Vincent Chui, chief executive, Morgan Stanley Bank Asia Limited shares his views with Asian Private Banker in ‘The Final Word’, a year in review by the region’s private banking leaders as they share their thoughts and opinions on key issues around industry trends, business performance, investments, regulations, and technology.
Industry Trends | In what ways has the COVID-19 pandemic irrevocably changed the private banking industry and your own bank’s approach to operations and service?
The pandemic has unwittingly acted as a catalyst for investors, banks and regulators to accept and embrace technology as a legitimate communication and governance tool. It has compelled investors and RMs to get comfortable with virtual meetings rather than physical ones. It has also forced individual banks to have a reality check of their remote technology competence and business continuity planning. The pandemic may well prove to be the most significant enabler of fintech and regtech in the financial services industry.
Industry Trends | Few can deny the importance of Asia’s onshore wealth markets — in terms of asset pools and the need for wealth management from increasingly sophisticated domestic investors. What opportunities do these markets bring to your business, and to what extent will ‘onshoring’ shape your strategic agenda?
Historically, “onshoring” for international banks in wealth management has been a challenging task. For those that have had a long presence in key onshore markets such as Japan, Taiwan, Korea and India, their market share remains dwarfed by the big local onshore banks.
Would emerging onshore opportunities in China or Thailand be different? Maybe, and different banks have different regulatory risk appetites and resources to explore onshore opportunities. For the UHNW segment, customers have very distinct onshore and offshore needs. International banks are in an excellent position to satisfy their offshore needs and, through collaboration with onshore players, can provide global products white-labelled as onshore products. As these economies grow and the number and size of the UHNW segment expands, there are more than enough opportunities for international banks to operate an offshore model profitably in the next five years.
Business Performance | NNA gathering and account opening have proven challenging in a pandemic-affected world. If we continue to experience lockdowns and travel restrictions in 2021, how can private banking businesses adapt?
2020 has been an excellent trading year, given the volatility and near zero rates, and notwithstanding the economic and human impact of the COVID-19 pandemic. We did not see a slowdown in NNA gathering at all. New account opening was a challenge during the early days of the pandemic, but the regulators have provided guidelines which facilitate remote account opening and for low risk jurisdictions such as China and Taiwan, RMs have resumed travel from Hong Kong or Singapore to meet clients there. I expect new account openings will gradually return to their normal pace.
Investments | From a portfolio perspective, how important will (a) Chinese assets and (b) alternative investments be for delivering clients’ objectives over the next five years?
As a firm, Morgan Stanley is very constructive on the outlook for Chinese assets, A-shares in particular. China is the only major economy registering positive GDP growth in 2020 (2%) and is expected to deliver 9% in 2021. While the political dynamics between China and the US and its allies post the new US Administration may not improve materially, policy induced risk and volatility will likely trend lower. Meanwhile, the localisation of consumption and technology will provide a strong and alternative source of growth.
Alternative investments have evolved to become a core asset class for alpha generation. Managers have the relative luxury of a long term investment horizon and work closely with the managers of investee companies. They also have the ability to influence timing of exit. These factors make it relatively easier to generate long term returns, as compared to public market managers. The quid pro quo is of course the liquidity trade-off versus liquid funds.
Investments | What key investment themes shape your bank’s 2021 outlook — and why?
It’s a V shaped recovery – keep the faith. Rising COVID-19 cases are a risk but we think this global recovery is sustainable, synchronous and supported by policy, following much of the ‘normal’ post-recession playbook. Overweight equities and credit against cash and government bonds, and sell USD. Be patient in commodities; we think that index-level returns will be back-loaded.
Meet 2020’s industry leaders in the full round up of of Asian Private Banker‘s The Final Word 2020.