Beneath the
broader macroeconomic war waged across Asia by central banks equipped
with interest rate, currency devaluation and QE arms, countless
smaller yet no less crucial battles will simmer to a head in 2015.
India vs. China.
Hong Kong vs. Singapore.
RMB vs. USD.
North vs. South.
Regulation vs. growth….the list goes on.
Competition emerging between these selected rivalries within the ever
evolving Asian banking sector is fierce.
Speculation that economic growth in China could stall has been rife
for some time, yet the acceleration of India as a revitalised economic
powerhouse is particularly noteworthy.
GDP growth projections for the two most populous nations on the globe
are set to overlap as soon as Q4 2015 as India drives towards 7.0
percent GDP growth and China fades below 6.5 percent.
Following in the footsteps of the US and Japan, People’s Bank of China
officials are tipped to introduce a bout of quantitative easing
intended to stimulate waning inflation. Equity driven growth is a
focus for China given the abundance of credit driven industries
currently undergoing review. The results of this review have been felt
in global commodity markets such as iron ore.
Rotation away from primary industries into service based commerce and
consumer driven growth is in full swing. The ability to smoothly
transition into a modern economy and straddle exciting digitally
disrupted concepts is argued to be the primary determinants for
realising current GDP growth projections.
Bragging rights for ‘Asia’s Financial Capital’ remains tensely fought
over between Hong Kong, the capital raising juggernaut, and Singapore,
a regional FX turnover hub. |
Businesses
expanding abroad and considering centralising their treasury
operations in the form of a regional treasury centre (RTC) are
increasingly faced with the dilemma of selecting which geography in
which to be based.
Both cities offer a diverse range of advantages yet additional
incentives introduced to make doing business easier could be the
difference.
The proliferation of RMB convertibility across the globe and rapid
expansion in RMB turnover resulting from currency liberalisation is
posing interesting strategic discussions over its potential to
challenge the almighty US Dollar.
As more businesses move into the nearby Shanghai FTZ, capital
restrictions are eased and trading systems are enhanced, Hong Kong
continues to emerge as a centre for RMB turnover. Hong Kong RMB trade
has ballooned by almost 75 percent, surging to over RMB 5 trillion in
executed trades within the last year while the number of enterprises
based in the FTZ has more than doubled to well over 20,000.
Surprisingly the correlation between Asian equities and currencies has
broken down, highlighting the presence of ulterior market forces
providing a distortive influence on Asian capital markets.
The requirement for banks to hold more capital against lending
balances will force Asia’s banks to become more streamlined and
efficient, quickly separating the industry leaders from the
challengers.
Additional regulatory and compliance costs balanced against continued
growth aspirations will play out as a fascinating interplay throughout
2015.
A New Year is never truly underway until the wave of ‘Year Ahead’
forecasts subsides, yet these relatively disassociated battles will
not just define the dialogue for next year’s 2016 ‘Year Ahead’
forecasts – they could ultimately influence who wins the war. |
