OCBC Bank chief warns South China Sea ruling could be ‘potential flashpoint for the region’
Samuel Tsien also says it is premature to write-off Britain’s influence as a global economic force, because of Brexit
Singapore’s most prolific cross-border acquirer of banking and financial businesses says he is considering his business strategies more carefully, as Asia has come to a crossroads follow The Hague’s ruling over its territorial rights in the South China Sea.
Samuel Tsien, the group chief executive officer OCBC Bank, said: “2016 started off eventful, and continues to be so... The disagreements over the South China Sea continue to be a potential flashpoint for the region.”
“While we keep an eagle’s eye over the financial markets, the regional socio-political events will have significant spill-over effects on the economic front,” he warned.
“These developments require us to consider, or re-consider, our business model carefully.
“We will need to plan, strategise and carefully pick our path forward.”
Tsien counted four other events so far this year have shaken the world’s financial markets: the two trading halts of the Chinese equity markets at the start of the year, the crash in crude prices, the Bank of Japan’s negative interest rate policy, and the shockwaves unleashed in the foreign exchange and equity markets caused by the unexpected Brexit vote.
And he still expects more uncertainty before the end of 2016.
“Depending on the outcome of the US presidential election in November, there may very well be more political re-balancing that may upset the status quo.”
There is also the question of what would China will do, in reaction to the latest turmoil.
“Would it be prompted to take a more visible role during this period of economic uncertainty?”
“Does it have the financial clout and resources to do what it did in the aftermath of the global financial crisis when it created additional demand with its 4 trillion yuan stimulus package?”, he said, adding that ultimately ballooned into a “12 trillion yuan credit injection resulting in a significant mis-allocation of capital”.
Tsien’s business base of Singapore is considered Asia’s most sensitive touch point to global events, as it plays a pivotal role in trade relations throughout the region.
OCBC has newly integrated its China branch network into the bank, after its acquisition of Hong Kong’s Wing Hang Bank, which is core to its ambitions of becoming a key financier for China’s outbound investments into Asean countries.
He believes the move has given his bank great advantages over other equally aggressive Chinese institutions now buying their way into the market. Its insurance arm, Great Eastern, has active plans, too, to buy its way into the Chinese insurance market.
OCBC also newly bought out Barclays’ wealth management business in the region.
That is now undergoing the process of being bolted onto the private banking business it has been building after taking over what used to be ING’s private banking business in Asia. That business has since been rechristened Bank of Singapore.
Despite the global economy’s downbeat sentiment, Tsien thinks there is still reason for great hope for the region, and his own business, looking ahead.
“A more pessimistic individual would conclude that these events foretell a global slowdown,” he said.
“It may not be all doom and gloom. Years that start off badly…typically finish off on a better than expected note.”
He is also optimistic on what effect Brexit will eventually have on the United Kingdom.
“Brexit does not mean that Britain disappears from the world. It continues to exist. It is only that it has to interact and engage with its European partners differently.
“Given the depth of Britain’s knowledge and its influence on markets, it is far too premature to write-off the country as a global economic force or, for that matter, a global financial centre,” he said.
“We have now formally established the ASEAN Economic Community.
“An economically integrated ASEAN market with greater liberalisation and a more business-friendly regulatory environment will generate more trade and investment opportunities for all of us.”