By Anton Bridge and Miho Uranaka
TOKYO, March 12 (Reuters) – Nomura Holdings is bolstering its foreign-exchange and emerging markets trading teams in Asia on the view that volatility will persist, driving demand from its clients.
Japan’s biggest brokerage also expects the favourable market conditions that drove global equities to all-time highs will soon reassert themselves as geopolitical tensions ease and record oil prices retreat.
“Our macro businesses tend to perform well in periods of volatility. So that has been a big theme for us and probably is going to continue being one of our main focus areas,” Nomura’s head of global markets, Rig Karkhanis, said in an interview with Reuters this week.
The macro business spans interest rates, foreign exchange and emerging markets trading, which clients use to diversify and rebalance their portfolios.
Despite expecting prolonged volatility, Karkhanis projects the overall favourable environment for stocks has another two years to run, driven by large-scale investment in artificial intelligence infrastructure that will boost productivity and growth.
“My base case is we’ll see a normalisation of geopolitical risk. Oil price volatility is likely a short-term phenomenon and we should go back to where we were two or three months ago,” he said.
Nomura’s latest recruitment drive builds on the turnaround in its markets business in recent years, as it has sought to assert itself as a global player and maintain profits regardless of market conditions.
Karkhanis said Nomura is also hiring for its U.S. rates business under new head of U.S. rates Moritz Westhoff, who was appointed in August last year.
He declined to specify the scale of any of the hiring.
Nomura beefed up its spread products business – primarily credit trading – around two and a half years ago as interest rates began to be cut worldwide, and bolstered equities trading a year or so ago in a wager that share markets would rally.
Broad market volatility over the past year has been a boon for Nomura’s trading revenue, which climbed to 716 billion yen ($4.5 billion) in the first nine months of the fiscal year ending in March.
“Next year I think it’ll be another very strong year,” Karkhanis said.
JAPANESE DEBT IN DEMAND
A normalisation of geopolitical tensions should bring down yields for long-end Japanese government bonds, he said.
Demand for the debt has been growing as global asset managers increase allocations, particularly at the long end, where yields are similar to those of comparable European bonds, Karkhanis said. If domestic asset managers also increase purchases, then long-end JGB yields have room to come down even further, he added.
The challenge for the industry is finding traders who have experience with JGB yields at levels not seen since Japan’s bubble economy of the 1980s and early 1990s.
“We would love to hire more JGB traders,” Karkhanis said. “Japan rates traders are probably the most in demand globally, so it’s highly competitive.”
($1 = 159.03 yen)
(Reporting by Anton Bridge and Miho Uranaka; Editing by Kevin Buckland)
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