Investor interest is up in Japan and trading volumes at top trading firms have been buoyed along with it.
“Global market conditions have resulted in strong client activity in Japan, particularly from U.S. clients,” said Shinji Ogawa and Khahlil Kirtman, co-heads of Japan Cash Equity Sales for JPMorgan Securities Japan, in an email. “As with the past year, the U.S. interest rate cycle will be a key driver of markets in 2024. The way markets have reacted has readied Japan to address any inflationary impact.”
Trading firms reported an increase in volume since 2022. Average volume in 2023 was up 16 percent compared to the previous year, according to data provided by Nomura. So far in 2024, volume is more than 44 percent higher than in 2023.
“Volumes are healthy and robust,” wrote Ogawa and Kirman. “We have seen an increase in companies visiting Japan and a growing number of attendees at conferences.”
Japan has become a focus for many investors thanks to reforms led by the Japan Exchange Group (JPX) and government. Retail flows have increased under the new Nippon Individual Savings Account (NISA) program launched earlier this year and less interest in China, according to Gael Vasseur, head of Global Execution Services in Japan for Nomura Securities Co.. “We have seen several new investors along with new strategies from existing investors entering the Japan market,” added Vasseur.
Amid these changes, the respondents to II’s 2024 All-Japan Trading Team survey pointed to Nomura Securities as a steady hand. Nomura is once again the No. 1 provider based on the views of buy-side traders and other investment professionals who rated their top trading and execution teams across four main categories: electronic trading, high-touch sales trading, portfolio/program trading, and Delta One/ETF.
In the overall leaderboard J.P. Morgan Chase took second place, followed by Goldman Sachs in third. Daiwa Securities Group and Mizuho Securities ranked fourth and fifth, respectively. Nomura topped three out of the four trading categories as well, while Goldman Sachs took first for Delta One/ETF.
Nomura reported that it has been scaling up its business and hiring people for the new market conditions. “Nomura is quite unique as we have both strong domestic and global franchises, and a lot of our value-add comes from our ability to connect them both,” according to Vasseur.
More changes to its sales trading organization are planned for April. Vasseur said the changes will improve the integration and coordination between sales trading teams in the APAC region, Japan, and internationally, and will include cash and non-cash (D1, Derivatives).
The firm also named new leaders for many of its business lines and focused on mentoring younger talent.
Liquidity remains the primary concern for clients and a focus for Nomura for the remainder of the year. Nomura’s NX dark pool remains a pillar of the firm’s liquidity strategy. The dark pool represents one-third of the dark liquidity in Japan.
The firm recently launched BlockCross, an electronic crossing solution in Japan, as well as a trade solutions department “to develop new methods to execute large blocks in a controlled manner, leveraging all channels and know how,” Vasseur said.
J.P. Morgan rose one spot in the overall ranking this year, and Ogawa and Kirtman credited its performance in a crowded market to its people. “We remain competitive due to the strong bench of talent across our teams that partner closely with our clients to offer the best-in-class products,” they said.
