In this article, our leaders in APAC look at the trends, opportunities and challenges for the region in 2022
Despite the ongoing challenges brought by the global pandemic, 2021 has seen the APAC region generally on a positive road to recovery from the post-covid recession. We remain optimistic in the new year as regional markets chart their paths towards the future and hope that the imminent re-opening of borders will lead to further increases in cross-border investments across various sectors in the region.
Below we take a look at what we expect in 2022 in our different regions across APAC.
Hong Kong remains a crucial player across the asset management space, retaining its position as the access point for China. The Wealth Connect programme, as part of the Greater Bay Area initiative offers market opportunities, and, if successful offers huge opportunity for the region.
While PE continues to grow at a high rate, and investors seek increased technology as part of service providers’ solutions, hedge continues to see increase interest as investors seek to benefit from lower risk and volatility as the world emerges from COVID.
Within Sanne, our own development of our Hedge Fund offering over past years has recently been noted with the business having been named as Best Fund Accounting and Reporting Software at the HFM Asia Awards 2021.
The implementation of new SPAC rules by the Hong Kong stock exchange (HKEX) provides an alternative for investors to the traditional IPO route, as the jurisdiction brings itself in-line with Singapore. HKEX’s stated intention to ensure SPAC’s are used by experienced and reputable promoters should breed market confidence.
China aims to become the world’s largest economic entity by 2028, a date brought forward by the country’s efficient management of the COVID-19 pandemic. Swift action by the government to contain the virus managed to avoid a cession in 2020, with China presenting GDP growth of 2%.
Private equity closely impacted local GDP levels. In the developed countries, private equity capital raised as a percentage of GDP typically falls in the 5-10% range annually. For China, this figure was around only 0.5% 20 years ago, implying a tenfold growth potential. When coupled with China’s tenfold GDP growth, it is not surprising to see that the private equity industry has expanded so outstandingly. China’s private equity industry has globalised significantly in recent years, as most institutional investors and fund managers have sought better risk-adjusted returns outside of their home countries.
We believe USD and RMB funds will continue to co-exist in China for a long time. The proper practice is to illustrate the interplay of USD and RMB funds in China is through QFLP and QDLP. We expect China ‘s private equity industry to further develop and become more attractive to foreign players this year.
Singapore continues to make significant efforts to further promote its appeal to alternative investment managers. The Variable Capital Companies (VCC) Act remained as one of the leading catalysts in spurring the growth of Singapore’s asset management industry last year. Additionally, MAS announced a new partnership in 2021 between itself and the private sector – known as the Singapore Funds Industry Group – to further enhance Singapore’s reputation as a leading full-service asset management and fund domiciliation hub.
In the green lane, Singapore is positioning itself to play a key role in as a financial services hub in Asia. A Green Finance Industry Taskforce has been convened, proposing a taxonomy and launching an ERM handbook, among other measures, to promote ESG considerations in the Singapore markets. The latter supports the financial industry’s efforts to implement MAS’ Guidelines on Environmental Risk Management (details of which can be found later in this report).
The above observations, coupled with the continued trend of “onshorisation” of funds, suggest a bright future for Singapore.