14/09/2011 (Channel News Asia) - HSBC said its commodity trading volumes in Singapore grew 50 per cent in the first half of this year.

As growth in the West sputters, HSBC said the commodities business is booming, thanks to South-South trade, or trade between emerging economies.

Khuresh Faizullabhoy, Head of Trade and Supply Chain at HSBC, said: "India, China are two large countries which are driving this consumption pattern, but that's not it.

"If you look across Southeast Asia as well, all the emerging economies are growing very strongly. There's a strong GDP growth and the demand for commodities is very strong. So being closer to their customers, being closer to the countries that are consuming is key for most of our customers."

Bankers and traders have been moving eastwards to where the demand for commodities is strong, pushing Singapore's offshore trade turnover to S$860 billion last year. It has grown at a compounded annual growth rate of 25 per cent over the past decade.

Firms such as Citi, Barclays, Standard Chartered and JP Morgan are among those that have relocated global heads to their trading desks in Singapore, and they have had plenty of incentive from the government.

Backed by the Ministry of Trade and Industry, IE Singapore launched the Global Trader Programme a decade ago. The programme allows companies to enjoy a concessionary tax rate on qualifying trade income.

For example, a company like XinRen - which saw export sales of S$189 million in 2010, will enjoy a concessionary tax rate of 10 per cent. As the uniform corporate tax rate in Singapore is 17 per cent, this will mean cost savings of about S$1 million.

According to IE Singapore, to date, more than 270 companies have chosen to anchor their regional and or global business operations in Singapore.

The commodities trading boom is also benefiting smaller players that provide support services.

Commodity trading software provider JustCommodity is one such example. Its revenue is on track to triple to S$6 million this year.

Joel Lou, CEO of JustCommodity, said: "We've enjoyed very good growth , because of the rise of the commodities market in general. For the last three years, we've seen our revenue growth doubling on average, year on year.

Be it palm oil, crude oil, rubber or any number of raw materials, booking commodity transactions in Singapore is weathering the global economic downturn, better than most. This is because higher living standards and the ongoing infrastructure build out in Asia will continue to underpin the demand for commodities, said Mr Faizullabhoy.