Sub-custody Poll
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WHY LOCAL KNOWLEDGE IS CRUCIAL
This page depicts the latest Asiamoney Sub-custody Poll, produced in 2004. A completely new Asia custody survey is currently in development by Asiamoney.
Effective sub-custodians require more than technical ability and a sound credit rating. They need local knowledge to help their clients, write Pauline Loong and Andrew Peck.
INTRODUCTION
Sub-custodians are very market-specific. Unlike institutions that cater to the global market, what makes a sub-custodian effective in one country may not apply in another.
Key operational skills and the ability to deliver straight-through processing are taken for granted. The differentiating factor is what might be called an institution’s local savvy: the depth and breadth of its knowledge of the local market.
Knowledge of fund flows and of peculiarly local practices is crucial, say respondents to our first-ever poll on sub-custody in Asia. One fund manager has this tale to tell: "In the early 1990s, there was very good yield on Thai corporate paper. Thailand was a physical market, which allowed a lot of counterfeit paper to float around. The counterfeits are very good but a local bank can usually spot the difference. And even if a mistake was made, they have the leverage to get the company to [compensate] the investor that a global institution does not have."
In cash and forex-restricted markets such as Taiwan and Malaysia, a sub-custodian that is able to lobby the regulators is a step ahead of its competitors.
Global custodians, who are often the major clients of the sub-custodians, want someone who can take up industry issues for investors and speak to regulators on their behalf.
This is especially so in China, which is poised to throw open its A-share market to foreign investors. The mainland is justifiably seen as a documentation minefield for the uninitiated. Those coming from markets such as Hong Kong or Singapore, which require minimal paperwork, openly confess to finding custody work involving Shanghai and Shenzhen very daunting.
METHODOLOGY
Click here to view methodology
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