Breaking China

ON THE RECORD

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The market for data on emerging Asia-Pacific (A-P) markets is booming as investors seek high-return strategies outside their traditional markets, and as Far East countries deregulate to attract foreign investment. Hardly a week goes by without a story in IMD about a company opening an Asia office, or adding content on Far East markets. With many looking to China to provide their next windfall, data vendors, financial services firms and non-Asia-Pacific exchanges are all anxious to break the Chinese market. In a recent interview, IMD's Asia-Pacific reporter Rahul Jhaveri talked to Fredy Bush, vice chairman and CEO of Hong Kong-based financial information provider Xinhua Finance—a company that is already doing just that.

IMD: How does the size of the A-P market data industry compare to that of North America and (separately) Europe? How much growth do you see in A-P in terms of revenues and market size? How much of that is driven by mainland China, and what is the timeframe for that?

Bush: The A-P market is, of course, smaller until you factor in China in the coming years. Much of the growth depends on the changing of regulations throughout the region and, particularly, China. However, Xinhua Finance is experiencing tremendous demand for our products and services due to the vast interest in China and the relative lack of information available. I expect our business to continue its growth trend for the coming years as we are uniquely focused on China.

IMD: In what ways can/will the Asian market copy the development of the European and North American market data industry in products and data?

Bush:

 There have been many new advances in technology, delivery systems and information products since the initial development of the North American and European market data industry. Therefore, I think core products and services such as indices, ratings and news will be similar in Asia to other markets mainly because the large investment banks rely on having the same type and quality of services they are used to getting in their home markets. However, delivery of the products and customization will utilize the new tools available to those of us who provide these types of services. For example, it is no longer necessary to put hardware on the desktop of financial information clients.

IMD: For international vendors looking to distribute their services in Asia, do you believe the best way for them is to partner with local vendors or set up shop alone, and why?

Bush:

 In Asia, given the cultural nuances, it's important to have a partner who can ease the way to market penetration.

IMD: Is partnering with vendors something Xinhua Finance is interested in, and if so, on what levels—sources? Distribution networks?

Bush:

 Xinhua Finance partnered with companies in our early years in order to gain technology and methodology required to build our China services. Today, we prefer to acquire the best company in the industry or sector where we want to build specific products or services in China. That allows us to acquire profitable, well-run businesses and own the technology and methodology we seek. As importantly, we own the China product 100 percent rather than having to share profits with a partner.

IMD: Do you believe increased trading in international markets by Asian investors will drive the demand for international market data, or vice versa, and why?

Bush:

 Again, I believe this depends on the rate at which regulatory restrictions are lifted. It was just last year that Taiwan and Korea lifted restrictions for trading on foreign exchanges. If this trend continues, which I believe it will, then Asia will definitely drive demand for international market data—especially with China as the largest wealthy emerging market in the world.

IMD: How about the demand for Asia-specific market data? Do you believe foreign investors will trade in Asia once information is available or do you believe Asian vendors will distribute data to global investors once trading is liquid?

Bush:

 Yes, you are already seeing many foreign investors knocking on China's door, and trading is significant in Korean futures. Investors go where there is growth and opportunity. I believe Asia will be providing that for the next 10 years at least, and a good portion of that will be due to China.

IMD: How is the growth of mainland China affecting the rest of the A-P market? How ready is it for the development of home-grown vendors or for the entrance of global vendors from outside China? What are Xinhua Finance's plans amidst all this?

Bush:

 I think it's a foregone conclusion that China is driving the growth of the A-P region and will do so for the foreseeable future. I think Asia will continue to have strong 'home-grown' vendors as they better understand the needs of the domestic markets. Companies like Nikkei, Taiwan Ratings and others are good examples. If you look closely, many Asian countries have only one or two strong local companies who dominate the financial data space. Global vendors from outside China or Asia will succeed or not based upon their ability to adapt to the needs of the domestic market and the number of foreign investment banks with offices in the country.

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