Japan’s equity brokers captured market share from foreign rivals last year, led by Mizuho Securities and SMBC Nikko Securities, according to a survey by Greenwich Associates.
Japanese firms made greatest inroads from foreign and offshore institutions that generate the majority of the market’s trading commissions and have traditionally been the stronghold of non-Japanese brokers.
Foreign firms continue to cut across Asia. CLSA cut more than 20 people this week, post its integration with Citic Securites according to a person familiar with the move, and this month Standard Chartered closed its global cash equities division.
Nomura Securities, Daiwa Securities and Mitsubishi UFJ Morgan Stanley Securities all picked up commission-weighted research and advisory vote share in Japan to varying degrees over the past year, according to Greenwich Associates. However, the biggest gainers over the past two years were Mizuho Securities and SMBC Nikko Securities.
Nomura remains far and away the leader in Japanese equity brokerage, not only in terms of share but also in quality, according to the results of the survey. Nomura won FinanceAsia's 2013/2014 Best Equities Trading House.
“Of course, economic growth and market performance do not follow a linear path, and it remains to be seen how things will continue to play out for the Japanese market and the major brokers in 2015,” says Greenwich Associates consultant Tomio Sumiyoshi.
Greenwich Associates conducted interviews with 163 equity portfolio managers, 135 equity traders and 118 equity derivatives users across domestic Japanese institutions, foreign subsidiaries in Japan and offshore institutions in Asia-Pacific about market trends and broker relationships in the Japanese market. Interviews were conducted from July to September 2014.
For the second year in a row, Japan’s domestic brokers grew their share. Timing has played an important role.
Several domestic brokers made significant investments in equities at the same time that a number of foreign brokers cut back. After weak market performance and anemic flows in institutional trading volume and commission revenues, global banks had started to scale back their Japanese equity operations by 2013.
Meanwhile, several large Japanese banks were placing big bets by making sizable investments in their own equity research and trading platforms.
This paid off for the Japanese brokers when Prime Minister Shino Abe launched the economic stimulus program that has come to be known as “Abenomics,” which sparked a resurgence in the Japanese stock market.