Globally operating HSBC Holdings PLC yesterday reported its full-year's results for 2017. Its reported profit before tax soared 141 per cent from the year before to US$17.2 billion, which however was still slightly lower than market expectation. In addition to this, to market's disappointment, the group only said it would undertake share buybacks "as and when appropriate". As a result, HSBC share price dropped three per cent, dragging Hang Seng Index down by move then 200 points yesterday.
As a matter of fact, business operation of the banking industry, as mother of all other industries, has been improving remarkably in recent years, which indicates the world economy is bottoming out from the financial tsunami and tends to steadily recover. More importantly, Asian market is gradually becoming the major profit growth engine for multinational banks. Eighty per cent of HSBC's reported pre-tax profits last year came from Asia market. This suggests Asia's economic performance is better than global average. In particular, China's economy maintains stable performance with good momentum for growth. Last year, China's economy grew 6.8 per cent, leading the world. China continues to act as the locomotive of the global economy. On the other hand, economic growth in EU and US last year was just 2-3 per cent, which pales in comparison (to China's). This is evident that the eastward shift of the gravity of the world economy is irreversible and keeps accelerating.
Last year, growth of global economy accelerated to 3.7 per cent, which could be said the best in a decade.Growth of major economies tends to accelerate simultaneously, bringing along multinational banks to bottom out from the financial tsunami.In particular, the pace of recovery of banking groups such as HSBC which have shifted the focus of their business operation onto Asia in recent year is obviously quicker.
Although geopolitical uncertainties and the threat of protectionism have the potential to disrupt economic activity, HSBC Group Chairman Mark E Tucker expressed his optimism about the prospects for the global economy, citing relatively low unemployment in major economies, recovering consumer confidence and improving trade.
The gradual implementation of the Guangdong-Hong Kong-Macao Bay Area development and the Belt and Road initiative is bound to further push the eastward shift of the gravity of the world economy. It is expected that more multinational banking groups will follow HSBC to shift the focus of their business operation onto Asian market. This will directly boost fast growth of lending, insurance and asset management businesses in the region. In particular, the lending business in Pearl Rive Delta and countries along the Belt and Road could be turned into a new profit growth point for the banking industry.
At present, Asia is an important motor for the world economy. The International Monetary Fund (IMF) estimates emerging economies in Asia will grow by 6.5 per cent this year, whose contribution to global economic growth will increase to 60 per cent.
Asian market's capability to attract capital grows stronger and stronger. Among others, China has attracted more than US$140 of foreign direct investment (FDI) in total last year, setting a record high. But FDI of developed countries recorded a year-on-year drop of nearly 30 per cent. This is an indication that eastward flow of global capital and investment has become a general trend.
China's A-share is very likely to be included into Morgan Stanley's Capital Index (MSCI) global benchmarks this year. And it is just a matter of sooner or later for the Mainland's bond market to be included into international bond indexes. This will attract even more capital from home and abroad to make use of Hong Kong as an investment platform. Therefore, Hong Kong's financial industry is very promising. No wonder Chief Executive Carrie Lam Cheng Yuet-ngor frankly said she is full of expectations for the development of financial businesses this year. Right now, HKEX must speed up the launch of A-share- and RMB-related financial derivatives, so as to consolidate Hong Kong's status as a financial centre, asset management centre, risk management centre and RMB asset pricing centre.
21 February 2018
