Today, we woke up and had a wrap-up session with Professor Webb. Professor Webb spoke about the growth of Singapore and Hong Kong, two cities which developed from fishing villages. In recent years, Singapore has been becoming a larger player in the foreign exchange trade. Currently, Singapore is ranked third in the world of all foreign exchange trading centers. This rise in foreign exchange trading is largely due to the steady increase in foreign exchange trading since 2000 and Japan falling in terms of foreign exchange trading in the East. On the other hand, Hong Kong is trying to take advantage of the offshore RMB market. While each city is well positioned for further growth, the two economic plans each vary greatly. Singapore is utilizing its position as a foreign exchange center and a place where there is strong human capital to take advantage of the growth throughout Asia. Hong Kong is attempting to become the financial center for China and is trying to take advantage of the growth within China. Unfortunately, if China’s growth slows substantially, then Hong Kong will most likely feel the consequences.
Today, we went to Temasek International where Mr. Song Hwee gave us a presentation about the company and about the industry in general. Temasek is owned by the government but operates similar to any other corporation. I found it very interesting that Temasek has a large control of companies within the airline industry as well as the shipping industry since these industries are having more and more competition with China opening up economically. While Mr. Song Hwee stated that the company likes to do what is best for the country, it does not feel that it needs to act in the best interest of the country, but instead acts in the best interest of the company. The company’s goal is to provide long term growth and has to this point, succeeded in doing so. The company also contributes a lot of money to charities within Singapore, including camps and children organizations.
This morning we woke up, Max and I had breakfast at the hotel, and then we went to the hotel conference room for a meeting with Dr. Aaron Low with Lumen Advisors. Dr. Low gave us a presentation about “Hedge Funds in the New Normal.” The “New Normal” is the current world economy. He believes the “New Normal” is more of a multipolar world in which people are not retiring as quickly, the youth are having more difficulty finding jobs, there is sustained low growth, higher sovereign risk, and embedded inflation triggers. He believes that there is confusion in the market due to increased regulation such as Dot Frank. Furthermore, he believes there as an asset bubble in Asia which could greatly affect the economies of every country in the world. He then transitioned and talked about hedge funds and how it has been tough for hedge funds to raise capital. Many people are still fearful to invest since the Great Recession. However, there has been more and more investment in distressed debt, particularly in Brazil. I found this very interesting because with all of the growth in Asia, many investors are looking at Brazil for their investments. I believe this could also be due to many investors not feeling comfortable investing in Asia, particularly in the real estate market, because they believe the asset bubble will end soon. With there being strong growth in Brazil, and Brazil getting more national attention (via the World Cup and Olympics), it will be interesting to see if Brazil can maintain its growth and keep attracting investors.
Today we began our day by visiting the Singapore Exchange. After getting lost on our trip to the building, we finally arrived and Mr. Magnus Bocker gave us a presentation about the Singapore market and how the Singapore exchange functions within the market. Mr. Bocker began the presentation talking about Asia’s recent growth. Asia needs to bring roughly one billion people into the middle class in the next 20 years and therefore will have to invest roughly 20 million dollars in infrastructure. This is a large difference from the 3.2 trillion dollars that was invested in the past ten years. He further stated that Singapore is in a good position to take advantage of Asia’s growth due to its Connectivity, Human talent, and corporate governance. This will allow Singapore to become the second largest global asset management hub by 2018. In terms of the Singapore Exchange, Mr. Bocker would like to grow the Singapore Exchange organically. He is very open to competition and wants more exchanges in Singapore to open up more investments and more volume for the Singapore Exchange. His biggest challenge is that there is not enough liquidity in the market. One point that I found interesting is that he said that he only cares about volume and not market share. This comes as a surprise since many companies care deeply about their market share but this is not the case for Mr. Bocker. After this presentation, Max. Jack, Lindsay, Justine, Professor Webb and I went to get lunch at a salad restaurant. The lunch was expensive for just a bowl of salad (Singapore is much more expensive in comparison to Hong Kong) but we enjoyed each others’ company and ate outside.
Today we woke up and then drove over to the American club where Mr. and Mrs. Kirtland hosted us for breakfast. The breakfast was great and it was nice to have a full American breakfast with coffee, eggs, and bacon. After an enjoyable meal, we went to J.P. Morgan where we met with Nathan Slack who is the J.P. Morgan’s market manager for the Private Wealth Management division in Southeast Asia. Nathan Slack spoke to us about Singapore’s growth in becoming a center for private wealth management. This rise of wealth management in Singapore is largely due to an increase in ultra-high net worth individuals within Singapore and Southeast Asia. J.P. Morgan attempts to preserve the wealth of these high net worth individuals and does not attempt to make any financially risky investments. Within Asia, high net worth individuals are more likely to spread their wealth across more managers than in the United States. In addition, the high net worth individuals are more secretive to their wealth managers than in the United States. This is partly due to the individuals not wanting the government to fully know their wealth and asset plans. Furthermore, Asian high net worth individuals have more of their assets in illiquid assets comparative to high net worth individuals in the United States. This is largely due to many of these Asian high net worth individuals becoming wealthy due to forming large corporations and still holding large positions within the companies. Mr. Slack also stated that many individuals from around Asia and Europe are beginning to place their assets within Singapore. He further stated how it is important for him and J.P. Morgan to be thorough in their background checks so that they only manage legitimate money and money of ethical individuals.
Today we left Hong Kong for Singapore. We went to the IFC Mall and took the airport express train to the airport. We were able to check in our baggage at the IFC Mall which was very convenient as well. For lunch, some of us ate Popeyes chicken which was a nice change from the Asian cuisine that we have been eating for the past few days. We took Jetstar Airlines to Singapore which was nice but unfortunately they did not serve drinks on the plane ride. Once we got to Singapore, after all of us got water to quench our thirst, we passed through Customs, got our luggage and, were led in many different directions by the Singaporean airport staff. The extreme humidity did not help as we were walking from one side of the airport to the other but it was nice to finally find the bus and make our way to the hotel.
Today was a free day for us and we tried to make the most out of the day. We first lunch at a dim sum restaurant next door to the hotel. We then made our way back to Sam’s Tailor in Kowloon so that Max and Jack could get fitted for their suits one last time. Below is a picture of the train station while we were on our way to Kowloon (Jack, in the bottom right, is very happy as he goes back to Sam’s Tailor).
Today we began our day at the CFA Institute. There, William Boivin and Grace Yeung hosted us and explained to us the importance of a Certified Finance Accreditation. The CFA is the gold standard qualification in the finance field. The CFA promotes the highest ethics, education, and professional excellence. Due to the economic recession, many people in Asia and in the United States are starting to get this certification earlier in an attempt to distinguish themselves from their peers.
We began the day with a Holiday Inn Express breakfast which was pretty good. A good start to the day! We then went to the Hong Kong Exchange where we talked with Matthew Harrison, the Head of Research and Corporate Development at Hong Kong Exchange. There, we learned how the Hong Kong Exchange is strongly based in the core China equity markets and is expanding its services, such as creating a commodities clearing house in order to benefit from China’s growth and opening.
Happy New Years! Our group just ate dinner together at the Cottage Gastropub and everyone is pretty tired from traveling. I got into Hong Kong at 5:30PM and had very little sleep on the long plane ride. In addition, I was delayed on my connection in Toronto due to the ice storm in the area and also Air Canada did not transfer my luggage. Luckily, I am borrowing clothes from my best friend Max who is on the Tripp with me as well. After a quick shower and a pleasant meal at Cottage Gastropub which is a local restaurant across the street from our hotel, Holliday Inn Express, we are now about to go to sleep for the night. Before I go to bed, I wanted to reflect on my travels and thoughts before the class begins. Flying over the Pacific earlier today, I couldn’t help but think of how the markets of Asia are growing at astonishing rates. With the world becoming more and more flat, the access and transferability of capital is allowing Asian markets to become larger players in the world financial market. However, one important lesson which I learned today, is that while technology and capital are important in all markets, necessary for a market to be successful. I am not inferring that the United States airline luggage system is exceptional in any way and this is not a statement about the airline industry, but instead a belief that human capital and human execution are essential for all financial markets to grow and be efficient.