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Embracing financial innovation to uncover new opportunities

Economies around the world have been heavily impacted by the COVID-19 pandemic, including Hong Kong which has also been affected by social unrest. Will 2021 bring back stability or will the economic downturn continue? And how should Hong Kong’s economy — particularly the financial services industry — adapt to prevail?

This was the subject of Hong Kong Shu Yan University’s Dr. Thomas Yuen Wai Kee’s session at TransUnion’s recent 2020 Hong Kong Financial Services Summit. In his presentation — A Macroeconomic Point of View and Outlook for Hong Kong — Dr. Yuen, Assistant Professor of the university’s Department of Economics and Finance, analysed the challenges faced by the Hong Kong market; why he’s optimistic about the financial services industry; and how the industry can best navigate these turbulent times.

Hong Kong’s GDP – a downward trend

Hong Kong’s GDP has continued to fall since the third quarter of 2019 — when the economy, affected by social unrest and other events, experienced a 3% year-on-year decline. Further impacted by the COVID-19 pandemic, it experienced another 9% decrease during the first two quarters of 2020. Dr. Yuen points out transportation, hospitality and the catering industry were hardest hit, experiencing year-on-year drops of 45% and above — as a direct result of closed borders and the tourism industry’s complete halt. Imports and exports have also been significantly hit, with a YoY decrease of 18%, affected by US-China trade tension.

Throughout the downturn, there were industries that experienced year-on-year growth: finance and insurance, and information and communications. Dr. Yuen notes the Hong Kong government has actively encouraged new innovations in the finance industry — supported by an existing communications infrastructure, along with minimal Internet regulations that allow information to flow freely. At the same time, even with the government’s $10,000 cash pay-out, citizens may not spend in the current economy. They may instead use the subsidy for investment or save it as a precaution amid economic distress — actions which have helped the finance industry during this challenging time.

Structural changes in a post-pandemic economy bring new opportunities

Dr. Yuen expects the Hong Kong finance sector to see many new opportunities in 2021 when the situation around the pandemic improves. With some uncertainty still surrounding the global economy, he predicts interest rates will continue to be close to zero, encouraging cash flow into the stocks and bond market, and allowing the finance industry to flourish. On the other hand, US-China relations may keep deteriorating, and massive investments from China into the American market may be a thing of the past. The Western world may do the same with China-focused investments, but may perhaps turn to the Hong Kong market as an alternative — thanks to its relatively clear regulation and transparency.

To maintain its position as an international financial centre, Hong Kong’s financial institutions must strive for industry innovations to keep up with the rest of the globe. In a post-pandemic world, the conversation is no longer about going global because the Internet has removed borders. What’s more important is how to take advantage of the opportunities provided by an uber-digital world. All businesses, whether they sell goods or provide services, require online financial services to survive and open new avenues in a post-pandemic environment.

To hear Dr. Yuen’s insights on the Hong Kong economy and opportunities for the finance industry, you may watch the session video and download the presentation materials here. Contact your sales representatives or click here for password.


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