Key factors that will shape APAC region's financial services sector in 2021
Twenty-twenty has been quite the year. It is astounding to reflect on the events and circumstances we have all found ourselves in and the collective experiences we have all experienced. APAC was the origin in the world of Covid-19 and to go through large-scale lockdowns. Even though many nations have led the way in virus control, Hong Kong, Korea, and the UK are still experiencing a new upsurge in cases and administering new restrictions.
Concurrently, cases continue to soar to new heights in the US, highlighting the ongoing frailty of the situation. The anomalous nature of the Covid-19 pandemic, the mayhem of the US elections, and the advancing regulatory landscape for Chinese IPOs make analyzing the APAC economies and their future a complex endeavor.
Despite such a tumultuous year for markets, global equities now sit at a record high and continue to break records. Abiding 2020, The timely opportunity to reflect on the fundamental shifts that emerged amid the disruption over the past year and explore new options that investors and businesses can capture in 2021 and beyond has commenced.
Below are the key trends that will continue to play a significant role in shaping the APAC region's Fiserv sector in 2021.
Transnational conflicts in Asia continue to affect markets and deal-making: It's been a turbulent and dramatic year in the global and Asian political sphere, with Covid driving US-China tensions, the enactment of the latest Securities Law in Hong Kong by China, and new tensity between India and China, to name just a few. All have had a substantial impact on markets and cooperation’s in the region.
The selection of Joe Biden as the new US President can improve the US-China relationship, but it will take some time to determine his stance and policies towards Asia.
Apart from the US, China saw itself in discord with India, which brought India prohibiting 118 Chinese apps from its internal market in September last year and continuing its stance while the US ascended its tussle on Chinese tech. Both of these instances are likely to continue to play out throughout this year.
A significant benefit for global markets and investors was the nomination of Prime Minister Yoshihide Suga in Japan. Japan's economy expedited on record in the third quarter, rebounding sharply from its biggest post-war slump. Enhanced exports and consumption manifested that the country is redeeming from damage caused by Covid.
As economies worldwide claw their way to recovery, few APAC countries have to deal with virus control and GDP rebounds of many countries, including Japan, Singapore, and Australia.
It would be inconsequential to speculate the future, given the events of this year. The financial services industry across APAC will expect continued volatility and notice the new world under Biden.
Chinese markets continue to open up: China has continued to amplify the opening up of its markets despite the pandemic and political upheaval this year. Over the next five years, the priority for the country is to make new strides in improving its economy significantly and instigate a new evolution plan to boost the domestic and foreign markets.
China is determined to open up its domestic financial markets to foreign companies. It is now allowing capable foreign institutions unbounded access to the Chinese stocks and bonds. The world's second-largest economy's regulations and announcements are to be made by the end of this year.
Sustainable finance gains elevation: In many ways, Covid has been a wake-up call prodding governments, organizations, and investors akin to pay greater attention to environmental, social, and governance (ESG) issues and to motivate all shareholders to chart a sustainable recovery.
This tendency is seen in Asia as well, with sustainable finance gaining more grip across the region. China has made a big call in September, with President Xi assuring that the country will attain carbon neutrality before 2060. Concurrently, New Zealand came to be the first country to claim the financial sector to report on climate risks.
Driven by the Environment Ministry, India has set up an Apex Committee for Implementation of Paris Agreement (AIPA) to correlate climate policies, regulate carbon markets and perceive the development of private companies. The main goal of the commission is to make sure that India sticks to its three objectives — a 33-35% reduction in emissions intensity by 2030 from 2005 levels; 40 percent of all electricity to be produced from non-fossil fuels by 2030; and tree plantation programs that can eliminate 2.5-3 billion tonnes of carbon dioxide-equivalent GHG from the atmosphere.
Besides the governments, companies and investors are also scrutinizing more on ESG risk management to build higher resilience in their businesses and their supply chains.
As ESG data is becoming progressively available and accessible, businesses and investors in Asia are afforded more significant opportunities to predominantly include sustainability into their internal processes and make ESG a core driver of future growth.
Digital becomes mainstream: Asia continues to make advancements in digital banking. This continues in 2021, with Singapore and Hong Kong leading the race. Nevertheless, with digital solutions becoming a mainstay, especially during an ongoing pandemic, institutions' cyber risks have also increased.
Cyber-attacks are becoming more advanced, and the latest attacks on New Zealand's stock exchange, which damaged the country's financial markets for four succeeding days, show that organizations are at risk to cyber-security risks, disregarding their size. To sum things up, companies cannot pay enough attention to being ahead of the game when it comes to cyber-security.
The Covid outbreak has prompted more organizations to shift their business online and migrate processes to the cloud. At the beginning of this year, Asia led the world in the mass working from the home experiment. With a virtual office environment becoming the new normal, organizations cannot afford to trail behind in their risk management capabilities. This is a well-timed wake-up call for companies in APAC to evaluate and enhance their technological infrastructure.
Spotlight to intensify the Chinese IPO landscape: In 2020, the US's tougher stance on China extended into its markets with plenty of verbosity around Chinese companies listing on US exchanges. This sets to continue to play out this fiscal year, with the US assembly passing legislation in early December that would force businesses to de-list from American businesses unless they comply with US accounting rules.
In spite of the Ant IPO's suspension, the Hong Kong market is challenging the Nasdaq nifty by competing to be 2020's top IPO venue, with a wave of Chinese' homecoming débuts'.
More than 1,200 companies gathered $228.7 billion through new listings in 2020. The figure, which comprises profits raised from original IPOs and secondary listings, is already 11 percent higher than the earnings raised through the whole of 2019 and greater than any other annual total since 2014.
Increased AI/ML maturity: While firms strive to gain a competitive edge over their peers, machine learning (ML) matures in financial services globally and the APAC region as companies deploy more sophisticated technologies ever to drive innovation.
Seventy-eight percent of the APAC firms are making notable investments in related technologies, and over two-thirds expressed that ML is a major component of their business strategy. A majority of APAC teste’s deployed ML for investment research and idea generation.
ML and data science teams have also developed as ML adoption increases globally, with 39 percent of APAC firms expecting an increase in data science roles in 2021.