Investors should get cash in motion and position themselves for the long term as the world experiences structural changes from falling interest rates, emerging technologies and changing demographics, top money managers said at a forum.
Meanwhile, the Global Financial Leaders’ Investment Summit will be back for a fourth year next November, Eddie Yue Wai-man, the CEO of Hong Kong Monetary Authority, said on Wednesday. “We’re going to do it again next year,” he said in his closing remarks to the summit. “The welcome dinner will be on the 3rd of November and the summit on the 4th of November, so everybody mark your dates ... I’ll see you next year.”
Diversified asset allocation strategies offer the best opportunities, money managers said at the forum organised by the HKMA.
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“We have seen money in motion,” said Andrew Schlossberg, president and CEO of Invesco. Cash began to move this year as the interest-rate picture started to change, some stability returned to markets and people were willing to take on more risk assets, he said.
Many of the stimulus, policy and retirement market changes around the world have created a generational shift in the way people are investing, Schlossberg said. The changes are the “incentives to be in the capital markets” while investment visibility and opportunities have improved, he added.
More than 300 financial heavyweights, including executives from State Street Global Advisors, Invesco and Bridgewater, gathered in Hong Kong for the three-day summit to discuss industry changes and share insights.
Investment managers have adjusted their portfolios in response to changing policies and stimulus programmes after Donald Trump won the US presidential election and China rolled out a series of measures in late September to support stocks, the property sector and the broader economy.
Volatility may linger if inflation returns and interest rates stop falling, pushing bond yields higher and suppressing equity valuations. The yield on the 10-year US Treasury, a global benchmark, hit a six-month high of 4.5 per cent last week.
Yie-Hsin Hung, president and CEO of State Street Global Advisors, said investors should think about a “spectrum of investments that can add alpha”.
The spectrum could include private equity and venture capital, diversifying into infrastructure and real estate, as well as gold that can provide a hedge against geopolitical instability, she said.
After the US election, investors have been reallocating cash, according to Laurent Ramsey, the managing partner at Swiss private bank Pictet.
“With short-term rates coming down, the opportunity cost of staying in cash becomes more expensive,” he said.
Ramsey saw a steepening of the yield curves, and correlation between bonds and equities being “conducive to diversifying one’s portfolio”.
Meanwhile, emerging technologies like generative artificial intelligence and blockchain are changing how the fund industry operates while spurring new virtual assets.
“Innovative technology is sending the financial industry into a blue ocean of endless possibilities,” said Julia Leung Fung-yee, CEO of Securities and Futures Commission (SFC).
Hong Kong has sought to become a virtual asset hub by introducing exchange-traded funds that invest directly in cryptocurrency tokens. It is also preparing a regulatory regime for stablecoins pegged to fiat currencies, similar to the licence requirement for cryptocurrency exchanges that took effect last year.
Chinese Vice-Premier He Lifeng and other top financial regulators pledged more support for Hong Kong’s financial markets on Tuesday. These include encouraging more mainland companies to list in the city, widening market access and issuing treasury bonds.
Fundraising in Hong Kong has picked up for the first time in four years, with US$9.2 billion raised from 57 initial public offerings (IPOs) so far this year, according to data from the London Stock Exchange Group. However, the levels are still well below those seen when the city was the world’s top IPO market seven times between 2009 and 2019.
More deals are possible as Hong Kong strengthens connections with the Middle East. Last month, the SFC and the Saudi Capital Market Authority said they would promote cross-border listings of stocks, ETFs, bonds and other financial instruments.
Southeast Asian countries and the Middle East share a strong aspiration for progress by pursuing investments in infrastructure, green transformation and technologies while diversifying their investments and asset allocation, Financial Secretary Paul Chan Mo-po said in his keynote address on Wednesday.
“We are making significant strides to capitalise on the opportunities presented by the growth of these emerging markets.”
“Uncertainty and market volatility are the new and only certainty,” said SFC’s Leung. “We must think and train like a triathlete for agility, strength and resilience to sail through the changes.”
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