Hong Kong Forum - October 24, 2013
EMTA FORUM IN HONG KONG
Thursday, October 24, 2013
Sponsored by
Island Shangri La
Pacific Place, Supreme Court Road
Island Ballroom C (Level 5)
Hong Kong
12:00 noon - Registration
12:30 p.m. - Panel Discussion
Investing in Asia Local Markets 2013-2014: Prospects and Risks
Tim Condon (ING Bank) – Moderator
Michele Barlow (Bank of America Merrill Lynch)
Johanna Chua (Citigroup)
Stephen Chang (JP Morgan Asset Management)
Hon Cheung (State Street Global Advisors)
Additional support provided by MarketAxess.
Luncheon will be served with the compliments of ING Commercial Bank.
Attendance is complimentary for EMTA Members. The registration fee for non-members is US$395.
Great Rotation, Opportunities in South Asia Among Hong Kong Forum Topics
Over 100 market professionals attended EMTA’s 8th Annual Hong Kong Forum. The event was held on Thursday, October 24, 2013, at the Island Shangri-La Hotel and sponsored by ING.
Moderator Tim Condon (ING) directed Hong Kong Forum speakers to offer their assessments of market tapering fears. Michele Barlow (Bank of America Merrill Lynch) attributed the market’s initial sell-off to a perception that the US FOMC would end its easy money policy “in the distance.” However, investors were now more cognizant that the policy would soon come to an end. Concurring, Johanna Chua (Citi) noted that “the initial shock is always worse than the reality; but I don’t expect as dramatic a reaction when it finally occurs because now it is built-in; people are expecting it.” Forecasts for the 10-year US Treasury varied widely from Citi’s 3.5% to Bank of America’s 4.0% (compared to a narrower band discussed at the EMTA Singapore Forum held two days earlier).
“The great rotation” from fixed income into equities was discussed, with speakers agreeing that there was some evidence of such a trend, while judging it a minor concern. Stephen Chang of JPMorgan Asset Management acknowledged his firm was experiencing some movement into equities from fixed income, and observing that the May sell-off could be more accurately viewed as a rotation out of long duration assets. Hon Cheung (State Street Global Advisors) stressed that EM debt remains a long-term theme for the sovereign wealth funds and Central Banks covered by his team (“the EM debt story isn’t dead!”). Barlow argued that the rotation was occurring in retail, not institutional portfolios (“there are still institutional inflows”).
Condon questioned panelists on whether investors had previously retreated to North Asian economies as a safe haven trade, and if the time were right for a return to other markets. Chua agreed that there were interesting opportunities in South Asia, including the INR, MYR and CNH, as well as Indonesian and Thai local instruments. She speculated whether India could open up its domestic bond market, leading to its being included in global indices, but asserted that this was not her firm’s house view.
Finally, speakers offered their annual assessment of the CNH bond market. “We don’t feel entirely comfortable to commit a lot of capital there,” commented Chang. He added that the market remained highly illiquid with 10-20 bp spreads. Barlow noted that performance had been strong “if you can hold it, since trading it is difficult given poor liquidity.”