US and Europe are leading economic recovery, Asian Financial Forum told

World's financial players say developed countries will expand faster than emerging markets, driven by cheap energy, capital and labour

PUBLISHED : Tuesday, 14 January, 2014, 12:21am
UPDATED : Tuesday, 14 January, 2014, 1:26am

The United States and Europe are leading the recovery in global economic growth, the heads of banks, corporations and development agencies said at the seventh annual Asian Financial Forum in Hong Kong yesterday.

"The US has seen a broad-based recovery," said Victor Fung Kwok-king, chairman of the Fung Group, his family-owned global supply chain and retailer.

"The danger of Europe falling off the cliff is no longer there."

Chairman of Deutsche Bank's supervisory board Paul Achleitner said he was "extremely positive" about the economic outlook for the US and Europe.

Among the factors driving the US forward, Achleitner cited cheap energy brought by advancements in shale-gas extraction, a growing supply of low-cost labour, technology-driven productivity gains and the availability of cheap capital.

He was also upbeat about the euro zone, which he said was staging a turnaround after years of debilitating crisis. "To underestimate the potential of Europe would be a big investment mistake," Achleitner said, adding he would put 40 per cent of his investment capital in Europe, 30 per cent in the US and the rest in emerging markets.

China Investment Corp chairman Ding Xuedong said the US recovery had accelerated in the past two years and Europe was bouncing back. The head of China's US$575.2 billion sovereign wealth fund said developed economies would expand faster than emerging markets, prompting him to look at opportunities in the US, including shale-gas projects and stakes in manufacturing and technology firms.

Ding said the rolling back of bond purchases by the US Federal Reserve was pulling money out of Asian markets. "Emerging markets will feel the impact of the US tapering next year and may face a credit crunch."

Asian Development Bank president Takehiko Nakao concurred. Asia used to enjoy the "economic tail winds" from technology transfer, foreign direct investment, exports and, most recently, ample liquidity after the 2008 global financial crisis, he said.

Now the region was seeing those tail winds become head winds, in large part owing to tightening liquidity given tapering by the US Fed, said Nakao.

"Asia should develop its capital markets further, in particular the corporate bond market," he said.

Fiona Woolf, mayor of the City of London, the British capital's financial district, said infrastructure would be a focal point of global investments whereas information technology and "soft infrastructure" such as hospitals and schools were "definitely areas of investments" in emerging markets. She said investors should be mindful of whether their investments fell within a sound regulatory regime, and whether the government of a target country for their money welcomed foreign funds.

A panel discussion involving Tu Guangshao , executive vice-mayor of Shanghai, and Levin Zhu Yunlai, president and chief executive of China International Capital Corporation, an investment bank, prompted questions about the viability of Shanghai's free-trade zone.

The People's Bank of China said it would roll out detailed policies in the coming months to construct the long-waited "free trade account" system in the zone, said Tu.

The Trade Development Council hosts the annual Asian Financial Forum to promote Hong Kong as a financial hub. This year there are more than 100 speakers over two days, with 2,300 attending. Speakers include Timothy Geithner, the former US Treasury secretary, Carlo Mazzi, deputy chairman of Prada, and Alexey Moiseev, Russia's deputy finance minister.