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Agencies

Asia’s rich and their bankers said they are backing an eventual recovery in China and betting exposure to a region that even in a slowdown is the fastest-growing in the world will pay off.

“You’ve got to have the fortitude and the forbearance to be able to look through cycles and look through the ups and downs,” said DBS Group Chief Executive Piyush Gupta, in an interview at the Reuters NEXT conference in Singapore.

For now, he said, it means a long-view that China will emerge from a property crisis to drive regional growth, a view that was echoed by bankers, investors and advisers to the super-rich. The comments point to a degree of steadfastness from the region’s top businesses and money managers that can underpin the return of foreign capital.

The world’s second-largest economy grew 5.3 percent in the first quarter, beating forecasts but with weak spots in consumption and property and with equity markets in the doldrums. China’s blue chip CSI 300 .CSI300 hit a five-month low on Tuesday.

“In the short term, there are headwinds,” said Gupta, whose bank is the largest foreign lender by assets in Taiwan and the biggest shareholder in China’s Shenzhen Rural Commercial Bank.

“We still haven’t hit bottom (in China’s property market) because we haven’t seen market-clearing prices,” he said, but a longer view - which would have prospered in the US through the last century - holds promise.

“If you take a look at the megatrends in Asia, it’s good to be long Asia.” So far this year there has been a net inflow of 22.4 billion yuan ($3 billion) from foreign investors into Chinese stocks, though it has been volatile and selling was prevalent in June as data came in showing the sharpest home price falls in a decade.

“Especially overseas sentiment and more so (in) the US is very skeptical on China,” said Stefanie Holtze-Jen, Asia-Pacfic chief investment officer at Deutsche Bank Private Bank, during a separate panel discussion at the Reuters NEXT conference.

“Our local ultra-high-net-worth private banking clients are obviously invested and they can see much closer ... that what the central government is steering towards is a pro-growth angle,” adding foreign flows will probably follow market returns.

Southeast Asia is a potential bright spot in the meantime as investors see demographics and political trends supporting growth as global companies expand manufacturing outposts in Vietnam and Malaysia.

To be sure, stock markets have seen outflow pressure and been overshadowed by the strong performance of developed markets and, in Vietnam’s case, spooked by political instability.

But foreign direct investment is reasonably steady or growing and, in Indonesia, the state-owned China International Capital Corp 3908.HK is planning a foray into dealmaking. “Over the next five years or so ... we are going to be deploying people into Indonesia, Malaysia, Indonesia, where we intend to apply for (an investment banking) license,” said CICC’s head of Southeast Asia and Singapore Stephen Ng.

On the wealth management side of his business, he said sentiment and flows were robust. “We have only seen the tip of the iceberg in terms of the wealth that is looking to be deployed in this part of the world and especially to Singapore.”

Vietnam’s VinaCapital Fund Management Deputy Managing Director Khanh Vu said investor demand remained strong and would eventually be supported by the country’s anti-corruption drive. “I think it should give investors some level of confidence that those practices are not tolerated,” he said.

“I think what is ultimately important is you have to be on the ground ... sitting even here in Singapore behind a terminal doing your due diligence remotely (doesn’t compare with talking) to investors who have gone through this and know here the potential pitfalls are.”

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10/07/2024
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