January 22, 2014 00:00 By Wichit Chaitrong
Large and stable stock markets such as Hong Kong and Singapore are expected to gain substantially from investment inflows from emerging markets such as mainland China or Thailand, where local investors are seeking to diversify, according to financial expe
China, the world’s second-largest economy, has been entering a new phase of economic development as the country starts to export capital.
As mainlanders become wealthier, they want to shift their wealth out of the country as well as to seek investment opportunities, according to financiers based in Hong Kong. Many financiers who last week joined the Asian Financial Forum hosted by the Hong Kong Trade Development Council shared their views that funds had flowed across the region in recent years, as investors looked abroad to diversify their portfolios, shifting from country-focused investment.
The Hong Kong Stock Exchange is expected to gain as it has a variety of asset classes, said K C Chan, the city’s secretary for financial services and the treasury.
The Hong Kong bourse is the second-largest in Asia after the Tokyo Stock Exchange, with market capitalisation of about US$3 trillion (Bt98 trillion). As of last month 1,643 companies were listed on the SEHK.
Romnesh Lamba, co-head for global markets of Hong Kong Exchange and Clearing Ltd, said he did not think the emerging Shanghai Stock Exchange would be much competition for Hong Kong’s bourse, of which HKEx is the holding company. One advantage is that the SEHK is less volatile, as institutional investors dominate the trading, accounting for 79 per cent. It is therefore similar to the New York Stock Exchange and Nasdaq, where 80 per cent of investors are institutional, he said. Meanwhile, the SSE has been dominated by retail investors, accounting for 80 per cent, making it highly volatile. He also pointed out that maturing markets such as the NYSE and Nasdaq in the United States and HKEx were currently driven by derivative products, shifting away from equities, which mainly drove the markets in the past two decades.
Most investors use derivative products to manage their risks, said Lamba, though he acknowledged that some of them used them for speculative purposes.
Asian financial centres are also competing for wealth-management businesses as Asians become richer and export their capital.
John Tsang, Hong Kong’s financial secretary, said that over the past decade, the total size of assets under management in Hong Kong had risen from about US$400 billion in 2003 to $1.6 trillion in 2012. More than 60 per cent of the assets are sourced from overseas investors. There are more than 370 private equity firms in Hong Kong with capital under management of about $100 billion as of last September.
Currently, Singapore ranks first in Asia’s wealth-management business. Its location in Southeast Asia and stable government make the city-state attractive for global wealth managers to establish their regional headquarters.
In Thailand, Saharat Chudsuwan, first senior vice president of Tisco Asset Management Co, launched the Tisco China Trigger 8% Fund, which will invest in China stocks via the Hang Seng H-Share Index ETF on the SEHK. He said in a press release that the Hang Seng China Enterprise Index (HSCEI, or H-shares) had gone down early this year and it had been traded at 1.2 times book value (P/BV) and at a price-earnings ratio of only 7 times.
Because of low prices and good prospects of the Chinese economy, Tisco expects Thai investors will see high returns from such H-shares while the Stock Exchange of Thailand currently is under high pressure from the political crisis.