‘Black mark’ for Australia exchange as glitch halts trading for the day

Australia’s stock exchange suspended trading for the rest of the day after earlier saying the problem that caused a 90-minute delay to Monday’s open had been resolved, drawing criticism from investors and brokerages.

ASX said i there will be no closing price auction on Monday that normally takes place at the end of the trading day. The bourse operator said it will advise the process for determining closing prices, remaining session states and status of orders.

The issue comes at an inconvenient time for investors and traders assessing their positions, with policy meetings scheduled at the Bank of Japan and the Federal Reserve this week, and Australia’s central bank set to release minutes from its most recent meeting on Tuesday. Australia’s equity market is worth us$1.1 trillion, making it the sixth-largest in the Asia-Pacific region.

“I’ve never seen anything quite like this before,” said Niv Dagan, the Melbourne-based executive director at Peak Asset Management. “It’s frustrating because they said they’d fixed it. We’d hope the ASX sorts things out by tomorrow to allow traders to exit positions before the Fed meeting. You’ve got traders and fund managers looking to change their portfolios before that, and unfortunately, they can’t do that.”

ASX delayed the normal 10am local time equity market opening until 11:30am due to an issue relating to a component that allows it to manage individual stocks, said Matthew Gibbs, a spokesman for ASX in Sydney, adding that the company was working with its technology vendor Nasdaq to prevent a recurrence. It then halted trading in the afternoon before cancelling it for the rest of the day.

Chi-X Australia, which operates a competing stock-trading system, had to delay its usual open due to the ASX glitch, said its chief executive John Fildes.

The ASX’s shares fell as much as 2.4 per cent in Sydney trading before trading was halted, while the nation’s benchmark equity gauge, the S&P/ASX 200 Index, was little changed. ASX shares were up 14 per cent this year prior to Monday, compared with a 19 per cent increase in a Bloomberg Intelligence gauge of security and commodity exchanges.

“We were expecting it to be fairly quiet in the market on Monday and tomorrow,” said James Woods, an analyst at Rivkin Securities in Sydney. “There would’ve been some position adjusting last week and on Monday and tomorrow” ahead of the Fed and BOJ meetings, he said. “It’s a bit of a black mark for the reputation.”

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”