Citi targets commodities, equities in Asia markets growth

Citi targets commodities, equities in Asia markets growth

Singapore: Citigroup is looking to boost its Asia markets division by up to 150 positions this year, building on the expansion of its equity, commodity and FX businesses as it seeks to take advantage of a pick-up in client trading activity.

Citi plans to keep hiring at about the same pace as in 2010 by pushing further into Asian equity markets and building a stronger commodities team to compete in a market where the bank has typically lagged rivals.

“Commodities is a space where we have not been punching our weight in Asia in the breadth and depth or products, but that is changing fast," said Rodrigo Zorrilla, Citi’s Asia Pacific head of Markets, in an interview with Reuters.

Citi is adding about 10 more hires in commodities this year after nearly doubling its team to 40 last year when it hired Rob Biro, a longtime Goldman Sachs energy trader, to lead its Asia oil products team.

Zorrilla said the selloff in markets this month, which started in commodities and then spread across assets, showed that some funds had built up too many one-way positions just as the economic outlook turned cloudy and the euro zone crisis worsened.

“It all went the other way at the same time," he said. “The fundamentals of the Asia story are still there. I’m still bullish medium term, but the next few weeks and months, it’s better to range trade."

Focus on equities, FX and credit

In equities, Citi has expanded its brokerage trading to markets such as Indonesia and Malaysia, expanding its client sales coverage and making big hires in equity derivatives.

Zorrilla said the bank has made strides in capturing more flow business from existing clients by bringing primary markets and equities into the fold with the traditional fixed-income, currency and commodity trading platform—creating a single Markets unit.

“These are the ones who are really helping the bank regain its position," he said.

Citi’s Markets trading division currently totals about 1,500 people in Asia-Pacific and is one of the biggest in the region, covering 18 markets in FX, equities, credit and interest rates. The bulk of its staff are split between Singapore, Hong Kong and Tokyo.

Of the five to 10% hiring planned this year, Citi has added about 25 positions at the vice president level or above.

Citi has also benefited from the 2009 launch of its CitiFX Velocity trading platform, which applies technology from its equity high-frequency trading platform to the currency market and has helped the bank in the highly competitive FX space.

Zorrilla said the algo-driven and high-frequency trading world of equities is “an example of where every other asset class is going to go eventually."

Velocity’s popularity has led to greater volumes and helped reinforce Citi’s position near the top of global FX trading. Among Citi’s main competitors in the FX platform space are Deutsche Bank’s Autobahn, Barclays’ BARX and UBS’ FX Trader Plus.

Even with Asian markets among the best performing in the world thanks to the region’s strong growth, competition is only getting tougher as banks beef up trading desks and reallocate talent to the region.

“Competition is getting fierce, margins are being squeezed. Every other bank has decided to increase its investment in Asia because Asia is the growth story," Zorrilla said, adding that Citi was competing well amid the battle for market share.

Citi’s securities and banking business in Asia, which includes investment banking as well as markets, saw first-quarter revenues climb to $1.04 billion from $964 million from the previous quarter, but they were down 21% when compared with the first-quarter of 2010.

Zorrilla said credit markets, including structured credit, were also an area where investors were paying more attention, seeking returns in an environment where equities have stalled, commodities are looking shaky and many government bond yields remain historically low.

“People are looking at the resilience of credit and looking to pick up yield."