Asian markets at the core of global strategies

Plenary speakers applaud the Asia-Pacific growth story and discuss future strategies for the region.
For those of us fortunate enough to be living in Asia-Pacific, rapid economic growth is a way of life. For the banks and capital markets exchanges operating in this region, the opportunities are immense. And everybody has an opinion about how the economies of the region will develop û opinions which were shared at the second plenary session at Sibos on Tuesday.

Asia-based economic luminaries such as Mervyn Davies, chief executive of Standard Chartered Bank, Ralph Parks, chairman of JPMorgan ChaseÆs Asia business, and moderator Dominic Barton, Asia chairman of McKinsey & Company, heralded the speed of economic development and prosperity in Asia through a series of visuals.

The audience, many of which were clearly not from Asia, gaped at before and after images of Shanghai and Shenzhen, which Barton used to drum home his point and the theme of the plenary.

ôProbably more than any other region in the world, Asia-Pacific is undoubtedly the place to be when talking about raising ambitions,ö says Barton. ôIt is not so much the size of economic activity, but the speed of interaction which is incredible.ö

To reiterate his point, Barton produced a slew of facts ranging from GDP per capita income growth in markets like China and India, to the growth in market caps of certain Asian stocks.

This introduction provided the perfect segue into thoughts from leaders of some of the regionÆs most dynamic banks and stock exchanges on how they plan to overcome some of the barriers to expansion in Asia.

John McFarlane, chief executive officer of ANZ, wasted no time in recognising the growth in the Asia-Pacific region, drawing comparisons between OECD economies and those in this rapidly developing continent. ôThis area of the world provides a very attractive opportunity for financial institutions, particularly as Asian growth rates offer three times the return from OECD countries,ö says McFarlane. ôIn the coming years, youÆll see a swift rise in wealth coming on the back of a fundamental economic shift in Asia, and there is clearly no way back.ö

McFarlane says the key for banks like ANZ finding success in the region is to follow their core strengths and focus their attentions on the underbanked Asian markets. ôFor banks like ANZ to succeed in Asia, we need to look at new markets with the same suite of products,ö he says. ôBy this, we recognise that there are great opportunities in the commercial and retail banking space and less in launching more sophisticated services.ö

Vincent Cheng, the Hong Kong-based chairman of HSBC, was quick to agree that the opportunities in Asia are great, particularly in the personal finance services industry. Although admitting that HSBC has faced some challenges in the region, he conceded that the rising consumer income and growing middle class in Asia had been a boon for the industry.

ôRising consumer income has meant that banks have more opportunities to provide financial services in Asia to clients that are increasingly coming to us with vastly different needs,ö says Cheng. ôHowever, regionally we are seeing a compilation of different trends in this space due to the huge diversity of Asia. In fact, you could say that the only common theme across all the Asian markets is good growth opportunities.ö

Although Cheng says China and India should be a primary focus for banks, he urged that smaller markets such as Indonesia and Vietnam should also be considered real growth markets. In the case of Vietnam, Cheng pointed out that the number of bank accounts has tripled in the last two years to six million, which still leaves approximately 76 million more potential clients out there.

Echoing McFarlane, Cheng also says that for foreign banks to achieve future success in Asian markets, they need to be selective on product introductions, know where they can compete and follow individual regulations closely. ôFor foreign banks in Asia, a lot of what we can do depends on individual market access,ö he says. ôIt is really a case of understanding which products will sell well and where they will sell well.ö

This sentiment was reiterated by plenary attendee and former Australian Prime Minister Paul Keating. ôBanks looking to Asia need to be focused on growth and if they try to knock off the big domestic banks on things like deposits, it will be hard.ö

Outside of the banking sphere, Rajnikant Patel, managing director and chief executive officer of Bombay Stock Exchange, which itself is looking to list, discussed the growing role of the capital markets in the region. Sharing his own experience in implementing a paperless settlement system and overcoming the telecommunications hurdles that perennially plague India, he says market infrastructure will be an important consideration for the securities markets. ôFor us, it will be a challenging future and sometimes an uneasy journey, like other areas of the Asian financial world, but it will not be boringö says Patel.

Reflecting on his experience in Japan, Masamoto Yashiro, senior advisor at Shinsei Bank and director at China Construction Bank, spoke at length about the similarities and differences between his home countryÆs banking system and China's. At times he was quite critical of the reaction of Japanese banks to the economic bubble that weighed on the country in the 1990s, but appeared relatively confident about the Chinese banking world, despite the spectre of non-performing loans (NPLs) and issues of corporate governance.

ôChinese banks are moving to international standards and it is very easy to be impressed at how open they have been on corporate governance,ö says Masamoto. ôHowever, it is also easy to question whether the reduction in NPLs reflects the true picture, but overall there has been a very good change at Chinese banks and they will be globally competitive.ö

In general, the panelists were extremely positive on the present and future direction of Asia-Pacific economies. They also maintained that banks and exchanges need to be selective when following ambitions in the region.
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