Asia is full of Small and Medium Sized trading businesses and while the
use of Spot FX is increasingly universal, engagement with hedging products
such as FX Options and Forward FX is currently less widespread.
East & Partners has just completed the first Asian Small Business FX
Markets review, interviewing 1,400 businesses across four jurisdictions:
Hong Kong, Malaysia, Singapore and the Philippines.
The program focuses on two critical smaller business segments: Micro
businesses turning over between US$1-5 million each year and Small and
Medium Sized (SME) enterprises with annual revenues of US$5-20 million.
These two segments represent by far the largest proportion of all business
enterprises in the region.
The research shows that while 100 percent of the businesses are using Spot
FX products, only one fifth (19.4 percent) are using FX Options and 21.0
percent Forward FX. The average product cross sell ratio was 1.4, meaning
that the average Micro or SME business in Asia is engaging with 1.4 FX
In terms of product penetration, businesses in Singapore and Hong Kong
tended to be more engaged with these products.
Singapore, for example, accounts for 30.3 percent of Forward FX product
penetration of the four jurisdictions, and 30.9 percent of FX Options
Malaysian businesses are the least engaged, with penetration of around
18.0 percent for both products, although the report also delivers evidence
that some Malaysian businesses are using Singapore as their FX hub.
The report also looks at the market
share of the major providers, and while there are several global banks
which are prominent across all four markets, each market has a number of
local players taking significant market share.
Boutique providers AMEX and Western Union have a presence across the
region and while their market shares are both in the single digits their
customer satisfaction levels are high, even though their Mind Share – the
number of businesses which recall them first in association with FX
products – is still at a low base.
Also of interest is the performance of Australia’s ANZ, which is five
years into its “Pan Asian” strategy and is building regional business both
organically, and off the back of its 2009 purchase of some RBS assets.
Although not strongly focussed on these small business segments and whilst
ANZ has a patchy market share performance in Spot FX across the four
markets, it does have a much stronger foothold in both FX Options and
Forward FX on a regional basis.
Not only is its market share in these products encouraging, but it enjoys
market leading wallet share. This means that customers doing their FX
Options and Forwards trading with ANZ are spreading their wallets much
less than customers of other risk solutions providers.
East’s first ABFX report will function as something of a benchmark going
forward. The next interview round of the program is scheduled for early
2014, and market trends and momentum will become apparent as the research
continues to cycle every six months.
Already, the inaugural report has provided some interesting areas to
monitor as the program continues.