Financial markets IT spend to reach $90B in 2015

Expenditure driven by financial institutions transferring power from traditional decision-making bases of New York and London to Asia-Pacific cities as region grows in economic strength, new report states.

IT spending by global financial markets will hit US$90 billion in 2015 on the back of more companies moving their bases from cities such as New York and London to Asia-Pacific, and rebound in the hedge funds sector, according to a new forecast.

Released Monday, the forecast from research firm Ovum stated that worldwide spending on IT is growing worldwide as financial institutions continue to transfer power to Asia-Pacific due to the region's growing economic strength.

Zooming in on Asia, Ovum noted that the IT spend will reach US$18 million in the next four years. China, for one, will see a Compound Annual Growth Rate (CAGR) of 8.8 percent for its financial markets IT spend during that timeframe, while Hong Kong will experience 8.1 percent growth and Singapore by 7.1 percent.

Furthermore, while the three Asian countries will see lower investments than the United States, United Kingdom and Ireland, their growth will outstrip their Western counterparts, the report said. These Western markets will experience IT spend growth of between 5.8 percent and 6 percent CAGR, Ovum stated.

"While there will be growth in nearly every major market, the Asia-Pacific countries will be at the forefront," Daniel Mayo, principal analyst of financial markets technology at Ovum, said in a statement.

"This is mainly due to global companies shifting their decision-making power from New York and London to cities such as Beijing, because of their growing economic influence."

Returning investor confidence
The analyst also highlighted that IT spending in the hedge funds sector will see the strongest growth of across all lines of businesses to achieve a CAGR of 14 percent from 2011 to 2015. The growth is driven by the a resurgence in the hedge funds market as investors seek higher return, he noted.

Mayo explained that investors had stayed away from the "disastrous performance of the global hedge fund market" after being badly affected by the financial crash, which resulted in IT investments falling "significantly" in 2008 and 2009.

"However, the Asia-Pacific market proved far more resilient [compared to other markets] and, as investors seek higher returns, is set to be a major driver for industry growth in 2011," he explained.

Mayo added that much of the investment in all regions and lines of business will be made in risk management systems as well as reporting systems that would allow financial institutions to provide greater transparency and comply with new industry regulations such as Basel III.


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