Exploring greater possibilities together
Thought Leadership
Exploring greater possibilities together
An important meeting of minds at our 2019 Asia Pacific Institutional Conference

Geopolitics, developments in Chinese markets, factor investing, trends in Asia's insurance sector - these were some of the topics that more than 230 attendees explored at the 2019 Asia Pacific Institutional Conference. Co-organized by Invesco and Invesco Great Wall, the conference was held on Nov. 7, 2019 in Beijing, China.
Attendees analyzed how geopolitical events could affect our investments. They also looked at how new technologies and innovations could impact investors in the medium to long term. They then explored possible opportunities in China and the emerging markets. Attendees also had a preview of the survey results from a study on global sentiment towards investing in China. The study was conducted by the Economist Intelligence Unit and commissioned by Invesco.
True to the conference's theme for this year - "Greater Possibilities Together" - guests, speakers and staff had lively discussions on several topics through polling questions, question-and-answer sessions, and of course the coffee breaks, lunch and cocktail sessions. And through these robust exchanges, Invesco and Invesco Great Wall aimed to help attendees discover new frontiers and uncover new investment opportunities.
Here we share key highlights from the conference.
Here's what was shared
A distinguished line up of 16 speakers shared their analyses and expertise on geopolitical and macroeconomic trends, global sentiment towards investing in China, developments in factor investing, how China's A-share market will grow, and evolution of the insurance sector.
Click on the video to watch the speakers unpack key highlights from what was shared at the conference.
Here's what was discussed
At the conference, we polled the 186 guests present on what they thought about a variety of issues. Eight questions were asked across four sessions on geopolitics, factor investing, emerging-market debt and China A shares. With the speakers' analyses of attendees' responses, there was a robust exchange of ideas.
Here's what the guests said about these issues, and Invesco's experts' analyses of those responses.

On geopolitics
"China has a lot more tools to fight trade tensions than the US does. Utimately I think what we'll see happening is that the US takes minor concessions from China - if China is willing to give them - and then walk away after both economies have been hurt by it.
In this environment what we need to recognise is that the economy is growing, certainly helped by central banks' acommodation, but we are late cycle. And typically late in the cycle is what we see is that cenral banks give less acommodation, and we see inflation rise. So this is not a normal kind of late cycle environment and what I suspect is we could se a longer period of extension - that the late cycle lasts a lot longer than historically, and in this case risk assets could outperform. Read our global markets outlook"
-- Kristina Hooper, Chief Global Market Strategist, Invesco

On factor investing
"The first poll question - I think we would get similar answers from any broad group anywhere in the world. What that demonstrates is there's a huge divergence around the factor journeys.
I'm going share some information that we can draw from a global survey that we've done for four years and we've just released the latest results with key findings.
One was actually about the idea of flexibilty and evolution - similar to the second poll question. There's lots of ongoing research and area of factor investing, new technologies, new data sources, new research it's not in any way static. so we weren't surprised that investors indicated a large preference to having a mroe dynamic or more fleixble approach. those of you tha tanswered you like to use factors in atactical way this is particularly important for those investors to have flexibility to adapt as markets change. Read the study"
-- Stephen Quance, Global Director, Factor Investing, Invesco

On emerging-market debt
"For emerging markets (EM), the two most improtant countries are the US and China. That's why in the second question, people said that the US dollar and the Chinese renminbi have the greatest impact on EM, I think that's very observant of every one in the room.
As for the two most important factors - global growth is improving and in that non-US growth is improving; and financial conditions are getting easier.
We're at the point of growth is slowing down, but financial conditions are getting easier. We're in a Goldilocks situation, but we're not worried from an EM-investing standpoint. If growth slows down materially below 2.5%, we'll be very concerned about credit quality. But for now, we do not see a recession in the near future. Read Hemant's views
Increasing exposure is the right answer for the first question, because there's a significant opportunity set today in EM."
-- Hemant Baijal, Head of Multi-Sector Portfolio Management – Global Debt, Invesco

On China's A-share market
"Any market undergoing reforms attracts investors' attention, but the real China story is actually about technological innovation as well as consumer spending. Read our paper
There's research that the more companies spend on R&D, the more they make. And that's the power of technological innovation and you see a lot of living examples in China. This drives investors' interest.
As for consumer spending, China has one of the largest middle class in the world and this will ensure that its economy will conotinue to grow. This is a very powerful catalyst. Read our paper"
-- Chin Ping Chia, Head of Business Strategy and Development, China-A Investments, Invesco
Here's what you wanted to know more about
Attendees also were keen to have some of their burning questions answered by the speakers. Here we share some highlights.
Given where we are now, how would you view as the biggest upside vs the biggest downside surprise for 2020?
Kristina Hooper, Chief Global Market Strategist, Invesco: The two biggest drivers in the past 18 months or so have been the trade war and the Fed so far. The trade war, depending on news flow, has moved stocks up and down. The Fed for 2018 moved stocks down. The Fed for 2019 moved stocks up. The biggest upside and dwonside surprises for next year will still be these two. If we get a comprehensive trade deal - which I highly doubt - that would certainly be a nice upside risk. Similarly, if the Fed were to shock us and cut rates more, that would be anice upside surprise. The downside of course would be the opposite of those.

How do the results of The China Position study go to address concerns over the risk/return profile of Chinese asset classes?
Jason Wincuinas, Editor, Economist Intelligence Unit: In our survey, we asked a question about how these investors feel about different asset classses in terms of risks and returns versus other emerging markets. And for the risk profile, they generally felt that China was a better bet than other emerging markets. On a scale of 1 to 10 for each asset class and the average (for China) was about a 7, and that's a really good result. And on the returns, we asked the same question again and the answer was about a 6 on average. I think what it tells you is that the lower risk is good, and returns are good too. Read the report

Will the risk of a breakdown in trade negotiations be a major factor in future MSCI's inclusion of A shares?
Chin Ping Chia, Head of Business Strategy and Development, China-A Investments, Invesco: The risk in trade negotiations is definitely a threat to investors; it'll definitely have an impact. But having spent 18 years at MSCI, looking at how they make decisions, I would say the most important factor is actually how China progresses in terms of market reform. MSCI has listed four criteria to upgrade the weighting of A shares in its indices. One is access to risk-management tools for international investors. China has green light to Hong Kong Exchanges for A shares futures, but because of the trade uncertainty, the progress has kind of slowed down. But definitely there has been some relaxation with regards to futures. The second criteria is about trading holidays. It's an issue for international investors because there's a misalignment between onshore China and Stock Connect holidays. I think that is not difficult to resolve and I personally will think that there'll be some form of resolution next year. Next is about the omnibus trading mechanism from Stock Connect's perspective, wthat refers to the ability to place a single order on behalf of multiple client accounts. I think it's likely that authorities will address this issue; I'm quite optimistic about that.
The last is the most difficult is the settlement cycle - it's short. International investors hope to have it move from T+0 to T+1, and then to T+2 eventually. That's what international investors want; that's how the rest of the world behaves. They want it standardized so you can settle cash flow. But changing the settlement cycle means you're changing the entire infrastracutre backhone of China's stockmarket so it is going to take some time. I'm sure the regulators will know what to do about it.
If China keeps focusing on these four key issues and keep improving on them and deliver, and I'm sure the trade tensions will get back to normal and that's when we can see the MSCI upgrade.

Greater possibilities together

The conference was aimed at providing investors with new perspectives on how to better invest into the world, starting with China’s capital markets. During the conference, speakers shared ideas on how to use disciplined asset allocation techniques and factor investing to manage risk exposures. They also looked at emerging-markets debt and real-estate asset classes as different sources of returns.
By assembling so many attendees from different fields under one roof, Invesco and Invesco Great Wall hoped to facilitate the exchange of ideas to help investors prepare for 2020, and through those interactions, create Greater Possibilities Together.
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The opinions referenced above are as of November 7, 2019.
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