Commodities broker Newedge eyes world's fastest-growing market
HKEx's takeover of LME prompts Newedge to step up its expansion plan in Asia
International metal and commodities broker Newedge, a member of the London Metal Exchange, plans to expand in Asia.
Its director of Asian commodities trading, Richard Fu, said Hong Kong Exchanges and Clearing's recent acquisition of the LME would enhance the broker's expansion plan.
HKEx completed its acquisition of the world's largest metal exchange for £1.39 billion (HK$17.4 billion) last month. The LME has an 82 per cent market share of global metal futures transactions.
"It is a win-win situation. The tie-up of HKEx and LME will benefit both parties," Fu, who is based in London, said in a telephone interview. "HKEx has experience and connections in [mainland] China. The deal will allow the members of LME, including Newedge, to have better access in Asia, particularly [mainland] China. It will help us get more new business opportunities in this region."
For HKEx, he said the LME link-up would allow it to expand into commodities trading.
Newedge is a joint venture equally owned by financial group Credit Agricole CIB and Societe Generale. The firm is one of the world's top commodities and base metals brokers.
At the LME, Newedge is a Category 1 member, which allows it to engage in open outcry trading on the floor (called the ring), with the attendant visibility and status, as well as electronic and telephone trading for clients.
Besides the United States and Europe, the firm also has offices in Hong Kong, Mumbai, Tokyo, Seoul, Singapore and Sydney. It has a joint venture, Citic Newedge, in Dalian and Shanghai.
Fu said Asian and particularly Chinese customers were important to the firm. "Asia is the fastest-growing area in terms of commodities trading. China is the biggest commodities and metal consumer of the world. This is why we need to be here."
The LME website showed the value of trading for last year up to December 6 was US$13.6 trillion, against US$15.4 trillion in all of 2011. The drop was partly due to a fall in metal prices. However, the number of trades done rose 10 per cent to 149.6 million lots.
Fu said prices of commodities might be volatile in the first half of this year because of hot money flows in the market as a result of monetary easing by various governments. "Commodities prices may go up and down for a while. In the longer term, they will go up as a result of demand in light of economic growth in this region."