For all the surrounding fears of a China slowdown and the impact of Brexit, the investing interest among Asian entrepreneurs has continued to hold steady, going by HSBC’s assessment of the opening weeks of 2019.
The thrum of corporate activity in the first quarter keeps HSBC’s Philip Kunz, head of the private banking division for Southeast Asia, and Alan Turner, head of commercial banking in Singapore, fairly optimistic about the prospects of growth.
This comes as HSBC sees increasing value and appetite from clients, in bringing both aspects of the bank together to better serve the entrepreneurial families from this region.
“There is rhetoric happening at one level, but the rhythm of the business has by and large stayed pretty strong and consistent,” says Alan.
“Where you do see slow down in a more uncertain economic environment is with the big strategic decisions. If you look at the end of last year, you didn’t see people rushing to do an IPO. As for investor confidence in the prospects for Singapore and Southeast Asia, it remains strong.
This confidence is reflected in the growth of the private banking business for HSBC, which is gunning for more growth in the wealth segment. It was just in September last year that HSBC Singapore said it plans to double total wealth – including deposits and investments – from the retail and private banking segment over the next five years.
For Philip, the story of rising wealth in Asia remains a strong one, and it is compelling for a universal bank with both private wealth and commercial banking capabilities to tap Asian wealth using Singapore as a hub.
Singapore remains a key part of HSBC’s global growth strategy to focus on the wealth business. Indeed, Singapore itself has seen an increase in its own high net worth individuals (HNWI) population and wealth from a year ago. Singapore is also one of the top three offshore wealth booking centres, and is the choice location of Southeast Asian HNWIs.
“At HSBC, one plus one is more than two,” says Philip. “Whenever there is increased uncertainty, people look for a safe harbour that can provide steadiness. That’s Singapore,” he adds. “We’re seeing a slowdown, but that’s still from elevated levels.” Business optimism is also reflected in HSBC’s recent poll.
The HSBC Navigator – a global survey of more than 8,500 corporates across 34 of the world’s major markets gauging business sentiment and expectations on trade activity and business growth – showed that Singapore firms are more confident than their global peers currently. The poll took in views from about 200 Singapore-based firms.
The October report suggested that eight in ten of Singapore businesses have a positive trade outlook, which is stronger than the global average of 77 per cent. Singapore corporates are still keen on China for future growth, with just over a quarter seeing it as a key growth market, followed by the US and Malaysia.
HSBC has seen Asian corporates reviewing their regional supply chains, given the trade tensions, even if it will take time for businesses to shift their operations from China and into ASEAN. What is certainly clear is that manufacturers and other businesses that already have factories in the region are raising capacity and running them to the hilt, says Alan.
He has also observed that amid the trade tensions, Singapore is becoming a more attractive home for procurement and sales.
“Singapore is a perfect neutral territory with its free-trade agreement with China, Europe, the US, and is also part of the ASEAN bloc. That’s a lot of market access from one country,” says Alan.
Again reflecting this sentiment, the HSBC Navigator polled showed that 64 per cent of Singapore firms think that free-trade agreements will have a positive impact on their business over the next three years. This compares with the global average of just 51 per cent. The confidence is not just underpinned by the plethora of free-trade agreements signed with key trading partners, but also comes as the key trade countries of Singapore – Malaysia, Vietnam and Indonesia – have stated that they are very bullish on their business outlook.
Keeping it in the family
Philip says that the true beauty of HSBC’s private banking business is in helping families with solutions to take them in the next generation and beyond.
And the younger generation in the family is, in turn, seeking solutions from the bank to guide them through sustainable business practices to keep the family business relevant as proper stewards of the environment.
While in the past, enquiries about sustainable business practices were sporadic in nature, these have become frequent among business owners today, as several Asian family businesses begin to transition towards ushering in the next generation of leaders, says Philip.
“The family dynamics and the cultural aspects are far more important than the economic variances. There is a desire from private banking clients to create sustainable businesses across the supply chain,” he says.
Asian businesses today understand that the evolving concerns over environmental, social, and governance issues could turn into risks as new rules to safeguard economies could challenge the profitability if business owners are caught unaware of these changing winds.
“These are interesting conversations because they look at completely new business models. They aren’t backward-looking,” Philip adds.
The bank can also bring together professional wealth structuring and planning to help families protect their assets, and allow for an orderly succession of assets across jurisdictions. These include estate planning, and ensuring that the family has sufficient funds available to meet financial obligations that include estate and inheritance taxes.
To safeguard family wealth as it passes between generations, having a neutral third party helps broker what is difficult but often necessary conversations.
Readying the next generation of entrepreneurial leaders in taking the helm is a combination of careful planning and execution, led by Wealth and Trust managers.
“There is seldom one solution that works for every client. Each family has their own dynamics, especially when adding in a family business to the mix,” explains Philip.