senior strategist at BNP Paribas Asset Management, said in a report that the impact on fund flows will be minor over the short-term, but sizeable over the long-term.

“We expect the MSCI inclusion of A-shares to attract $22bn of foreign inflows in the first year,” added the report. “However, $360-$400bn of inflows are expected over the next five to 10 years.”

This week Hyannis Port Research announced the expansion of its market access platform to include support for the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connects. China’s Stock Connect programmes allow equities listed in Shanghai and Shenzhen to be traded internationally via the Hong Kong stock exchange without needing a license or an approved quota, which reduces transaction costs.

“With the move, Hyannis Port Research becomes the first firm to provide trading access through the platforms using an ultra-high-performance pre-trade risk gateway,” added the statement.

Amicangioli continued that the firm had decided to add support for the Shanghai and Shenzhen Stock Connects due to interest from several large clients.

“We’ve been live and operational for both for about six months, which included a beta testing period with one of our larger clients,” he added. “We’re very excited to now push it into full production. Feedback has been extremely positive thus far.”

The HPR platform performs over 50 customizable risk checks for things like “fat finger” errors, client credit breaches, broker-mandated parameters and regulatory compliance requirements.

“In Hong Kong the local short selling and wash sale rules can be especially tricky, which is a big part of the reason that clients have been requesting that we extend support for the two Stock Connects,” said Amicangioli.

He continued that the whole of Asia represents a significant opportunity given the increasing investment flows into the region and the continued modernization of the individual markets.

“We see growing interest in the Connect platforms following China’s recent inclusion in the MSCI index, and with new platforms like the ETF Connect expected to come online later this year we think their relevance will only increase,” added Amicangioli.

HPR already operates in Australia and is looking to expand in Japan, Korea, Singapore and Taiwan.

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