January 25, 2010

Inside Market Data - Special Report

China Data Needs Grow as Market Matures

Annual spend on market data by financial services firms in China is expected to grow rapidly over the next 10 years, reflecting the maturation of the Chinese financial industry and broader user requirements, which is creating opportunities for vendors that can respond and meet those demands, according to new research from Burton-Taylor International Consulting LLC.

According to the report, the Chinese financial industry spent $342.6 million on financial information in 2009, including market data, news, research and analytics, which has grown at a compound annual growth rate of 29.5 percent since 2003.

And this is anticipated to grow further as assets under management increase.  Based on an estimated $1.5 trillion in assets under management, which Burton-Taylor projects to reach $5 trillion in 2020, an average annual asset management fee of 1.25 percent will generate cumulative asset management fees of $513 billion between 2010 and 2020.  "Over 10 years, this is a potential $513 billion that will be reinvested in the firm's business, taken out as profit or spent on differentiating market data, news, analytics and investment tools, and will create opportunities for new products or vendors to generate significant revenue," says Douglas B Taylor, managing partner at Burton-Taylor.

According to the report, in 2009 Thomson Reuters had the largest share of the Chinese market, deriving $66 million in revenue from the country, followed by domestic vendor China Finance Online with $61.6 million, mostly from the retail market.  Bloomberg pulled in $50.4 million from China, while Wind Information is the largest domestic vendor catering primarily to professional users with annual revenue of $34.8 million.  Overall, domestic data providers command almost 60 percent of total annual data spend in China, although Taylor expects that to shift as more international vendors take a greater interest in the country.

China's increasing appetite for international data could benefit foreign vendors, who typically offer better coverage of international markets, though Chinese users view domestic content as more of a differentiator when selecting a vendor, Taylor says.  This could lead to more global providers entering into partnerships with local providers, or acquisitions of domestic vendors by international providers, to gain strong domestic coverage and tap into established local client bases, he adds.

The report also indicates that in general, users are less satisfied with their current providers than in the past, though Taylor says this "isn't an indication of vendor products performing poorly, but rather an indication that the market is maturing as users develop more sophisticated needs and demand broader content."  In particular, the breadth of news considered a requirement by portfolio managers and researchers in China has expanded, while satisfaction levels are significantly lower.  This may also be a result of the roles of portfolio managers and researchers becoming more defined in China, leading to users becoming more explicit about what tools they need, Taylor says, adding that vendors seeking to grow their business in the country must understand these needs and deliver products that satisfy them.

by Vicki Chan