The third day of class in Singapore we stayed at the Conrad and had guest speakers visit us. The first was Strategic Alliance Capital, which focused on venture capital in Asia. One of the main takeaways is that in Asia you rely heavily on friends to screen potential investments and deal with local government issues. The second group of speakers was from Franklin Templeton Investments. They talked about the three ways to do value investing and doing them in Asia. The third speaker was Elizabeth Sam who held many positions in the Singapore government. She talked about the development of Singapore with an efficient government and low-tax regime. Moreover, it has the right infrastructure with a deep-water port and great transportation networks. The final speaker was Lumen Advisors who talked about how strange investments could provide large returns. The example was the Brazil law firm that finds people who have damages against the Brazil government from a previous financial crisis.
The second day of company visits began with a visit to SGX where we talked to the CEO of the exchange and got a tour of the facilities. SGX is unique in that it owns its own clearinghouse, which is a profitable area for exchanges. In the US, the Treasury department attempted to make the exchanges more competitive by requiring the exchanges be separate from the clearinghouse. But this just made the exchange business in the US more fragmented. However, since Singapore has many exchanges, the regulatory authority allows SGX to own its own clearinghouse. Lastly, the way SGX makes its money is changing; it is from derivatives trading, not stocks.
Our flight to Singapore was on Singapore Airlines, which was recently rated one of the safest airlines in the world. Many people on the trip were cautious about the meal served for lunch, but they were quite excited when the flight attendants handed out Haagen Daz ice cream. We then took a couch bus to the Conrad Centennial Hotel. Our first Singapore meal was an Italian meal that excited many students because it was their first bit of western food since they left the United States.
Our third day began at the Hong Kong Exchange where the talk began by addressing why Hong Kong did not get the Alibaba IPO. Hong Kong was not going to relax its standards in order to get a historic IPO. Then the talk focused on the Hong Kong – Shanghai Stock Connect. The link has mainly benefitted Shanghai with northbound flows vastly outpacing southbound flows. The main reason for the differences is that Hong Kong investors have not been able to invest in Shanghai before, while Shanghai investors could trade on Hong Kong Exchange if they had a Hong Kong trader. Moreover, there were more arbitrage opportunities for the Hong Kong investors in Shanghai than for Shanghai investors in Hong Kong. One interesting development that occurred after we left HKEx was that Chinese investors have increased their purchases of stocks in Hong Kong according to the Wall Street Journal (http://www.wsj.com/articles/chinese-investors-buy-record-amount-of-hong-kong-stocks-through-trading-link-1420802287).
Our second day of class began with Mikaal Abdulla from 8 Securities. He used the knowledge he gained from working at E*TRADE to start a mobile financial trading business. He started up his own business in Hong Kong, even though he said HK was a tough place to start a business. However, China is a great place to start a business because of the potential. The first of two main lessons from his talk was that financing will be hard to come by, especially external financing, so family, friend, and self-financing may be needed at early stages. The second was that the new competitors to financial institutions are unconventional sources like technology companies such as Alibaba.
I arrived in Hong Kong a day early to recover from jet lag and explore the area surrounding the hotel. The Holiday Inn Express was no place of luxury, but it was conveniently located next to a MTR stop and walking distance from the financial district. I explored the IFC mall before meeting up with the class for our first dinner. Malls are set up similar to many in the United States but the stores are much smaller, there are many more stores, and department stores take up a large section of one floor instead of taking up the same place on many floors.
Naturally, I presumed that the Hong Kong/Singapore J-Term trip would only take me to two countries. However, as I stepped off of the Singapore MTR metro and onto one of the streets within “Little India” it felt as if I had been transported straight to Mumbai. Immediately and almost instantaneously all of my senses were engaged at once. All around me were smells of spices, sights of people, and sounds of car horns. The streets were lined with stores that sold everything from sparkly gold bangle bracelets to vibrant fabrics used for making saris.
John Templeton is famous for his quote: “Invest at the point of maximum pessimism”. McIntire graduate Clara Lee, from Franklin Templeton, spoke to our class and taught us that this seemingly simple quote is the foundation behind all of Franklin Templeton’s investments. Franklin Templeton is a “value” investor, which means that the firm prides itself on selecting companies with high intrinsic value whose stocks are currently being underpriced by the market. Clara went on to highlight that value can come from many different sources including unappreciated growth, restructuring, macro crisis, cyclical depression, secular pressure and micro crisis.
As Professor Low stepped into the meeting room of the Conrad I was expecting to listen to another speaker highlight the importance of Hong Kong as the “gateway” to China and the importance of Singapore as a capital for wealth management. While Professor Low did mention the usual topics of the arbitrage opportunities in China and the surprise that the southbound flow of trades with the Hong Kong/Shanghai connect were much larger in volume than the northbound movement his talk took a surprising turn in terms of geography. Near the end of his speech Professor Low highlighted an extremely interesting money making opportunity that his hedge fund takes advantage of in Brazil.
I just awoke on my flight for Atlanta from Seoul, South Korea ( I made a connection in Seoul from Singapore) and want to reflect on the amazing trip that I just experienced. This trip was one of the best trips of my life and I greatly recommend anyone who can go on this trip next year, to go. The small group (Roughly 14 Students) was a perfect size and everyone had fun together and become close, even though the trip was roughly 10 days. Hong Kong and Singapore are two iconic cities and have lots to offer. While it is safe to say that we learned a lot from Professor Webb and from the many people who we met on the trip, we also had a lot of fun. Professor Webb gave us ample free time to explore Hong Kong and Singpaore and we all had a lot of fun during our free time. I certainly recommend this trip as this trip will be one of the highlights of my four years in college.