Foreign investors 'not likely to pack and go'

PUBLISHED : Monday, 08 July, 2013, 12:00am
UPDATED : Monday, 08 July, 2013, 4:49am

Foreign firms are unlikely to move their investments out of the mainland and Hong Kong back to the United States, despite signs of an economic recovery in the US, a senior banker says.

It is difficult for the firms to just "pack and go", since they have spent a great deal on infrastructure for long-term development in Asia, said Sohfern Boey, the managing director and head of global transaction services at DBS Bank (Hong Kong).

"We don't see capital going back to the West," she said.

Boey's division looks after trade flows and manages cash for companies. It collects deposits, transfers money, processes transactions and provides trade finance and other forms of secured lending.

Global transaction services, which Boey described as the bank's "bread and butter" business, has contributed a third of the revenue of the wholesale bank at DBS in Hong Kong for many years, regardless of market volatility.

"You may regard the income from investment banking as the bonus, and the income from our department as the basic salary," Boey said.

In the wake of the financial crisis, commercial banks have kept a closer eye on transaction banking, which offers a relatively stable income, and competition has intensified as a result.

"Margin is being lowered by competition," Boey said.

She said the bank never set its prices too far from those of its rivals and hoped to reduce the cost of services to maximise its profit margin.

It encourages clients to use electronic means for many transactions to save on labour costs. Boey's division has 50 staff, excluding those in the back office.

DBS ranks fifth by market share in trade financing in Hong Kong, accounting for 6 per cent of the total. Boey said the bank hoped to increase that proportion by building on its strong relationship with small and medium-sized enterprises in the city and improving internally, even though economic growth in the region might slow down a bit.

DBS is adopting the new international standards for banking practice, updated by the International Chamber of Commerce in April, to facilitate trade by using standardised documents and checking of procedures, so as to manage non-payment risk, she said.

Boey declined to give the growth rate of the bank's trade finance loans but said they rose faster than the market, which grew 22.4 per cent year on year in March.

New trading links developed with Africa, South America and within Asia would bring an increase in trade volumes in the city, which would benefit DBS, she said.

DBS Group's chief executive, Piyush Gupta, said most Asian financial firms were not heavily affected by the tougher Basel III bank safety rules on capital requirements, because "everybody has got enough capital and everybody has enough liquidity" in Asia.

"While leverage in trade finance is a pain for some banks, by and large across Asia, banks are not really overly impacted negatively by the trade finance leverage issue in the short term," Gupta told reporters in Singapore last week.