With the hire of Daniel Kong, Yeo Hwee Choo and Julie Tay from OCBC, ABN AMRO has signalled its enthusiasm for the Singapore dollar bond market. Here, the head of Asian credit trading and local fixed income, Zafar Alam explains the reasoning behind the hires.
You have just hired a salesteam from OCBC. Is this a similar strategy to Thailand, where you took a team from Thai Farmers and created a successful business?
A similarity could be drawn. In Singapore we've wanted to expand. We are committed to Singapore, which is a growing market. We believe in the asset securitization business, the asset swap business and the credit derivatives business. Traditionally the Singapore market was driven by the liquid cash market and any assets that came to the market were locked away for a while. We strongly feel the market is ready to see some innovation. With corporatization, clients are also becoming much greater users of debt, and with the swap markets being more liquid the global clientele are greater users of the local Singapore dollar market.
So you think the days when Singapore was a buy and hold market have changed?
Last year we saw corporate issuance of $12-13 billion, and people are managing their portfolios more actively. Part of that was reflected in the volatility we've seen. Investors are making changes in their asset allocation. There is a more proactive approach to portfolio management. This is also a function of seeing the mutual fund industry being established.
But the bond funds must still be dwarfed by the insurance companies, which tend to lock bonds up?
Well, it's a growing segment. It's not as big as the insurance companies. But the mutual funds are an important segment, and there are now dedicated bond funds that weren't there a couple of years before.
In terms of your growing your Singapore business, is hiring this team from OCBC the first step?
The team will facilitate and complement our distribution, and our existing business. We have had a Singapore team for a number of years, so this is complementing our existing resources.
Do you think S$ issuance this year will be higher than last year?
It's a growing market, although one should bear in mind that significant issuance last year came from bank issuers, which were going through consolidation. I foresee international issuers continuing to play a role, but more growth coming from the local players that want to raise money, not only via plain vanilla bonds but also through structured products.
Of the local debt markets you cover, do you foresee Singapore being among the most profitable of those you cover?
Overall, I continue to see local markets being profitable. Singapore will be one of the core markets for us, but to say it would be the most profitable would be difficult. However, I believe most of the local markets will be profitable.