Made in Asia

The developed world is well aware of the rise of Asian economies, having long bought basic manufacturing goods labelled 'made in Hong Kong' or 'made in Singapore'. While those same goods are now more likely to be made in China or India, Hong Kong and Singapore have not stood still. Asia's city-state tiger economies - more so than their larger peers, such as South Korea and Taiwan - have shifted their emphasis to the upscale services sector, with financial services featuring prominently.

Unable to rely on scalable domestic consumption, both cities have pursued the goal of becoming major financial services trading hubs by adopting a relatively open architecture in terms of regulations and immigration. And they are attracting a wealth of talent across the board, increasingly including derivatives and financial risk management professionals.

Many seasoned industry experts are being drawn from Europe and North America by the sheer growth potential of the Asian markets. Their thinking is clear: if China is due to outstrip the US economy by 2050 and India isn't far behind, surely their derivatives markets will become as important - if not more so - than those in the US and European Union by the same time?

That's enabled leading derivatives dealers to assemble substantial financial engineering and structuring teams in Asia, in addition to the ubiquitous traders, marketers and sales staff that have plied their trade in the region for many years. These engineering and structuring teams are starting to move away from a model where they tweak structures developed in Europe or the US to better fit Asian markets. A growing number of structures based on Asian themes are being sold to clients in Europe, Japan and the US.

But that's just the start of the process. As the article on page 10 shows, the shift in talent is starting to mean best-practice structures are now being developed in Asia. Credit Suisse's geometric-dispersion trade looks likely to be followed by other innovations started in Asia to be exported to the West, rather than vice versa.

Sure, there will be setbacks. For example, Asia's equity structured products market had comfortably outstripped that of Europe last year, but volumes seem to have lagged the traditional heartland in the first quarter. But with subprime-related problems pushing more talent into Asia, this trend looks like it will accelerate - and will only be boosted by the raft of highly numerate and energetic talent emerging from Asian schools and universities.

- Christopher Jeffery.