Navigating Business – Asia Pacific Series
All industries and sectors across the world have been uniquely disrupted by COVID-19, causing companies to revisit their strategies as they look to react to the current environment and plan for the future. In this Navigating Business Series we interview HSBC experts as they provide insight around sector outlooks, opportunities for multinationals and investments and the future of trade.
Listen to the series below
Listening time: 16min
Every sector has been uniquely disrupted by COVID-19, Frederic Neumann, Co-Head of Asian Economics Research, HSBC takes a look at the technology, healthcare and education sectors. What are some of the key opportunities that are emerging in these sectors?
- Lockdowns have revealed a lack of tech infrastructure in many countries, presenting a short-term investment opportunity for necessary hardware components such as semi-conductors
- As digitalisation continues to accelerate across all facets of life, more investment will be required in key services like online shopping and banking
- The need for personal protective equipment, clinics, beds, as well as various forms of health insurance, is providing an opportunity for the public and private sectors to collaborate
- With the active ingredient in 240 of the most critical drugs produced in China, concern among policymakers on the vulnerability of supply chains is creating opportunities for domestic providers to increase production capacity that can be scaled up and down as needed
- Institutions need to consider how to incorporate the seamless integration of offline-to-online learning and classroom flexibility, a trend that us expected to continue, requiring fresh investment in software and hardware
In this episode, Frederic Neumann, Co-Head of Asian Economics Research, HSBC discusses the economic outlook for the tourism, apparel and automotive sectors and the opportunities that are emerging in these challenging sectors?
Tourism and Hospitality
- International tourism is not expected to bounce back for several years, creating opportunities for domestic tourism eg travel providers, hotels, restaurants etc to adapt and fill the gap in the short to medium term
- Investment that reflects changing consumer expectations around social distancing and higher hygiene standards is a trend that will continue
- One of the biggest retail trends is the transition in demand from formal wear to leisurewear, a shift driven by changing workplace norms
- Increased investment in online channels is needed as they become the preferred way to purchase among consumers
- The disruption to global trade has created opportunities for domestic manufacturers to shorten supply chains and bring production closer to their consumers
- Reluctance to use public transportation is driving a new demand for automobiles, a trend that could last until concerns about social distancing abate
- Technology around automated driving and alternative energy vehicles is gaining momentum, providing new opportunities for industry growth
Listening time: 18min
Listening time: 11min
COVID-19 has brought into question the future of globalisation and forced international companies to refocus their strategies. Sandeep Uppal, Global Co-Head of International Subsidiary Banking, HSBC discusses the state of globalisation, trends around foreign direct investment (FDI) and key considerations for multinational corporations (MNCs).
- The longer-term prospects for globalisation still hold, due to MNCs having cumulatively invested USD32 trillion in FDI around the world, USD7 trillion of which is in Asia; considering these investments are mostly in physical infrastructure and given occasional restrictions on the repatriation of capital, limited short-term movement is expected
- Due to rising protectionism, as well as the impact of COVID-19, countries are increasingly discouraging imports while at the same time still welcoming FDI to generate employment and boost GDP
- Key for MNCs is assessing how to achieve greater returns on their existing investments or become more active in parts of the world, such as Asia, that have a welcoming stance toward FDI
- While onshoring production addresses the challenge of countries wanting to produce goods at home, they are still dependent on MNCs due to the lack of specialised skills locally; international companies should therefore consider readjusting their service offerings as a way of maintaining competitiveness in overseas markets
- Rising geopolitical risk means that diversification across the board, not just in supply chains, is important for businesses and overtime MNCs are expected to manufacture and sell their products in a more diversified manner
In this episode, Sandeep Uppal, Global Co-Head of International Subsidiary Banking, HSBC shares his thoughts on the impact of the current pandemic, how it is driving multinational corporations (MNCs) to revisit their global strategies and what they need to consider in the process.
- Changes in the business, economic or political environment present an opportunity to retest business models globally as well as locally
- MNCs can generate a higher return on their overseas investments by utilising their assets to also produce goods for the local market, for example, the China Plus One strategy whereby international companies produce goods in China for Chinese consumers and not just for export
- Increasingly MNCs are using overseas markets for setting up operations, raising equity and producing exclusively for consumers in the local markets. This may give rise to strategic questions about their global positioning and this requires careful consideration
- COVID-19 has increased the cost of doing business across borders, highlighting how essential it is for MNCs to ensure they are well equipped with adequate financial and non-financial resources to succeed
- A change in corporate strategy should be supported by digitalising global operations to increase resilience and efficiency, as well as a thorough revaluation of competitors and the new classes of risk
Listening time: 12min
Listening time: 8min
The pandemic has hit global trade at an extraordinary scale, challenging the modern supply chain and leaving many companies with liquidity concerns in the face of uncertainty. Ajay Sharma, Regional Head of Global Trade and Receivables Finance, Asia Pacific, HSBC shares his insights on how companies can navigate this challenging period and mitigate their exposure to supply chain risk.
- COVID-19 has created significant cash flow challenges for many businesses, increasing the focus of companies on managing daily liquidity levels and assessing their trade credit insurance product options
- Over time companies will nearshore their supply chains to manufacture where there is demand – an attractive move from a logistical perspective
- Another manufacturing consideration is for businesses to find low-cost locations or jurisdictions with free trade agreements that carry additional benefits such as Bangladesh and Vietnam
- The banking system is no longer flush with liquidity and credit risk is a real concern. This makes a robust risk-management policy covering suppliers and supply chain exposure critical for businesses
- Banks can play an important supporting role in managing counterparty risk, providing an opportunity for businesses to transact more confidently
- There is growing interest in trade as an investible asset class and this is certainly something for companies to monitor
In this episode, Ajay Sharma, Regional Head of Global Trade and Receivables Finance, Asia Pacific, HSBC shares his insights on how the pandemic has accelerated the development of emerging technologies and sectors and in what ways this will shape the future of trade.
- The pandemic has increased the adoption of digital technology and positively impacted the forecast on revenue growth from these offerings and operations. Business leaders need to continue transforming their operating models and investing in key enablers such as advanced data and analytics, blockchain and integrated cloud platforms
- HSBC’s recent Navigator survey highlights how the digitisation of trade processes will become standard practice and technologies such as blockchain may offer opportunities to increase trust and transparency
- Globally, a US$1.5 trillion trade financing gap exists and is expected to increase over the next two years (1), highlighting the need for financial institutions to optimise fintech and digitalisation as a potential solution
- Ecommerce and B2B digital sales will accelerate with the adoption of 5G technology and this means financial institutions need a fundamental shift in how they approach the financing of trade in services
- Over the next five years, there will be an even greater focus among businesses on how they interact with their clients and the channels they use to operate
Listening time: 8.30min
Issued by The Hongkong and Shanghai Banking Corporation
The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s) whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the covering analyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) or issuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and any other views or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Frederic Neumann
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