The special administrative region of Hong Kong has long been a magnet for foreign direct investment. Recently, the cracks in its special “one country, two systems” relationship with China have widened. The grievances of pro-democracy Hong Kong residents have erupted into massive protests—threatening Hong Kong’s appeal to international investors. If not Hong Kong, where else can investors direct their wealth? Or should they wait the Hong Kong situation out?
Thanks in no small part to recent rate cuts by the US Federal Reserve System, Singaporean banks are now under increasing pressure. And the outlook for the Asian city-state’s banking sector suggests that things may get only worse this year, especially for the three biggest players:
China’s Silk Road was for centuries an invaluable network of trade routes connecting Eastern and Western Eurasia. Now, in the 21st century, it has been resurrected in the form of China’s Belt and Road Initiative. Despite suspicions about the motives behind the ambitious project, no one would deny the magnitude of China’s sweeping plan for infrastructure and economic development in more than 150 Eurasia countries. But can it pull it off?
Vietnam’s banking sector has needed a reboot for some time. Impacted by bad debt, corruption and lax regulation, banks have not reached their potential. In response to the multiple problems, Vietnam is implementing a development strategy to strengthen the sector. The pressure is on banks to comply with new regulations, such as adhering to Basel II capital standards, but banks along with rating agencies generally have an upbeat view of Vietnam banking’s future.
Singapore has much to celebrate. Along with Hong Kong, it is regarded as one of Southeast Asia’s top financial hubs. Although these rivals match each other on many fronts, their stock exchanges do not. Singapore’s SGX is shrinking, while Hong Kong’s stock exchange continues to grow. It’s easy to see that the SGX is ailing but much harder to figure out exactly why—and how to reverse the trend.
In spite of the recent rise of protectionism amongst major trade partners, international trade growth is strong, with emerging markets providing the main impetus. Trade growth could be even stronger if not for the shortfall in trade financing supply relative to demand, a gap that is partly due to regulation compliance. Technology is coming to the rescue, not only in addressing the trade finance gap but ameliorating operations throughout trade channels.
Prospects for Southeast Asia’s largest economy, Indonesia, are looking much brighter, especially after recent raises in the sovereign credit rating. Although the government has set an ambitious growth goal that is unlikely to be achieved, the country is still outshining its neighbours and receiving its just rewards in the form of increased foreign capital inflows and lower borrowing costs, to name a few.
Malaysia—beset by scandal, political turmoil, dropping oil prices and falling currency—hasn’t appeared to be the land of opportunity to investors in recent years. But 2017 has brought hope of a turnaround to this Southeast Asian emerging-market economy, with factors such as improved trade performance, infrastructure development and a stabilizing currency resulting in renewed investor confidence on the nation’s markets.
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Across the world, governments are increasingly acknowledging the need to raise the levels of investment in infrastructure projects within their respective countries.