BROKERS NEWS

Talk to us about the current retail trading landscape and what trends are you seeing?

The power of technology is driving the growth of retail trading in the Asia Pacific region, which  has seen strong economic growth and numerous local pockets of economic dynamism since the  end of the pandemic.  

Increasingly, new traders are motivated by a desire to learn new skills and seize opportunities  triggered by heightened market volatility, often becoming self-taught. As the number of providers  offering trading services rises, it is crucial for new traders to choose regulated brokers.  

To kickstart their trading journey, new traders require providers that offer comprehensive tools,  information, news, and data to make well-informed decisions. Moving forward, there will be a  greater demand for trading solutions that provide outstanding user experiences, top-notch  customer service, and effective risk management tools.

How has the retail trading landscape evolved over the years, and what are we expecting in  2024-25? 

Over the past decade, the rise of digital brokers and wealth management funds has democratised  trading, giving individuals the autonomy to trade in the best possible way. The surge in online  trading solutions has left traders more independent, making education and access to insights  crucial.  

The strongest traders share specific characteristics: they educate themselves, focus on sound  strategies, and leverage market data and technical analysis. Trading is personal and involves a  significant emotional component. New traders must learn to control their emotions and navigate  volatile markets with a clear focus to avoid irrational decisions that can lead to poor results. Risk  management tools provided by OANDA can help traders maintain better control over their trades. 

Recently, OANDA entered the prop trading industry- What are the opportunities you see in this  sector? Why did you choose to enter this space? 

Profit-sharing models, such as OANDA Prop Trader, have the potential to further  democratise trading by making it even more accessible and attractive to a broader range  of skilled retail investors.  

We conducted a survey in September 2023 to understand investors’ attitudes towards prop  trading, and discovered that interest in this type of trading is really high amongst  experienced traders in what OANDA defines as the ‘emerging markets’ segment. Findings  from our survey also suggest that traders are excited by the prospect of proving  themselves in a challenge, and those with limited capital welcome this as an opportunity to  profit and thrive in financial markets. 

This is really key because OANDA Prop Trader is particularly compelling for the "active  trader" - OANDA’s target user in its core business. With our offering, this type of  experienced trader has the opportunity to earn a profit share, which could be significantly  greater than what would be earned with the typical retail deposit. The low fixed cost of  entry for the user means limited downside, which adds to the appeal. 

We believe that the prop space has the potential to grow further as more people become  aware of and learn about the products and services. Established players like OANDA  entering the sector can lead to the right type of healthy competition, innovation, and liquidity in the industry, benefiting all participants.  

Interest in OANDAs Prop Trader offering is growing fast. In the few months since we  launched the OANDA Prop Trader website and associated social media channels, we  have seen a spike in traffic to our educational blogs on FX, Indices, MT4, MT5 and  technical analysis. Our Facebook page, where we publish daily educational content,  reached a following of more than 9,000 users in a few month.  

What do investors need to know about prop trading?  

When embarking on a prop trading journey, it is crucial to find the right partner. Seek proprietary  trading firms with a long-standing history and global recognition, top-notch training, leading-edge  technology, a secure withdrawal process, direct licensing with MetaQuotes, and substantial  trading capital. Look for firms with their own technology and liquidity arrangements, not subject to  the whims of a broker. Prioritize firms with equitable profit-sharing arrangements that do not rely  on contractor payroll firms for payment, as these have proven unreliable for some.  

Prop trading typically gives traders access to more capital than they would normally have, offering  the opportunity for higher profits. These firms usually include access to tools, technology, and  market data, which would otherwise be too costly for many potential traders.  

Not everyone is cut out for trading; it’s a competitive environment with much to learn. Successful  trading at any level depends on the trader's skill. While a prop trading firm can supply tools and  technology to help build strategies, it is up to the trader to refine and make those strategies work. 

Moving to markets in 2024, what is your view on emerging markets especially Asian emerging  markets for the rest of the year as inflation remains sticky and we have the US elections 

Firstly, the sticky inflation trend is likely to dissipate in the second half of 2024 as we have a lower  probability of oil prices moving up to retest the US$90 per barrel after a change in the supply  dynamic.  

OPEC+ in the last cartel meeting has decided not to extend its voluntary cuts of 2.2 million  barrels per day (bpd) until the end of 2024 but instead end these cuts after Q3 2024. Hence after  September 2024, prior voluntary oil supply cuts are likely to be gradually restored every month till  the end of September 2025.  

Emerging Asian countries/markets such as South Korea, and India have relatively high import oil  bills and are likely to benefit from the latest OPEC+ decision where the respective central banks 

(BOK) and (RBI) face fewer challenges to enact their first interest rate cuts in H2 2024 than will  likely see an uptick in their respective economic growth prospects.  

The US Presidential Election is going to be a wild card with both candidates; Biden and Trump  advocating populist trade protectionism policies to sway US voters, and their target is primarily  towards China. 

Trump even floated the idea of a blanket increase for all Chinese imports to at least 60%, while  Biden offered a more targeted approach towards selected Chinese imports such as EVs, clean  tech, and semiconductors. Nevertheless, both are pointing towards a potential return of US-China  Trade War 2.0. 

If such forms of tariffs on Chinese imports are enacted after 2024, retaliation from China cannot  be ruled out which eventually see a revival of global inflationary pressure and create negative  volatility in emerging Asian markets as central banks are being forced to withdraw liquidity from  the financial markets to combat an uptick in inflationary trend. 

What views do you have on China and public markets of China as well as CNY, how will this  impact the rest of EM

The deflationary risk spiral inherent in the Chinese economy since the start of the year has  dissipated. The latest China Caixin Services PMI has advanced to 54.0 in May from 52.5 printed  in April, beating forecasts of 52.6, and recorded its fastest pace of expansion since July 2023. 

In addition, its new business and new export orders (sub-components of the China Caixin  Services PMI) for May grew the most in a year due to strengthening domestic and external  demand. 

This latest set of positive macro data suggests that the piecemeal stimulus measures from  China's top policymakers are working This may see a continuation of the medium-term uptrend  phase of China's public markets (i.e. CSI 300 Index) that kickstarted in April 2024. 

As for the CNY, since there is an improvement in domestic demand as mentioned earlier in the  latest Caixin Services PMI dataset, there will be likely less need for China policymakers to  deliberately weaken the CNY as a counter to boost external demand (net exports) to meet China  2024 GDP growth target of around 5%. 

Therefore, the odds of a currency war-like scenario are low at this juncture, and EM countries that  are more export-dependent such as South Korea and Taiwan face less pressure to depreciate  their respective currencies to maintain export competitiveness.