INVESTMENT
How COVID-19 upended investments in 2020 COVID-19 has brought unprecedented challenges to the global economy and caused many disruptions in our daily lives. But every cloud has a silver lining and quite a few industry participants have shared with Asian Private Banker throughout 2020 that the pandemic has accelerated a number of trends and has removed obstacles to change. Here are three positive changes triggered by the pandemic in 2020.
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nvestments were surprisingly resilient to a year like no other. “We can look at the [2008] global financial crisis as a template on how Unprecedented monetary easing measures by central banks this plays out. Banks in most places in Asia will be providing support worldwide ensured the spectre of a recession was staved off, at least to troubled borrowers,” said Dan Fineman, Credit Suisse’s co-head of equity strategy, Asia Pacific and head of Thailand research said. for the time being.
Rocky start
On 31 December 2019, the World Health Organization’s Country Office in China first picked up a statement by the Wuhan Municipal Health Commission on cases of ‘viral pneumonia’ in Wuhan, China. Due to the mass internal migration during the Chinese New Year and Wuhan’s geographic location as an important transportation hub in China, the virus started travelling to other provinces in the country since early January 2020. As the virus spread through China, wealth and relationship managers and investment managers suspended travel to China, a key source of offshore wealth in the region. When the China A-share market reopened on February 3, the Shanghai Securities Composite Index declined by nearly 8%. As the virus started appearing outside China, global equity and bond markets reacted sharply.
“You won’t necessarily see pressure in banks’ balance sheets, as central banks will provide support, focusing intensively to keep SMEs alive. If this can be kept into a one to two months issue, it shouldn’t be too much of an impact for banks.” But things were going to get worse before they got better. “COVID-19 had a negative and limited impact on the stock markets of China and other Asian countries in the early stage of the epidemic,” said researchers writing in the Economic and Political Studies (EPS), a peer-reviewed journal hosted by Renmin University of China. Volatility went up in global markets, adding pressure on investments made by borrowing against stocks. In Singapore, DBS evacuated an entire floor in February after one member of staff was confirmed to be infected with COVID-19.
Lockin’ on private banking’s door
The silver lining
Nearly all private banks told Asian Private Banker that they had to resort to meeting clients and disseminating investment and portfolio advice online and via virtual meeting sessions.
Julian Schillinger, co-founder & co-CEO, Privé Technologies, believed t hat t he pa ndemic sped up t he adoption of digita l technologies by three years.
98% of fund managers surveyed by the Investment Management Association of Singapore (IMAS) suspended all employee business travel to China with nearly three-fourths cancelling or deferring their events. At the time, the impact of the virus was not fully assessed as the investment community in the region expected it to be widely limited to China.
“When we spoke to financial institutions (such as insurance companies and banks) a couple of years ago, getting digital was absolutely on their agenda and was already a priority,” he said. But pointing to the change in funding for many financial institutions, he added: “But now, there is much more pressure on that.”
Banks in the region shouldn’t be severely affected if the coronavirus situation can be contained into a “one to two month event”, Credit Suisse said in February.
The adoption of digital tools, actually ended up increasing the intensity and frequency of client interactions as hard-to-pin down UNHWIs were more accessible due to the lockdowns.
Countries started imposing lockdowns, and restricting travel. Meetings were severely curtailed. This hurt the ability of relationship managers to meet private banking clients in a largely relationship-driven industry.
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Private banking’s adoption of digital technologies went significantly up as relationship managers struggled to keep in touch with HNW and UHNW clients.
