Nomura Holdings is increasing headcount in its foreign-exchange and emerging markets trading desks across Asia, betting that elevated volatility will remain a driver of client activity, the bank said in an interview this week. The move is part of a broader push to strengthen its macro trading franchise, which the firm regards as likely to benefit from continued market swings.
Rig Karkhanis, head of global markets at Nomura, said the group sees macro businesses - which cover interest rates, foreign exchange and emerging markets trading - as particularly well-suited to periods of market turbulence. He described volatility as a long-running theme for the firm and said it is expected to remain a focal point for hiring and investment.
"Our macro businesses tend to perform well in periods of volatility. So that has been a big theme for us and probably is going to continue being one of our main focus areas," Karkhanis said.
Nomura highlighted that clients use macro products to diversify and rebalance portfolios. Even as the firm prepares for prolonged market swings, Karkhanis said he expects the broader favourable backdrop for equities to remain intact for about two more years, underpinned by large-scale investment in artificial intelligence infrastructure that could support productivity and growth.
"My base case is we’ll see a normalisation of geopolitical risk. Oil price volatility is likely a short-term phenomenon and we should go back to where we were two or three months ago," he said.
The current recruitment push builds on a multi-year refocus of Nomura’s markets operations. Over the past several years the bank expanded its spread products business - mainly credit trading - approximately two and a half years ago when global interest rates began to be cut, and added resources to equities trading about a year ago on the expectation of rising share prices. The latest hires in Asia are intended to reinforce the foreign-exchange and emerging markets capabilities within that strategy.
Karkhanis also confirmed the firm is hiring in its U.S. rates business under Moritz Westhoff, who took on the role as head of U.S. rates in August last year. He declined to provide details on the scale of the new hires.
Broad market volatility over the past year has lifted Nomura’s trading revenue. For the first nine months of the fiscal year ending in March, trading revenue rose to 716 billion yen, equivalent to $4.5 billion. Karkhanis expressed optimism about the year ahead for trading performance.
"Next year I think it’ll be another very strong year," he said.
Japanese debt
Karkhanis said a normalisation of geopolitical tensions should exert downward pressure on yields for long-dated Japanese government bonds. He noted a growing appetite among global asset managers for long-end JGBs, in part because yields at the long end are now similar to yields on comparable European government bonds.
He added that if domestic asset managers increase their purchases, long-end JGB yields could fall further. At the same time Nomura faces a hiring challenge: finding traders with experience trading Japanese government bond yields at levels not seen since Japan’s bubble economy of the 1980s and early 1990s.
"We would love to hire more JGB traders. Japan rates traders are probably the most in demand globally, so it’s highly competitive," Karkhanis said.
Nomura’s strategic hiring in Asia and in U.S. rates reflects a broader aim to position its markets business to generate profits across different market regimes and to assert itself as a global player irrespective of short-term conditions. The firm’s commentary ties together its staffing choices with views on future market behaviour - persistent volatility supporting macro trading demand, and an eventual easing of geopolitical and commodity price pressures helping equity markets regain momentum.
($1 = 159.03 yen)