07 August 2017

Europe offers opportunities for far-sighted Asean firms

BREXIT, trade pact uncertainty and political changes have led many Asean businesses to take a wait-and-see approach to further European investment over the past year.

Contact us

Customer Service and Technical Support

By Tony Cripps, CEO, HSBC Singapore and Chris Davies, CEO International, Europe

First published in The Business Times, 21 Jul 2017

While understandable, the old adage of “where there is volatility, there is opportunity” holds true across several sectors and countries within the European Union (EU). Indeed, the number of merger and acquisition deals in the EU in the first half of 2017 was 70 per cent higher than the same period last year, according to Bloomberg.

Within that, Europe’s commercial and industrial real estate is becoming particularly attractive for Singapore-based real estate and investment trusts.

City Developments Limited Hospitality Trusts, for example, recently purchased the Pullman Hotel and its office and retail components in Munich, citing the economic recovery in the region as reason for the acquisition.

Elsewhere, Frasers Property International entered into a conditional agreement to acquire an 87 per cent stake in  Amsterdam-based Geneba Properties, in a deal which gave the company access to a portfolio of long lease logistics and light industrial properties in Germany and the Netherlands.

Asian investors are also leading the charge in the student accommodation sector. Mapletree Investments – another  Singapore based real estate developer and manager – made its first foray into student accommodation in 2016 when it acquired 25 properties in the United Kingdom (UK).

Singapore’s sovereign wealth fund and real estate investor, GIC, fuelled a record US$16.2 billion of student-housing acquisitions, with an additional US$3.3 billion of deals in the first quarter of 2017.

China has been a major investor in Europe particularly in technology, advanced manufacturing, real estate and services, and its focus continues unabated.

According to the Mercator Institute for China Studies, Chinese investments in the EU increased 77 per cent in 2016, with Germany alone accounting for a third.

The Belt and Road Initiative (BRI) will underpin Chinese investor interest in Europe. Several countries, through tax and other business friendly incentives, are seeking to position themselves as China’s gateway to Europe.

Poland is a prime example, and the recent state visit by Chinese President Xi Jinping attests to the importance of that relationship.

A few years ago, the idea of a direct train connection between China and Poland would have seemed improbable. Today, trains ply between Chengdu and Lódz, carrying goods between the capital of Sichuan province and Poland’s third largest city.

While rail is still more expensive, the cost is offset by the reduction in inventory and warehousing costs associated with the shorter trade cycle, which is why major electronics companies such as HP, Dell, Acer and Sony are beginning to deliver goods by rail to Europe. Similarly, Volvo announced in May 2017 that it would begin to transport cars via rail, cutting 66 per cent travel time.

Although still minuscule compared to traditional shipping options, rail is beginning to ramp up.

Widening of trade modes

European railway cargo carrier DB Cargo is reporting that more than 40,000 containers were transported between China and Germany in 2016, a record, and expects this to grow to 100,000 by 2020.

The further widening of trade modes between China and Europe has implications for China’s substantial supply chain across Asean over time, which will inevitably need to adapt its production and trade arrangements to accommodate the changing and faster supply-chain dynamics of rail.

In the short term, trade between China and the EU – and Asean as a result – is beginning to bounce.

During the first five months of 2017, trade between China and Europe jumped 16 per cent from the same period last year with exports of electronics rising. Given that Singapore, Vietnam, Thailand and Malaysia are all large players in China’s electronics supply chain, they are seeing corresponding spikes in their exports to China and to Europe directly.

Opportunities in Europe also extend to the finance sector. As the UK and the EU deliberate over a hard or soft Brexit, several continental European countries are beginning to position themselves as a treasury hub.

The UK has always been a key entry point to Europe for Asean firms; however, there have been reports that Germany, France, Ireland, the Netherlands, among others, are seeking to build in-country banking capabilities and infrastructure for corporates looking for a base for their European treasury centres.

This is all geared towards providing foreign corporates with a viable path for commercial continuity and for new entrants to feel confident in embarking on their European expansions plans.

While many of Europe’s challenges will not be immediately fixed, they do not obscure the region’s fundamental strengths. During the past decade, Asean exports to the EU grew by more than 40 per cent. And while the template for doing business in Europe has been shifting, clearly, activity and opportunities remain for far-sighted Asean corporates interested in taking a longer-term view.


This document was prepared by The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch (“HSBC” or “we”) and published in The Business Times in Singapore on 21 July 2017.

The document is intended for those who access it from within Singapore. The document is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation.

The information contained in this document is derived from sources we believe to be reliable but which we have not independently verified. HSBC makes no representation or warranty (express or implied) of any nature nor is any responsibility of any kind accepted with respect to the completeness or accuracy of any information, projection, representation or warranty (expressed or implied) in, or omission from, this document. No liability is accepted whatsoever for any direct, indirect or consequential loss (whether arising in contract, tort or otherwise) arising from the use of or reliance on this document or any information contained herein by the recipient or any third party. Future changes in law, rules, regulations etc. could affect the information in this document but HSBC is under no obligation to keep this information current or to update it. Expressions of opinion if any are subject to change without notice. If you seek to rely in any way whatsoever upon any content contained in this document, you do so at your own risk.

This document does not constitute an offer or solicitation for, or advice that you should enter into or start using, any of HSBC’s products and services. Recipients should not rely on this document in making any decisions and they should make their own independent appraisal of and investigations into the information described in this document. No consideration has been given to the particular business objectives, financial situation or particular needs of any recipient. Any examples given are for the purposes of illustration only.

No part of this document may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC.

Copyright © The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch 2017. All rights reserved.

You are leaving the HSBC Commercial Banking website.

Please be aware that the external site policies will differ from our website terms and conditions and privacy policy. The next site will open in a new browser window or tab.

You are leaving the HSBC CMB website.

Please be aware that the external site policies will differ from our website terms and conditions and privacy policy. The next site will open in a new browser window or tab.