Citigroup considering onshore cash equities business in China

Above, reflections are seen on the glass facade of a Citibank branch in Beijing, China. (Reuters)
Updated 06 October 2017
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Citigroup considering onshore cash equities business in China

HONG KONG: Citigroup is considering setting up an onshore cash equities business in China and expanding research coverage of Chinese stocks, to boost its share of the business in Asia, said the head of its regional equities unit.
The US-headquartered bank is also looking to add at least 10 people to the unit, including bankers and technology staff, mainly at its Hong Kong and Singapore hubs, Richard Heyes told Reuters.
Citi’s sharpened focus on its Asia equities business, which includes stock trading and research, is part of its global effort to bolster trading technology, hire senior bankers and boost financing to hedge funds.
“It’s an interesting opportunity, one we are looking very closely at,” Heyes said, referring to setting up an onshore cash equities business in China, which he said was in its early stages. He declined to give details.
“At the moment we don’t feel we have a competitive disadvantage doing it from Hong Kong in the way the majority of people do. But over time, do I think we should strongly think about on-ground presence? Yes.”
Analysts said China-listed shares’ inclusion in the US index publisher MSCI’s emerging-markets benchmark this year, a milestone for global investing, would lead to a jump in demand for brokerage and research services.
That came on top of the introduction of programs allowing two-way trading between stock markets in Hong Kong and Shanghai and Shenzhen, as part of Beijing’s efforts to open up capital markets.
China’s brokerage revenue pool touched $41 billion in 2015, showed a report last year by Quinlan & Associates.
Assuming institutional broking revenue is 10 to 15 percent of the total, a 1 percent market share would bring $40 million to $60 million in annual revenue to an equities house in the world’s second-largest economy, the consultancy said.
To tap into an expected demand surge, Citi, which provides research on 175 China-listed firms, plans to increase coverage to 200 by year-end and 250 in the longer term, Heyes said.
“We have seen very clearly, as one of the biggest players in (the Hong Kong stock) connect, a very significant ramp up in the opening of accounts. It’s very clear that many people are getting prepared for future activity in the China market.”
Citi is also looking to bolster financing support for hedge funds, to help win more trading business and boost its Asia equities market share.
“We have had very meaningful success with some very important, large global hedge funds in the US We are now expecting or have commitments from many of them to on-board us in Asia either by end of this year or early next year.”


Oil up on OPEC uncertainty regarding production levels

Updated 22 June 2018
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Oil up on OPEC uncertainty regarding production levels

  • Saudi Arabia and Russia are in favor of raising output. Other OPEC-members including Iran have opposed this, resulting in a flurry of backdoor diplomacy ahead of the meeting
  • Phillip Futures said in a note that it expected “an approximate 300,000–600,000 barrels per day (bpd) hike by Saudi Arabia and Russia collectively”

SINGAPORE: Oil prices rose by around 1 percent on Friday, lifted by uncertainty over whether OPEC would manage to agree a production increase at a meeting in Vienna later in the day.
Brent crude oil futures were at $73.78 per barrel at 0502 GMT, up 73 cents, or 1 percent, from their last close.
US West Texas Intermediate (WTI) crude futures were at $66.26 a barrel, up 72 cents, or 1.1 percent.
The Organization of the Petroleum Exporting Countries (OPEC), a producer group with top exporter Saudi Arabia as the de facto head, is meeting together with non-OPEC members including No.1 producer Russia at its headquarters in the Austrian capital to discuss output policy.
The group started withholding supply in 2017 to prop up prices. This year, amid strong demand, the market has tightened significantly, pushing up crude prices and triggering calls by consumers to increase supplies.
Saudi Arabia and Russia are in favor of raising output. Other OPEC-members including Iran have opposed this, resulting in a flurry of backdoor diplomacy ahead of the meeting.
“The actual decision by OPEC and its partners — which may not actually become apparent until Saturday — is the big one traders are watching,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
Phillip Futures, another brokerage, said in a note that it expected “an approximate 300,000–600,000 barrels per day (bpd) hike by Saudi Arabia and Russia collectively.”
US investment bank Jefferies said an increase in “the range of 450-750,000 bpd seems the most likely outcome” of the meeting, driven largely by Russia and Gulf OPEC members Saudi Arabia, the United Arab Emirates and Kuwait.
Jefferies said these increases “would essentially offset Venezuelan declines and falling Iranian exports,” but the bank warned that global “spare capacity could fall globally to around 2 percent of demand – its lowest level since at least 1984.”
That would leave markets prone to supply shortages and price spikes in case of large, unforeseen disruptions.
The other big uncertainty is potential Chinese tariffs on US crude imports that Beijing may impose in an escalating trade dispute between the United States on one side and China, the European Union and India on the other.
Asian shares hit a six-month low on Friday as tariffs and the US-China trade battle start taking their economic toll.
Should the 25 percent duty on US crude imports be implemented by Beijing, American oil would become uncompetitive in China, forcing it to seek buyers elsewhere.
Chinese buyers are already starting to scale back orders, with a drop in supplies expected from September.
“If China’s import demand dries up, more than 300,000 bpd of US crude will have to find a new destination,” energy consultancy FGE said.
“This will certainly depress US Gulf Coast prices,” it said.