Transcription
Heat. Heat. Heat. Heat. Please take your seats. The program is about to begin.
Heat. Heat. N. Hey, hey, hey. Please take your seats. The program is about to begin.
Please welcome to the stage Hanan Muhammad Ahri, CEO of the Securities Depository Center Company, ADA, part of Saudi Tadaw Group, for a conversation with Bloomberg's Lulu Chen.
Good afternoon. I hope you all enjoyed lunch. Um so for our first panel in the afternoon, we're going to talk about capital markets and new developments between Saudi Arabia and Hong Kong. As we know, this city is emerging as a gateway for Middle East uh capital flow and we're talking about the new developments and policies and what opportunities they bring. So Hanan for for starters can I ask you to set the scene of what's happening in Saudi Arabia capital markets and the role that your firm and you play in it.
Thank you Lulu. First of all it's my pleasure to be with you here today. Uh the the sessions in the morning were really insightful and educating with a focus on the Asian markets. So it's my pleasure to share some overview and insights for my side of the world and our market which is the Saudi capital market. Uh and to start with with covering um briefly the Saudi capital market. So it has undergone a fundamental transformation over the past uh decade to evolve into one of the main emerging markets globally speaking. Uh the vision that we have vision 2030 which we have it on a national level has been a main driver for this growth and the vision has put the capital market and having an efficient capital market at its core for economic diversification and having the funding that the private sector needs. So our market today is uh sized at $2.6 6 trillion US dollar in terms of market capitalization and to look at the Saudi market uh we don't focus on the size but the growth of the market overall and this growth has been um has been uh governed and driven by I would say three powerful engines first of all is the supply side evolution So again the vision is moving first of all public assets uh our state-owned assets into the public hands. U Aramco is a very good example and then the logistics companies etc. The Saudi market today is one of the top markets globally in the number of IPOs which is something that I think we share with Hong Kong exchange. uh at the 2025 uh the Saudi market ranked number one in the world actually and the number of of uh IPOs this is when it comes to the supply side the second powerful engine is the demand side demand side opening and by opening I'm referring to the change in the investor base in Saudi the the client base or the investor base have changed drastically ly from being a retail domestic market into an institutional and international one. Uh the Saudi market was opened for foreign investors back in 2015 but at that time there were stringent requirements for foreign investors to participate. uh we're talking about a minimum of five billion US dollar assets under management and a minimum number of years and experience in asset management and the the investor types were limited to banks and financial institutions. Fast forward and the beginning of this year uh the regulator our regulator the CMA have completely removed these qualified foreign investor requirements. Now the market is is fairly open to all segments of of uh international uh investors from all around the world. So this is when it comes to the demand side. Of course with the inclusion in the emerging market indices this played a critical role in of inviting foreign investors and the increase of their participation in the uh in the market. Third uh is the debt market renaissance because the equity market got the headlines for quite some years but arguably the debt market is as important. uh the the government bonds on suk market paved the way for the corporate also did issuances which creates now uh two pathways for issuers to raise capital and come to the market for funding.
So this is uh in a nutshell uh an overview of of the market.
So you have the demand for listing opening up to foreigners and also developing the credit markets. Yes. Um in terms of um working with Hong Kong about three years ago we saw this basket of policies initiatives coming out from the two places. Um what are the developments since? Can you walk us through what's happened and what's what what should we expect next?
Right. So uh our partnership with Hong Kong Exchange has honestly moved from uh soft engagements to real connectivity and this goes beyond having a financial and bilateral uh agreement. uh I actually one time came across a metaphor that is not far from reality uh describing the movement that's happening now to the Silk Road that is has history of 2,000 years ago where the Silk Road were to connect the Arabian Peninsula with southern China. today with these links and connectivities, we're not reinventing the Silk Road, but we're digitizing it in a way. So, uh today the ETF, the first actually ETF that, uh covers the Saudi market is listed in Hong Kong Exchange and it's tracking a lot of interest from investors in the region. uh vice versa. We also have an ETF in the Saudi market that links the Hong Kong exchange and the China index. And this is the foundation I would say layer to many more products to be listed in the local markets. And um we see always these interests from investors in China and Hong Kong in our markets and also from Saudi investors to the Hong Kong and Chinese market. uh PIF alone have have uh signed I think up to $50 billion US dollar of investments in Asian markets and have increased their presence of three regional offices uh between Hong Kong and China which also follows the Silk Road metaphor of of not being a one-way traffic but it serves both uh mutual uh for the mutual benefits of both countries.
And what about the connected listings?
Right. So yeah, so the next steps to follow as as things that we can do together is of course normally the crosslistings and we're we're looking at this together with the Hong Kong exchange and our regulators of course of how can we realize the cross listings between the two markets. We have recently launched the depository receipt uh regime and framework which can help actually of of listing of foreign companies in the local market. So we have this path and we have the the classical path of cross listings and having links between the depository centers in the two markets to to be able to list companies.
Now I know that um you want to look for you want to be careful when in terms of what types of companies can qualify for the cross listings. We mentioned Emirred as a successful example. Um what what do you see as the type of companies that could become successful candidates for these types of listings?
So, as an infrastructure and exchange and depository center, we do not specify a type of company or a type of sector per se. uh and the first approval uh comes usually from the regulator to list uh a company. uh having that said today our requirements for crosslisting that the company needs to be listed in its home country first. So so this is the first uh check that we need to to run over and then the the disclosures and being able to to uh comply with the regulations in the Saudi market. This is of course another important factor.
Now I have to ask about war the impact in the region and how are you seeing that affecting uh money flows.
Right. So with the unfortunate like circumstances that the region have have witnessed an interesting actually observation uh we've seen in the market that there was an increased trend of foreign participation since the beginning of the year and this hasn't slowed down with with the war or the events associated with it.
When you talk about foreign participation, uh what is um what is the definition of that?
When we say foreign participation, I mean how foreign investors um uh that they contribute to daily trades and of course the ownership that they they represent as a segment of investors in the market. So this is something that was um a positive actually outcome that we've we've been looking at closely and it's something that indicates that foreign investors are here for the long run. uh and they are looking for the long-term uh investment objectives and they realize that the current circumstances are uh are basically backed by a lot of fundamental evidence a lot of uh operational resilience that the market has and a lot of diversity in terms of opportunities. uh our we have today in the market algo traders and high frequency traders and they're growing actually in their um and how much they contribute to the daily trades. Today we have them as they reached 30% of daily trades are being done by algo traders and you would see that algo traders are pretty much sensitive to all the events that happen. However, having that said, it's still an upward trend of of uh algo traders together with the foreign participation. So, this is something that um a factual actually aspect that the market have have lived.
Interesting. You mentioned high frequencing trading firms because this Hong Kong is one of those centers that attracts a lot of these firms. Is this also something that Saudi Arabia is looking at and what kind of policies infrastructure are you building in place to for these kinds of firms?
So absolutely they are really playing a major role in increasing liquidity uh in the market and we try to provide from an in infrastructural point of view the tools that they need uh for example the low latency uh tools that they they require to be able to execute especially the high frequency traders. So this is something that we offer through our innovation arm WAL. It's um a subsidiary to Saudi Tadaw group and we see an increasing demand to these low latency services with the demand and the increase of the HFTs and the algo traders in the market.
And are you seeing a successful um attraction for talent for people who want to relocate to the region? Has that been impacted in any way?
Actually it was very interesting to hear about the the talents and the different concerns around it in the previous uh in the previous panels and the demographics as well. This is something that I was uh hearing very carefully and thinking about the differences between the regions of the world in that matter. For example, the demographics in Saudi uh we have more than 60% of the population under the age of 30. So this is something that is very powerful in terms of realizing the the national uh economic u development on a national level. You know, you expect these newer generations to be scientists and engineers to be able to keep up with how the world is changing with also the AI and everything that we've heard uh this morning.
Yeah. 60% of the population so young that would have a huge implications in terms of how you develop policies and the economy model which is very different from what we're experiencing in Asia and many countries. Um, so for our people in the audience um if they are looking to tap opportunities um from the Middle East uh what would your advice be for people who are looking at the next developments what to look out for?
Right. Uh so we've been very focused in Saudi to tell our story, our growth story to the world and we've done this and re realized some uh some important results that put our market very clear on the map as an investable market as well as aligned in terms of infrastructure and policy with the international markets. So when it comes to the equity market, we worked of course on different tools that institutional investor usually look for. Uh one example is adopting the omnibus structure. Omnibus structure is very important for the backend operations.
And that's for efficiency of administration.
Yes, absolutely. So it's it's much easier operationally speaking to be executing trades in an omnibus structure. So this is something. Another thing is that we've seen a very very um uptick and increase in the securities borrowing and lending and the short selling of course which follows normally. uh and it is adopted in the market in a way that it helped uh in the price discovery um of the Saudi market. So it's something that that institutional investors are keen to find in the market and then we we're making it available for our.
On the shortselling policies. What was the reason for developing these um allowing investors to participate in them?
So uh shortselling is an important tool in any market because investors would invest long and short and they have long strategies versus short strategies. I'm talking about asset managers, hedge funds, etc. So it's very important uh having a long market exposure is a bit limited for institutional investors. So it's it's a crucial aspect of what a market as an infra infrastructure can provide. And then on the debt market which is a focus to us and our regulator at the moment because you know um we want to mimic the growth and the success story of the equity market and we've we've done this we've seen uh uh the trading activities have doubled in a year in the debt market and if we consider the government uh debt market it is now as I said included in the JP Morgan emerging index uh which is an important milestone that of course brings international flows into the local market. We are now also linked with the international depository centers uh which ease the access of course for foreign investors to reach our local market and not having the need to open accounts locally so they can invest through their accounts in euro clear clear stream. Another infrastructure improvement that we've implemented recently uh is the OTC trading in the debt market. So uh usually the debt trades are done over the counter and this is something that was really well anticipated by the international investor community and have helped increase the liquidity also in the debt market. So these are the main points of developments that we've we've worked on in the in the market recently.
So overall the trend seems to be relaxing rules and also development of different asset classes.
Absolutely. An thank you so much for your insights. Let's give her a round of applause. Thank you.
[applause]
Thank you.
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Of course, I have to give real consideration to the geopolitical dynamics that are playing [music] out in terms of how we construct our portfolio.
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Please welcome to the stage Sam Kelly Smith, chief investment officer and CEO for Asia-Pacific at Jane Global and Kenny Lamb, CEO of Two Sigma Asia-Pacific. pick for a conversation with Bloomberg's Eric Shatska.
That's bright.
Welcome, gentlemen.
Thank you.
Good afternoon.
Uh ladies and gentlemen, a few quick words to introduce our panelists and establish some context for their remarks. This is quite obviously a conversation about hedge fund investing. And we are fortunate to have with us today two very different kinds of hedge funds. Two sigma is purely systematic, quantitative, datadriven, lots of AI, machine learning and distributed computing. Chain global on the other hand uh multi-manager operation with seven businesses of which quant is one. APAC interestingly is another alongside strategies such as equity arbitrage and commodities. Did I get that mostly right?
What do you want?
Okay, good. I thought a good place to start is by attacking the premise of our panel. So here's the first question for our panelists. Is it getting harder or easier to make money in Asia?
Great question. You want to go and then give it a go. Um I think generally easier. Um making money is never easy. You know, uh different people make money in different ways. um you know we play largely relative value across a whole bunch of asset classes but if you just look at and we can kind of get into the premise of exactly why we built the fund the way we built the fund um when I started in Asia 25 years ago you know Japan had sort of come and gone India really hadn't got going um Hong Kong had the war market uh the IPO market had just you know it was actually a good time it was a big bull market but in terms of um notional time spread and liquidity across you know the whole of Asia very limited products and really it was a kind of Hong Kong game at that time it had been Japan 10 years before Southeast Asia hadn't really got going uh nor had India you know wind forward to today um between rebal quance lonia bank domestic retail India Japan greater China Korea Taiwan uh levitate ETFs um you know deep deep vibrant longdated adoption market um that the whole of Asia is playing and and uh and there are products to boot which is you know what we do for a living.
Kenny I uh I wouldn't say easier or more difficult but I would say this um we are seeing a lot more opportunities that we could create alpha from uh what that means is if you look at um the two things we care a lot about we we care a lot about markets being deep uh having lots of trading great [clears throat] companies being traded uh and you mentioned that we're we're purely systematic firms so we're looking for data and if you look at Asia um not only are we seeing more data that could be discovered for value but but there there's a lot of structured unstructured data so for our firm that's great so we have to find a way to work on it uh it's not easy to find a way to work with data structured or unstructured in Asia uh but that's where the opportunities are so I would say there's a lot more opportunities than even before you know I I joined two sigma eight years ago and and between now and back then you already see you know markets being a lot deeper and a lot more data to work with so that that for us is great.
I'd like to come back to both those issues issues in a moment. Liquidity on the one hand, opportunities on the other, but before I do, um I think it's it's worth exploring another point that applies to both of your firms. Uh they chose to treat Asia as a nerve center.
Yeah. and to establish offices here with high degrees of independence and deep pools of talent rather than branch offices that are just order takers for bosses back in New York or London. Uh the so-called global local or local global model. Why, you know, what's what's the edge there?
I'll go first, Sam. Um we maybe a bit of context. You you uh you mentioned about um our scale and where we are. Uh we have a domestic PFM license in China. Uh they're about 30 plus of them for global managers. Uh we're lucky that we're one of the top three um that's operating in terms of scale. Uh we have invested a lot to build a domestic team uh that works in a very local way. Uh even though we're a global platform, we believe that if you look at Asia, I mentioned about data. Um it's not just about access of data, it's about context, nu nuances and all of that comes from having deep local understanding and you can't really fly in expertise and that's why however you call it, it's really just about understanding context in a much better way. I mentioned about unsupported data. Essentially what it means is put a lot of great context in a scientific way to the to to the nuances and that comes from that deep local expertise. we're still, you know, step one, two of the 10 step we need to to do to build that local practice. Uh but yeah, so that that's where we are. So we never believe that a model that only comes from New York would work in in a global market like this.
Yeah. So I mean it's funny. I remember when you guys uh I was not working at Jane Global because it didn't exist, but I was uh working at a US bank and uh in Asia and I remember when you guys turned up.
Um.
you tell people where you worked. I wor I I worked in Morgan Stanley for for for many years [laughter] and uh 28 to be precise, but um and spent a whole bunch of time out here. But I remember when you guys turned up and um you know it was kind of you were one of the first crowd Yeah.
to turn up was you and Oxif and there were a few hedge funds that actually did set up that kind of that that Asia model, right? And then I think the US just became so centric um around sort of investment returns kind of everyone went back to the US and Asia definitely became I think an afterthought an extension and the way we look at life is I mean it's a whole bunch of stuff is a pretty complicated place point one um point two it definitely needs a real commitment day one um in terms of capex that's tough to commit that type of capital if you're just pushing a pen in the US. Um, but I think most importantly, you know, it's it's pretty straightforward, right? People don't really want to bounce out of bed and love come to work if maybe they get to speak to their boss, you know, once every two weeks at 8:00 in the evening. And so that Asia US especially with the US firms and we're a US firm that ability to manage a business um and I did that instantly for many years both managing Asia businesses and having to deal with New York and sitting in New York having to deal with uh with Asians um and I don't know actually I don't know how I don't know any way else we would have done it. I think to allow Asia to have autonomy um is just so important for so many reasons and very few people have done it. So it feels like a a huge competitive edge and you guys would agree with that, right?
You mentioned liquidity before and I suppose there's no question that there's more of it available today than there was as you say 25 years ago, but it does still come up as a barrier to scale relative to markets in Europe, relative certainly relative to the US market. Uh what is the current state of affairs? You know the HKEX is doing a lot of things here in Hong Kong to try to add liquidity to the market. Is it are is there a material improvement?
Yeah, massive massive. I mean I I would say Europe is not an issue and not even competitive. So really now it's about the US which is obvious and we know that story. Well,
I agree with that.
Um you agree with that? Yeah. And then um no, if you just think about it, you know,
dangerous amount of consensus up here.
Six of the largest stock markets in the world of the US are all in Asia. Uh, China's arguably the deepest bond market on the planet now. Um, you know, the yen trade.
So, no liquidity is no longer a barrier capacity, no longer a barrier to scale.
100%. I mean, there's tons of work to do. We were just chatting about, you know, the previous speaker, you and I were over there um, you know, talking about short sale, you know, we could bring a whole bunch of that to Asia and uh, you know, across a whole number of markets, right? So, I would say no. in general across the whole of Asia not fully developed but liquidity now compared to 20 years ago not even comparable.
I mean amazing deep very tradable.
I mean I I'll add to what Sam said I mean if you look at top seven eight markets I think five of them are actually in Asia.
market cap uh and if you look at our portfolio um Asia is about 20% of global trading uh Japan Korea Taiwan Hong Kong mainland China easily uh top uh in our portfolio right and So um it's not really an issue of liquidity or or death. Uh it's really now you know finding ways to to create alpha and look I mean the other thing I might add to that as well is I would say in general and India has been probably slower than some Korea's just starting to move but in general I would say there's a move from regulators the industry across banks and alternatives you know the support groups that we use but that that communication around actually figuring out you know efficient price discovery which is ultimate free capital markets where you can buy and sell I think is getting like immeasurably better. So direction of travel I would say is uh is quite powerful.
Uh maybe Kenny I start with you on this one. The surveys that I see and I think some of our headlines alluded to this um indicate that that hedge fund allocators continue to add exposure to Asia. Is there enough capacity here to satisfy demand? Or if the money keeps pouring in, do returns inevitably erode?
That's our day-to-day job to make sure that we continue to create more capacity. Um, and if you think about the a firm like ours, um, the the idea is that we need to have the best uh research to create the right alpha for capacity. and we are limited in capacity just means that we're we don't have enough research power to create that capacity. And so my role and and all of our teammates is to make sure that we actually get access to to that that alpha. Uh if you look at Asia, we have Hong Kong, we have Tokyo and we have Shanghai. The teams are operating differently. So Tokyo for example is an engineering hub where we put a lot of engineers to make sure that we cover time zones. Hong Kong, we have research, we have data, uh, and Shanghai is a very local team. All of them are aiming to do the same thing, which is create capacity. We we would love to create more for our clients, but at the same time, we're careful in making sure that what we do.
What are the constraints?
Um, talent. I mentioned about data. Uh, I also mentioned about, you know, market depth. Now, while they are they're great in volume and increasing by the day, we still want to make sure that the access is right. you mentioned about access to um financing, all of that is is something that's key. Uh, yeah, so so that that's something we need to continue to work on.
So Kenny looks at things and the question of capacity strictly through a quantitative lens.
And you get to think about it in multiple ways.
Yeah, we look at it in we we have a business but tiny compared to to to these guys. Um I guess you probably have added transaction costs as well. you know, generally higher in Asia.
Uh, which is a big component of of of the quantle.
Um, we maybe differently get the benefit of also being able to trade global from Asia.
Yeah.
Um, and I think without a shadow of a doubt, I don't think anyone will push back. It's easier to trade the US from Asia than it is to trade Asia from the US. Um, and you can see it's not just us. If you look across the prop, you know, Citadel Securities is the high frequency guys. um, you know, most of us are trading global everyone trades, you know, dollar rates wherever you are in the world um, so look I would agree with you I think talent is definitely getting better uh but definitely we don't have the talent pool maybe we have the kids coming out of school from China and India but I would say experienced talent we don't have the pool that the US have um but no I think um, you know, we asked ourselves when we set up Jane you know, why does the world need another hedge fund was a real genuine question, right? And um, we very firmly came to the answer that there's tons of room both in this part of the world but also globally. If you think about the size of the balance sheets of the banks pre- crisis and how small actually the alternative universe is that's replaced effectively that risk-taking capability um is not even close. That's probably the one place where you know you have I don't want to say unlimited capacity but I think in the alternative space in the alternative trading space you have huge capacity.
I mentioned that I wanted to come back to opportunities. Um maybe you could tell me Sam how do you think about the nature of the opportunity set here in Asia over say the next two to five years. How much of it is structural? How much of it is cyclical?
Okay. I mean we can get into you know kind of memory cycle is it cyclical or super cyclical or structural and so we're getting into the micro um but no we made a definitive decision when we set up our Asia business that Asia was going through a structural change um and we're going to stick to that plan unless we had a really good reason to to change it but I don't think there is one um you know and then it becomes look you can't do everything and so generally we think about you know Japan India integrated China, Korea, Taiwan, that's large. We do other things outside that, but but that's really the universe we play in. Um, but you know, you have to evolve. So, you know, out of the blue, Japanese power, probably not something a lot of people in this room think about. That's could be multi-year, deep, and really structural, right? And um,
typical components to the energy equation at the moment.
Japanese power probably not. you got to turn toasters on and you know power is actually a pretty constant thing. um maybe cyclical volatility around you know to moving around or um but uh so you're right I mean there's a cyclicality to you know a lot of what we do right but I'm not you know the real game and I think you'd agree with this Kenny is we're looking for notional time spread.
y.
Then you have liquidity and cyclicality and v and a whole bunch of other stuff but largely, you know, do you have notional is the spread can we figure out how to extract that spread and um, we think very firmly in Asia that that is structural ongoing and actually pretty early in the journey of of Asia.
Kenny, how does um two sigma adapt its systematic approach to cyclical issues like supply chain disruptions for example, closure of the straight of Hormuz, consequent impacts on liquidity and trading volumes in Asian markets.
We we constantly find ways to improve our mode and the mode comes from mainly two things. Um not only access to data but interpretation of data. So if you look at our data set we currently have about 380 pabytes of data and that's basically hypers scale in terms of how much data we we interpret and we we work with. Uh second is we mentioned a lot about talent. um we need to double click on that right because talent if you look at our type of talent actually a lot of them actually come from Asia.
but a lot of the f peer firms including us our strategy is still um relatively US centric and so we we have to find a way to globalize to make sure that we get the best talent anywhere um you mentioned about volatility so back to your question to address volatility the best way is to make sure that your models your research search uh your algo are consistently top of its game and that comes from building a foundational layer that can be excellent in any cycles. Uh, and that's how we think, right? That's why we call ourselves as a a systematic firm is that we don't believe that there's one person or one bet that could really change.
What's the toughest place in Asia to recruit top talent right now?
Probably.
Hong Kong.
Probably.
Yeah. Yeah. I I I I think here, Singapore, uh, mainland China are great places to to look at.
So, there's always been a competition for talent. Uh and as a result, the best people are in relatively short supply. Um sort of a a law of the universe.
Mhm.
But is any of that here changing with the restrictions the Trump administration has placed on foreign access to US universities and also the restrictions on work permits um and restrictions on immigration.
Yeah, look, I would say I mean he's the icing in the cake if you want to I'm gonna little personal bias here, right? But if you want to make America a little less exceptional, he's doing a good job. Um I think it was before him and it'll be after him. But in general, I think it's fair to say that the US is still amazing. Um I spent most of my career there, you know, but I do think it's a little less exceptional. That's the way I would describe it, right? Um and marginal change can be absolutely huge if you get the right you know inflection point um and the talent is not going to Europe. So I think we're actually in a great.
net beneficiaries.
net beneficiaries I say very much Asia you know at the margin um, you know, you're not necessarily sending your kids to Stanford now they're perfectly good unis here and they're going here um, you know, the margin you don't need to go and join government in New York or to Sigma New York you can come work for an Asia firm I mean a bit of I think I think absolutely right US is still by far the best in terms of attraction of talent so we even saying that we need to diversify. US is still the core base. Um I I do think talent themselves are diversifying. It could be one of those issues. But at the same time, if you look at universities in Hong Kong, they're doing amazing programs and great research, right? China,
Singapore, you know, N US, NTS, they're great in many of the disciplines that we care about.
Uh, and so if you're a talent, you're you're thinking, well, where should I put my next four or five years for a PhD program? then it's not as lopsided as even five, seven years ago. So that's why for a firm like ours, you've talked about talent, then we need to basically go to where the talent is.
How many for both of you, how many people would you say you've hired in the past six months whom previously you would have lost, you couldn't have had because they would have gone to the United States.
Great question. It's not huge, but but it's marginal. It's real.
10%.
10%.
of the crowd. I can put a percentage but.
And I would say some of those maybe have come from Europe and it's not it's not like a we didn't just get them straight out of binary a PhD program in in China but it's real.
but but I'm but I'm we're planning not just for the year or the year or two years after we're planning for the 510 and we do see a structural trend.
where it has to be global approach it can't be a one place right so.
If you asked a 100 traders uh where they'd most prefer to work and live. How many would say Singapore? How many Hong Kong? How many Tokyo? How many Shanghai?
Hong Kong for me. Why ask?
But you're not 100. You're you.
You sure?
I think uh it's 50% plus in Hong Kong.
Yeah. And I'm biased to Singapore. I live there. I'm Singaporean, so I got to speak for my country. But um I think Hong Kong is still a real hub. Um Shanghai, I think, undeveloped yet to be honest. which.
Shanghai.
um undeveloped.
to be to be certainly in our business, right? Um I would say Tokyo, less people now than actually 20 years ago and Singapore on the horizon. So if you want to kind of do the mix, I would say it's probably a little more mixed, but Hong Kong is still a big chunk of it. Singapore is uh definitely become, you know, macro and commodities and uh actually some of the trading firms um are in Singapore.
Well, Eric, you and I talked about this, right? Uh just just before we're saying look Hong Kong the vibe and all of its back part of it is um, you know, was born born and raised here the role that Hong Kong played for many years is a bridge for global firms to go into mainland and China. I think the role has shifted evolved to become not only global hub for global firms going into China but also Chinese firms going global and so that that that unique role has become such an attractive position for talent right and and and that's why I think Hong Kong would be a good place not the only place but a good place.
but by the way, you know, I think two years time you're going to have uh Mumbai or Delhi on that list.
Really?
Yeah. I think I mean you look at said sag all the all the you know so many people are now on shore in China we're not yet you guys are sorry in India you guys are not.
um but people are um I would argue more people in some respects are going on shore India more than China in some respects so I wouldn't write about you know I think India will be on that list at some point.
The so that raises a question for me about India most people in this room if they have any experience in India could agree that equity market's expensive It's crowded. Uh shorting as we discussed is very difficult and costly and there's a lot of domestic competition. So why be there? What's the case?
Um it's a great question. I think I mean the case is we happen not to be in that business but this is the case. Um very very deep liquid tradable market and a huge retail.
Yes. Um and it's a pretty much captive audience given, you know, how they deal with capital there. Um and so there's being there's real money being made um in the trading businesses. Um I think with respect to us, um Machi just came back last week, probably next year's trade. Um, you know, the energy thing is real, the lack of AI is real. Um, you know, foreign flows have been negative for, you know, each of the last 18 months. So that's tougher trade. I agree with you. Yeah. expensive market. Um funding short for probably a whole bunch of places but uh but very tradable.
I don't have a lot to say. We we are focusing on the markets we're working on now. [laughter]
Um occasionally uh I like to uh help our audience uh learn um from your mistakes. So, um, I'd like you both to share with us, um, your biggest screw up in Asia, what happened, why, and what did you learn from it?
Way to ask the live broadcast.
Thanks for that, [laughter]
Eric.
I I think um there are many mistakes to draw from. uh one of them I would say is to I wouldn't say is a big blunder but learning about operating really domestically in China is something that we have to constantly evolve especially in how we think about attracting domestic talent. Um, of course, you know, we think of us as, oh, we're global brand name. We come in, we should be able to easily attract.
should be a magnet, right?
But you quickly learn that domestic leaders are great and domestic talent are as attracted if not more to domestic great firms. So, we have to make sure that we articulate our proposition clearly. Why work with a two sigma and not a this great leader in the domestic market? And that I think it's something that I would say we have learned the hard way [clears throat] in many years of operating in the market.
Yeah. So look, I wouldn't say it's necessarily a screw up, but I would say um thank God.
Not at least not not saying it in public.
I'm not No, I mean public or private. We actually [laughter] haven't had one of those. So that's good. But um but what I would say which I think is maybe akin to what you were saying is one thing we absolutely have picked up. There are so many rabbit holes in Asia and you kind of want to go down them all. Um, and I would say we've got much better at actually making sure what we do do we do extremely well and there's real depth. Then you go on to the next project and um, you know, which is very different from the US.
Pick your spots.
Pick your spots and then and then you know to your point you know the the domestic talent knowhow is deep and um, you know, you got to yeah pick your spot and do it well. Ladies and gentlemen, Sam Kelly Smith, Kenny Lamb.
Thank you, Eric.
Thank you, [cheering] sir.
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Please welcome to the stage Claraara Chan, CEO of the Hong Kong Investment Corporation for a conversation with Bloomberg's Steven Engel.
Oh, bright lights. I'm not used to them. No, of course. Hi, everybody. Good afternoon. I get the 2:30 or the 2:20 afternoon [snorts] panel just when everyone's back from lunch in a food coma. Um, but hopefully everybody will be um enjoying this lively conversation with Clara Chan, uh, the CEO of the Hong Kong Investment Corporation. Just four years old. you deal with what they call patient capital, but I've lived in Hong Kong in and out for 36 years. This is not a patient city, right? This is a city of action. So I want maybe we can get we can start by kind of giving an update on four years in what has surprised you most about the investment climate because Hong Kong obviously has had through the pandemic and through some of the the political turbulence sort of some confidence crisis. What has surprised you the most about your remitt and how it's been performing?
Well, thank you Stephen. Um always glad to be sharing on the Bloomberg stage. Um from the HIC's perspective, we started off, we were established in N 2022, but 2024 was the very first year of our full operation, but as you said, we basically have been through a great trajectory seeing the bounce back of Hong Kong. The fact that Hong Kong bounced back is always well proven by track record. I think we have been through many different cycles in the past of different natures but I think the speed and the scale of the bounceback is really a pleasant surprise of everybody. Just now the panel I think people talk about how talents how great firms like to have the foothold in Hong Kong as an international hub. So for us we actually also see different dimensions. For example um setting off we are we are charged with a mandate do mandate not only bringing home financial return by investment but we also want to bring um new impetus of growth in upgrading our industry AI applications our future generations. We are very surprised pleasantly surprised number one the great pool of talents that Hong Kong have. Basically people are all very focused on innovation technology. So in terms of investable space and companies we see a lot. So good for investors because you have a very great pool of um I would say companies and entrepreneurs that you could work with. The second part is what I think the earlier panel also talked about. Hong Kong is play a great role in terms of being a super connector.
bringing the Chinese mainland companies to go outside but at the same time it's a two-way flow. We also see a lot of good high quality long-term capital coming to this part of the world. So to your point about patient capital, we think that we are not alone because a lot of other software well funds pension plans they're also looking to invest for the long term particularly in technology.
Well technology has been a big part of the portfolio companies and uh projects that you've invested in. uh does it get to the point when you see the frothy valuations in AI? But then at the same time, the story that was on the Bloomberg terminal today was about uh the National Development Reform Commission among other bodies in China are talking about spending billions of dollars building out data centers across China. That would seem like a a golden opportunity for Hong Kong, not only from the financing perspective, but also for an investment.
Well, um I earlier mentioned the HKC was set up in N 2022. The reason why 2024 was the very first year of operation is because we spend a lot of time understanding the market and the sweet spot for Hong Kong because as I said it's not only for financial return but whatever we invest, whoever we partner with, we want them to bring benefits, long-term benefits to Hong Kong. So the reason I mentioned this
is because when people were debating what AI large language model is about, we already invested in a number of them in 2024.
When people talk about, oh, whether embodied AI is real again, we already kind of put our bets into a couple of them. So, give you some examples. I think a few days ago, the Financial Secretary wrote in his blog about a company called Galbart, which is going to operate Hong Kong's very first embodied AI convenience store in Hong Kong, in the waterfront of Hong Kong.
So, what is it? Robotics with robotic making? What is it?
Yeah. Yeah. Well, making coffee or like selling different things, more like a full-fledged convenience store, but manned by embodied AI. So, I think this is actually great for Hong Kong. And as I said, first of its kind in Hong Kong. That company, we invested in 2024. And throughout this trajectory, they already operate a similar store, like in Beijing. So, it's not a concept, it's a proven concept that we can touch, we can see, we could feel, and it's now in Hong Kong.
And the other, um, example I could give is, I think a lot of us in Hong Kong are very pleased about, um, our very first astronaut, Dr. like Caying, right, who's now in space with Shano 23. And many of you also may be aware that she is bringing with her an innovation from the Hong Kong USD, basically is an AI-powered wind power and weather forecasting, like solution, and also a monitor she's bringing with her that and operating in this space. So, that company is called Stellaris, and we invested in 2025.
What was your remit? Take me back four years and how much leeway were you given on risk appetite? Because I would say in the past, the Hong Kong government can be labeled as a bit conservative, but then you were given what was originally, um, capital of 62 billion Hong Kong dollars, about 8 billion US. It's fully invested, isn't it?
Yeah, it's pretty much fully allocated.
Fully allocated right now. We'll, we'll get to in just a minute whether you're going to get some more in the coffers, but, uh, what was your risk appetite then versus right now?
We see risk and return going hand in hand. But our sweet spot and striking zone, I would describe as we try to focus a little bit more on the space where we could find value for the future of Hong Kong. A few dimensions. Number one, if you look at the data, we share, basically we invested around, like, 10% in really early stage, which is like pre-round. So, around 60% in what we call growth stage, which is actually ABC rounds, basically early stage where we think we could bring value. The second point is about the fact that when we invest in those companies, those are bringing to us like cutting-edge technology. We talk about AI, large language model, embodied AI, and now we're in areas such as commercial aerospace and also brain-computer interface. And the last bit I would like to add is when we call patient capital, that patient is not just like passive sitting there and waiting for return. What we want to bring to the table is number one, not only our own capital. We always quote a number saying that the capital multiplier ratio, for every dollar we invest in the company, on average, we are bringing in more than $8 from the international market, long-term capital, like out of sovereign wealth funds in the same company. So, for us, the growth is not like sitting there picking the right team, but we also want to add value to them.
So, again, I come back to, if you're fully allocated with that initial, uh, investment in this fund, will you, and when will you possibly receive top-ups and from whom as well?
Well, um, the Financial Secretary already mentioned in his budget speech the fact that we're pretty much fully allocated or committed. And this concept is like when we invest in early-stage companies, as you said, return is good, potential is good, but we are very cognizant of risk, right? A lot of this, like early-stage companies, they may or may not work, even with our, like, best effort and everybody putting our heads together. So, we need to have that professional and market mindset how to mitigate risk. So, the reason and the way how we do it is by milestone approach. We identify the company, the sector, the team, and then we put a little bit of money. We try to test them out. We set the milestones. So, the fact that we set is like fully committed is because by that milestone approach, we already committed to give them more, maybe three or five tranches more, if they hit a certain, like, business milestone. So, that's how we describe as fully committed. And to your point about, so what makes, basically, while we are on a very good track in grooming the company and also bringing financial return, the government Financial Secretary already mentioned in his budget speech in end February that he is considering and discussing with us, um, the capital injection. And, uh, well, I will leave that tough question to the government in terms of how the next chapter of HKIC will be.
But you're managing the portfolio. So, how urgent would it be if you see the opportunities right now, while the market is doing pretty well and the returns seem to be pretty well, and you're well invested in growth areas right now? Are we talking this year, next year, or within a five-year time?
Well, for me, the urgency is always really because we see great opportunities in Hong Kong. And as you said, we need to act now, right? If you see a great opportunity, you don't want to miss them. But not missing them is not just because they could generate good financial return, but because of the additional benefits that they could bring to Hong Kong.
I'm going to put on my Financial Secretary hat here. I'm Paul Chan right now. Would you need a 50% top-up? 25% of the exist, of the original capital? What do, what kind of top-up do you think would be adequate four years into this fund?
Um, well,
Multiple funds. You have multiple funds.
Well, I would say that number one, we need to think from the broader perspective. HKIC has been doing a reasonable job with a reasonable trajectory. But what next? Do we want to build with this platform? Is it financial return? Is it really also more like the international thought leadership? So, if that's the case, so what is the best reputation, the brand that we want to build with the right amount of capital? So, that's number one. Number two is, aside from the trajectory that, uh, we have been through, you may note from some recent announcements, there are new things that do it, we are doing. First of all, apart from the individual thematic, um, investment, the names that I have just mentioned that coming to fruition, another area we also announced, we talk about launching of an offshore RMB venture capital fund. So, I think these are the new things we think we could go hand in hand with Hong Kong's traditional advantages.
How did you know I was going to ask that next? Because the Paul Chan, uh, in his blog post on June 2nd, talked about they're actively considering launching this, uh, offshore RMB venture capital fund. Uh, how close are we to that? What kind of, you know, capital are we talking about and where would that be deployed? I mean, I can honestly see, obviously, the, the further integration that we're likely to see with the Northern Metropolis and some of these initiatives that are going to be, uh, ongoing.
For, for us, we always want to add value, um, in the way that we try to showcase and marry the traditional and emerging advantages of Hong Kong, the great attributes of Hong Kong. So, the idea of having an offshore RMB fund actually is a testament of both. The first part, Hong Kong being the biggest offshore RMB center in Hong Kong. I mean, we actually have a very good pool, very deep capital in that sense. And what we do is to try to leverage this advantage to provide a better diversity of product. But on the other side, you ask about how close we are. And I could tell you, it's very close because of the fact that it's not only a remote dream or vision that we think it may work. The reason why we propose it, in addition to Hong Kong's traditional advantage, is actually because when we talk to our peer investors in the Middle East, in Southeast Asia, around the world, people are having high and high confidence of offshore RMB, and actually they have a lot of trades and transactions done in the currency, and at the back, of course, after getting the currency, they want to have a deeper and more diversity of product where they could deploy, deploy. And that's why when we say we have that idea, we already have that natural matching of the demand and supply.
So, in lockstep with that statement is how much are your investment strategies in lockstep with national goals and initiatives from mainland China? Obviously, they do want, uh, to further internationalize the RMB. So, how do these investment decisions go in lockstep? And I mentioned Northern Metropolis. Uh, we've mentioned the, the data centers, a number of these different, you know, money oftentimes follows policy initiatives. When the weight of policy is, uh, comes to Hong Kong from Beijing, money follows. So, would you say that the, the push for the offshore RMB hub, which Hong Kong already is, the largest in the world, further, um, makes the RMB more international?
How it works for us. I think it's also the beauty of the HKIC is we are a testament of the integration of a very proactive government and also a highly efficient market. Meaning that when we look at something, we propose something, we implement something, it's really a matter of how we see that would fulfill the due mandate. Due mandate number one, as I said, financial return. So, that's why we actually always in consensus and dialogue with other peer investors because we speak the same language and we look at, like, risk return, like macro, and a lot of these things in the same way. So, that's the professional market side. At the same time, we exist for a reason. We want to build a better future for Hong Kong. So, for that part, we need to really marry the professional and market insights and also that standard, that reputation, that brand together with how to bring goods and bring things to the table for Hong Kong. And I would say that so far, we think those are very smooth, um, integration and also implementation because, as I said, look at, like, Galbart, Stellaris, these companies, and the different AI companies. If they are not good companies by themselves, if those are only really policy initiatives, so how will we be able to have that capital multiplier ratio, bringing in other professional investors' money? So, I think that's a real testament of how good these companies and how good the future of Hong Kong is.
How are you impacted? Not to go too micro, because you have a longer-term horizon and you're not dealing with hot money, uh, flows across the border, but again, sentiment is a big issue and confidence for Hong Kong. How are you impacted with your decision-making on your portfolio projects by the recent raft of regulation to, to kind of stem illegal cross-border transfers that have gone into stock markets, gone into insurance products and the like? And also simultaneous crackdowns, or at least scrutiny of source of wealth of high-net-worth individuals in China?
As long-term professional investors across cycles, I think we always try to distinguish noise and rumors with facts and data. Being patient capital, we have that luxury to sift through cycles and also try to pick the themes which could be bringing cross-jurisdictional, cross-generational benefit. So, for us, as I said, even though whether it's policy, uh, changes, whether those are sentiment changes, but we need to really stick to our core on picking what's best for Hong Kong. The key thing I would say policy would be interacting very robustly with our choice. It's really how Hong Kong government plans for the future. So, if they say, well, these are the key industries that we want to bring Hong Kong into, or we want to accelerate the, um, the development. So, definitely those will be the areas that we are very focused on.
But that's an area as well you're going, you're diversifying, not just in high-tech or hard or core technologies. You told me before this that you're going to be looking at investing in education.
Oh, yes. Well, so, uh, we talked about, like, thematic individual investment in the core themes previously, which was hard and core technology, biotech and health tech, as well as green energy. Gradually, we are pivoting towards also other sectors, including, as I said, offshore RMB, definitely that's financial services related, um, and also education, because the more we invest and in this role, we see the great future of Hong Kong because of the talents and the younger generations. So, we definitely want to work more in terms of the education side, including, uh, for example, student housing, which we allow to invest, um, no, Financial Secretary's budget speech where he talked about our expected investment and curation of capital into commercial real estate in Hong Kong.
Can you give it, we only have 15 seconds left. This went by fast. Uh, can you give me an indication? You talked about returns. It's patient capital. So, your horizon, your time horizon is a little longer than, uh, than some here in Hong Kong. But we haven't gotten the, the number for returns for 2025. We did see 5.234 billion in, uh, profit earned at the HKIC in 2024. We're going to get the annual general report coming soon. Can you give an indication of what, as Paul Chan talks about double-digit returns for 2025? Is that 10% or 99%?
So, I'll stick with, I'll borrow his words, like double-digit return and, uh, save the secret for the, um, announcement of the annual report, which is coming aligned pretty soon, I think end of this month or early July. But I would say that, uh, it's a pretty decent number where, notwithstanding our dual mandate, even if we compare that with professional market standards, we actually beat the benchmark. Clara, thanks so much. Everyone, please give a round of applause to Clara Chan, the CEO of Hong Kong Investment Corporation. We could do another hour, couldn't we? Thanks so much.
Thank you, Stephen. Appreciate you.
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Please welcome to the stage Yimeme Lee, CEO, China Asset Management Company, for a conversation with Bloomberg's Minman Lo. Hi everyone. Thank you for sticking with us for this afternoon session. Our conversation with Yimeme Lee. She is the CEO of China AMC, which is the largest ETF fund manager in China. Thanks, Yimeme, for joining us. I just want to start with, um, the latest news flow we are seeing today. Right. The market is really concerned about this AI sell-off that is led by South Korea. And yes, granted, China is weathering it a little bit better, but what is your outlook on Chinese AI?
Well, I think we are still quite optimistic of, um, the whole industry and the growth that are actually starting to take off. So, this is not, um, from our perspective, a short-term bubble. We felt like, um, this time around, well, everyone will say this time is different, but, uh, we really need to look into the earnings and performance and fundamentals to know if there's a concrete, um, performance and fundamentals that are laying out for this AI and technology upgrade. And we all say that this is a revolutionary, uh, force. So, uh, from what we have seen on the ground, we do believe that the fundamentals are starting to be there already. And, uh, our portfolio managers joking about it, well, as the price is going up, it's all the stocks are getting cheaper. So, definitely the earnings are showing the signs. So, we are still quite optimistic. And we have seen that really the market has been quite volatile, but you have all, you know, observed that the whole supply chain are getting very strong.
I just want to challenge that a little bit because we, we do see a bit of concentration risk, right? I think last month's data showed that the top 10% of stocks is driving 60% of turnover. Is there any sign of, you know, pockets of equities looking a little bit overheated?
I think overheating certainly is there. Uh, I wouldn't deny it, but, um, every trend, uh, turns out to be overheating in the process. And for an active, uh, fundamental, uh, researcher or portfolio manager, I think we, our job is to determine this overheating process on just managing the risk along the way. So, where do we see actual bubble is overheated, or do we see that, uh, we have concrete numbers to back them up? Uh, and up till now, we think there definitely will be overheating process going forward, but risk management needs to be very cautious where we can determine when is a good, good time to get out.
So, could you be a little bit specific? Where are you looking at, you know, signs where are you seeing signs of overheating? You did mention that this is a stock picker's market. It's not a time to invest broadly in index tracking funds.
Um, well, I, I think, well, in the beginning of last year, we definitely have seen great index products to be very rewarding. And this year, I think active equity stock picking really starts to show the color. And we have really good returns, like in the past one year, maybe 100%, 200% return from our active equity. Um, but what we are looking at is the scaling game is still working. So, the scaling game for large language models, the scaling game for all the, you know, computing, uh, technology is still going forward. And we need to be cautious when that scaling process is slowing down or even stops. And that is the whole, you know, um, cycle probably coming to a, you know, plateau, and then the whole growth story probably will pivot. And that's when we probably will be very cautious.
I want to ask about the geopolitical risk that we are seeing because the US has been tightening scrutiny over that. For example, they are barring mainland investors from participating in SpaceX IPOs, and then you have these, uh, big tech firms that are being blacklisted. What sort of challenge does that pose to your business?
Um, well, certainly, I think, well, barring investments certainly will deny a lot of the accessibility. Um, at the same time, we still is a firm believer of globalization, and we are very strong behind the support of cooperation between two countries or even, you know, a larger global, global technology, uh, community as a whole. So, we are trying to actually launch products actually to unify the different regions and different supply chains. So, last month, we actually, uh, launched a product on global AI in Hong Kong. So, we are trying really to give people a holistic view, instead of just looking at China separately and then looking at the US separately. We hope that we still have a holistic perspective and investment tools to actually get all the supply chain working for our investors.
Yeah. Speaking of that, I, I know that China has some caps, right? We all know China has caps on their Q sort of capital. And I understand your company is coming up with some innovative products to really bridge that gap and allow investors to tap into international equity. Could you just tell us a little bit more about these new products?
Yeah, thank you. Um, we actually still think that, um, the regulators in mainland China and the regulators in Hong Kong are working closely together actually to provide more accessibility to the market. Actually, just yesterday, that the Hong Kong officials in Beijing held a press conference saying that they probably will enlarge the Connect in the financial instruments in the Greater Bay Area. And I think that's a great tool that domestic investors can use that to invest in Hong Kong's products, and with that, an extension to international products. And at the same time, companies like China AMC, we are trying also to launch more products internationally and also serve as sub-advisory to different products worldwide. Like we have a product in Brazil, in Thailand, we have three products in Canada. And last year, we launched the CNQQ product, it's like the Chinese version of, you know, QQQ in NASDAQ. So, I think accessibility really matters. And then we, as a portfolio manager and fund manager, should be proactive.
Yes, um, when it comes to ETFs, which China AMC's specialty, right, in China, this is still a relatively young industry. And in terms of the divers, the, the product mix, it's not as diverse as, say, in Hong Kong, where you have leverage, single stock ETFs, actively managed ETFs. Tell us about some of the innovations you're seeing or you are creating in that space, because I understand you're working with, um, index builders to create more specialized ETFs.
Yeah, we call it, uh, active indexing. Even though we don't really have active ETFs yet, but our belief, as the largest ETF provider, is index always the key is the fundamental. What investors are actually investing? So, how do we express our fundamental views through indexing, through how to composite the index? I think that's the number one question that we need to answer. So, with the, you know, the market is changing so quickly, and the supply chain also is changing very quickly. We try to modify the index to keep up or to even guide the investors to different sectors to the market. So, in China, I think, um, we are never saying that we are passive investors in ETFs. We are actually very active in creating index and then constantly optimize the index to, to really keep up with the whole changing of the technology.
And in China, we know that people are compulsive savers.
Yeah. Um, what are you seeing in terms of retail flows? And are you expecting more of this deposit migration into equity investments, into ETFs?
Yeah. Um, I think this whole, um, deposit migration really starts to going to be the best opportunity for China's asset managers to ever have seen in the, you know, next 10 years. Um, so we have this term of, um, deposit migration that from, because the interest is so low in China, and even though people originally really keep their savings in real estate or in deposits, they start to reaching out. And this year, we have definitely seen products like, um, we say, like balanced funds or fixed income enhanced type of funds, really start to attract attention from retail investors, or deposit savers. Um, at the same time, FOFs can also provide like TRS and low-risk type of products, really attract more attention from investors. I think migrating to equity or ETFs will be a long way to go, but the trend is starting to picking up.
So, speaking of interest rates, what is your outlook on whether the PBOC will loosen monetary policy further?
Um, well, we, um, we didn't really see much of the window probably to lower interest rates in the near term, um, because with the economy in the first quarter to be quite satisfactory, um, I think, well, the PBOC and the central government really sending out quite optimistic looks. And our projection for the Asia earnings this year will be nearly 10%. So, with that, I think, well, the monetary policy will still provide a quite well comfortable range, but at the same time, I think the interest rate probably will be like the secondary instrument they will consider.
Yeah, we have been seeing this, uh, improvement in earnings, um, this year, right? Especially when it comes to onshore stocks, but what is your outlook on some of these blue-chip names that have been lagging behind quite significantly?
I would say it's a good time if we're long-term, long-term, um, you know, asset allocators. So, we are actually very actively to push insurance companies or even, um, our social security funds, actually to allocate more, especially at this time, to large blue chips as dividend-type of driven products, because at this time, really, they are quite a good bargain already.
Okay, let's expand to the global macro environment because now we have expectations of a Fed rate hike. We have all these geopolitical news coming out of the Middle East. Um, oil prices in focus. What do you think is, uh, the most important factor that would be shaping Chinese markets in the second half?
Uh, for Chinese markets, I think because it's so large, and then definitely we have seen in the past several years, the new economy really is picking up and booming. Um, I think a lot of investors are more interested in China right now because of the whole, uh, trend behind, you know, deep tech and then all the innovations coming along. Um, but at the same time, because China's economy is so large, and then we don't really forget the traditional side of the business, right, the traditional economy. So, for China, even though the geopolitical tension outside is very volatile, but we have a lot of, you know, domestic, um, you know, work we need to be done, especially around the domestic consumer confidence, the spending on consumption, and also how we are going to start to really push back on the job of real estate. So, these, I think, is still mingled in our investment minds, and we need to be very active in reacting to the numbers that are coming out on the second quarter.
And we actually just got the inflation data out today, and the trade data yesterday as well, and it still shows this, uh, bifurcated economy, right? Consumption is still lagging. Do you think we should be prepared for still quite a prolonged slump when it comes to the consumption names?
I think, um, the multiples really need to have time to kick in, kick in. So, we have, um, performing a better performing stock market. We have people have better returns on their financial investments. We have a lot of the new economy that are earning better returns, and that will circulate back to the consuming and consumption side. But it really takes time, like multiples, think time to actually.
How long do you think?
Um, well, we had, are more optimistic, probably, you know, in the fourth quarter to see, you know, things starting to panning out from, you know, the beginning side to be the multiplier into the end. But, um, there are consumer names currently, I think doing better, unexpectedly, and we need to be more focused on new economy at the same time, how that will really, um, influence the consumer side.
What are you seeing in terms of, uh, global capital flows now? Global capital flows.
Um, well, we experience a lot of inflows in our products through QDI, and also we are looking at more interest, um, in domestic equity from international investors. Um, but I would say it's still more concentrated on the transactional side from, um, the international investors. So, the asset allocation investors are not coming yet as strongly as we probably have expected or have seen in the past. So, I would say it's still early in terms of international money coming into the domestic market, but certainly, I think people are starting to show more stronger interest.
What do you think it would take to attract more of these global investors to come into the domestic market?
Well, the current story is still the technology upgrade. Um, but I think I also understand that, like what you mentioned today, about the traditional side of the economy, and certainly international investors are more, more concerned with those type of investments. Um, but we do think that we need to show a different side of China, and then that probably is the first step. And we think the economy is a cycle, and then like the flywheel is still, is already moving, starting from the new economy, and the flywheel, once it started, I think it would just probably amplify a lot of different aspects of the economy. Uh, we have to take about, talk about the, the latest regulatory crackdown when it comes to outbound investment. I'm just wondering, do you see any direct impact of that on your business?
Um, I would say it's probably a plus for my business, because originally, I think people have different, uh, ways in investing overseas. And, of course, I think currently, it's just regulation, it's not really tightening, but it's more demanding more compliance with the regulations that already were in place. But at the same time, we've seen that people starting to use more QDI products to invest overseas. We've seen that people have more requests from our, um, Greater Bay Area financial instruments Connect. We have seen that, well, people start to talk about more about the ETF Connect project as well. So, I definitely think, well, once those loopholes were sort of sealed, I think the, the formal channel will be more open.
Yeah. So, that's my judgment.
Okay. So, it might be good for your business.
Yes. Um, you are one of the first movers when it comes to tokenized assets, especially when it comes to tokenized RMB assets, right? Uh, tell us more about the products that you have and why should investors be looking on into these alternative assets.
Um, yeah, we are at China IMC, we are very proud to be the innovator in this area, and also with the guidance of the Hong Kong MA and also the CSRC. And I think tokenized, um, product, it's, it's more like our way to put things, put concepts into proof. So, it's not just, um, how investors should transform their traditional investments into tokenized products. It's our way to build an infrastructure so that once digital assets start to kicking in in different areas, different regions, different business scenarios, there will be readiness in the infrastructure for tokenized investments. So, that side, I think, at that, at this time, we are still exploring. We have already finalized, you know, tokenized the market, market fund in both RMB and the Hong Kong dollars, and also US dollars. We also have the first tokenized gold ETF ready. So, in that sense, we want to be a bridge between the traditional investment instruments and the tokenized digital assets to link them together.
All right, thank you so much. We are out of time now, but fantastic conversation, Emily, CEO of China AMC. Uh, and for those of you joining us online, that's it from us at Bloomberg Invest Hong Kong. But for those of you who are here in the room, as well as for terminal subscribers, we have a Bloomberg World coming up, a live recording of our podcast, Odd Lots, with our very own Tracy Alloway and Joe Weisenthal. So, thank you for staying with us. Uh, that's coming up next.
Thank you.
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Hello and welcome to another episode of the Odd Lots.