Feature: Tapping opportunities in the next phase of global growth

This article first appeared in Wealth, The Edge Malaysia Weekly, on December 27, 2021 - January 09, 2022.

"A lesson that I learnt during 2021 is that if we can harness our strength and resilience, we can move forward with confidence and focus on the opportunities that are available to us.” - Bullock-Cann

-A +A

The Covid-19 pandemic has shown that we are stronger and more resilient than we think, says Renee M Bullock-Cann, country head of wealth and personal banking at HSBC Bank Malaysia. She came to this conclusion after dealing with the many challenges of 2021, which ranged from surging demand and rising inflation, to global supply chain disruption issues and labour market shortages. 

“2020 was a trying year and 2021 didn’t seem to get any easier. As a leader, I thought about how to remain motivated and sufficiently enthusiastic to energise my teams. I was tired, too, but decided to speak openly about the challenges I was experiencing,” says Bullock-Cann. 

She also shared articles and initiated discussions with her teams on creative ways to prepare themselves for the future, especially for the eventual reopening of the Malaysian borders. “A lesson that I learnt during 2021 is that if we can harness our strength and resilience, we can move forward with confidence and focus on the opportunities that are available to us,” she says. 

Notable events that took place during 2021 include China’s unexpected regulatory crackdown on technology companies and online education providers as well as multimillion-dollar debt defaults by two of the country’s biggest property companies. 

According to Bullock-Cann, the crackdown continues to dampen the performance of Chinese equities while the defaults led to extremely soft investor sentiment for Chinese high-yield property bonds. “Some Chinese high-yield bonds had started to default or show signs of trouble when their prices took a hit. It is worth noting that Chinese high-yield bonds contribute a significant portion to the overall Asian high-yield bond space,” she says. 

Another high-profile event that took place during the year was the 2021 United Nations Climate Change Conference, or COP26. Critical sustainability-related issues such as “green innovation” were tackled during the summit. Green innovation comprises all types of innovation that contribute to the creation of products, services or processes that help reduce the harm to, impact on and deterioration of the environment while optimising the use of natural resources. 

Bullock-Cann believes green innovation, which is critical for the world to move forward, has strong potential to generate long-term capital growth. “All in all, the much-discussed issues at COP26 helped turn environmental, social and governance (ESG) factors into top priorities for governments, companies and investors,” she says. 

The emergence of the new Covid-19 variant Omicron is another extraordinary event that has affected individuals and communities. Little is known about this variant. Bullock-Cann says its impact on financial markets is yet to be determined. 

Digitalising, the way forward for banks

As the global health pandemic changes the way the world works, the future of banking is about digital enablement. “Millennials are the most digitally savvy group of investors, but while their preference is for tech-based interactions, they also require the human touch and nuanced advice that a human adviser can give, particularly in a more complex investing situation. The financial services industry has to adapt and up their digital game or face losing out in a hyper-competitive market,” says Bullock-Cann. 

During the year, HSBC worked to create digital customer experiences which include a credit option with fixed repayment terms for selected purchases and a unit trust platform on the bank’s mobile app. Customers use this unit trust platform to transact with selected funds instead of visiting a HSBC branch. 

Going forward, Bullock-Cann says the bank will respond to fundamental changes in its operating environment and continue to enhance its digital innovations and features. 

“We have a refreshed purpose, and that is opening up a world of opportunity.  Our strategy centres around leveraging our strength and investing in areas where we see significant opportunities for growth, digitalising at scale to improve how we serve customers, as well as increasing efficiency, energising for growth through a strong culture, simple ways of working and equipping employees with skills they need for the future. Finally, we are also focused on helping customers and communities to capture opportunities presented by the global transition to a low-carbon economy.” 

Key themes in 2022

The key themes that Bullock-Cann expects in the year ahead include Asia, ESG and technology. Inflation could be a theme, but there are differing views on this. “Some expect inflation to persist and remain elevated while others anticipate inflation to normalise. So, the jury is still out.” 

Meanwhile, global economic growth is expected to moderate to 4% in 2022, compared with 5.7% in 2021. “This moderation isn’t a bad thing. It is just a reflection that the world’s quick and easy recovery from the Covid-19 recession is largely over, especially in the developed world. The global economy has moved into a new phase of growth,” says Bullock-Cann. 

In terms of assets, Bullock-Cann predicts that stocks will continue to rise on the back of earnings growth, as opposed to the multifaceted expansion that delivered outsized returns in 2021. The pace of equity returns should moderate while remaining positive, much like economic growth. 

“I think stocks are more attractive than bonds now. The outlook is ripe with opportunity, but extreme care must be taken to manage risk since the Covid-19 pandemic has yet to abate. Here, we advocate a diversified, risk-managed portfolio focused on high-quality, large cap companies that provide a generous dividend yield,” she says. 

In terms of structural themes and geographical preferences, Bullock-Cann points to sustainable investing, digitalisation, and Asia. She believes these themes should play a critical part in most portfolios. “Think about incorporating ESG metrics into your strategy, as this can add value. ESG practices tend to be more transparent, and these companies tend to maintain shareholder value more effectively. 

“Explore opportunities that foster digital transformation in the long run. These include cloud technology, automation, 5G, healthcare and smart mobility. Technology continues to be a structural winner as the world adjusts to a more convenient, digitally empowered way of living.” 

Financial lessons learnt, taught by the pandemic 

The economic shock caused by Covid-19 and government lockdowns highlights the importance of two components of a financial plan. The first component is emergency reserves, also known as rainy-day funds and the second component is retirement planning. 

“The pandemic puts the spotlight on the importance of emergency reserves and the difficulties that many individuals and households face in accumulating these funds. It is not surprising that lower-income households are the least equipped to handle financial emergencies, but we should note that a lack of short-term financial resources is not limited to the lower-income tiers. It is truly a wise practice to keep an emergency fund that is separate from your long-term investments. This will give peace of mind and confidence that you can reach your financial goals,” Bullock-Cann says.

She adds that the current economic situation may have impacted retirement plans for many, as the crisis has disproportionately affected older workers. “Some of the newly unemployed older adults may be thinking about finding new jobs and others may be looking at early retirement. 

“But early retirement isn’t always in an individual’s best interests. Working a few years longer than the traditional retirement age can be immensely advantageous to the health of a retirement plan. In contrast, early retirement can pose challenges to a plan’s sustainability,” she cautions.