When looked at from a Hong Kong perspective, the treasurer’s world is familiar, yet has its own preoccupations.
In one sense, sitting on the edge of the world’s second-largest economy – with its huge currency reserves, growing middle class and restless political ambitions – might be viewed as an advantage for a (relatively) small entrepôt economy. On the other hand, dealing with the nuances of an onshore/offshore currency regime, an uncertainty about whether the China boom will last (is that a mainland banking bubble on the horizon?) and rising regional economic and political tensions could mean risk specialists will have their work cut out.
Treasurers at the recent ACT Cash and Treasury Management conference in Hong Kong were decidedly mixed in their views. The growth in renminbi capital markets offers the opportunity of diversification into the Asian US dollar market, while the growth of the Hong Kong equity markets should help with capital raising.
For example, international companies are increasingly issuing equity in Hong Kong because they have Asian customers and stakeholders. Issuance allows investors access to all types of derivative trading – for example, warrants and exchange traded funds – bringing liquidity and diversity. As the Chinese government relaxes the rules on renminbi convertibility, Hong Kong’s presence in the renminbi market will increase. But a full float of the renminbi is still seen as some way off, if it happens at all. Dim sum bond issuance for investment in mainland China still requires the relevant Chinese authorities to approve the onshore investment.
Corporates in Asia are piling up cash at an even faster rate than their counterparts elsewhere, which is causing the expected counterparty risk management issues and one that is less well-known: the quality of risk assessment varies quite widely, particularly in cultures where relationships matter. This has shades of the treasury experience in the Middle East.
Some things about Hong Kong remain reassuringly familiar, however: the astonishing use of bamboo scaffolding, the sheer weight of humanity crammed into this tiny speck in the South China Sea, the resourcefulness and brio of the Hong Kong economy and, lastly, is there a place in the world that loves to eat more than Hong Kong? Whatever crawls, walks, runs, flies or swims on the earth or in its waters is available for consumption. The good news? It’s all eaten cooked. We’ll be back next year for more.
Peter Matza is engagement director at the ACT