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The trendy world of Asian
finance
By Todd W John
SHANGHAI - Understanding the ever-changing
developments of Asian trade finance is essential to
making a successful evaluation of the prospects that
markets in this region offer investors, with several
trends emerging.
That was the main topic of
discussions at the Pudong Shangri-la hotel in Shanghai
this week, where Asian, North American and European
business leaders met to discuss and analyze trade
finance.
The three-day event kicked off on
Monday, with a keynote address covering some of the
primary aspects facing the trade finance sector in Asia
and beyond.
Bruce Alter, JP Morgan's vice
president and head of trade services and finance for
Asia, addressed the delegates regarding key trade and
finance industry trends affecting the market, covering
such topics as macro trade trends in Asia to the effects
of severe acute respiratory syndrome (SARS) and the
constant evolution of e-commerce as an essential tool
supporting global trade.
Industry
trends
Citing JP Morgan as an example, Alter
discussed the trend of consolidation within the banking
industry, noting that "not too long ago, the bank was
actually four banking entities". This trend to
consolidate banking has led to greater concentration on
diversified services that these institutions can offer.
At the same time there is a vast increase in the usage
of technology and e-commerce in trade. In terms of
structured trade trends in Asia, there remains excess
liquidity in certain markets in the region.
A
short-term but also possibly long-term trend affecting
trade in Asia, Alter notes, was the outbreak of SARS in
Asia early this year and the possibility of its
re-emergence. "Experts see expected US recovery and
strong growth in China and Southeast Asia [8 and 5
percent respectively] as offsetting the SARS impact this
year," Alter stated. However, he added, the possibility
of a re-emergence of SARS over the next few months is
still being very closely watched.
The long-term
picture looks very positive in China at present, as
supply chain production continues to move toward the
People's Republic and foreign investors are generally
staying focused and committed to projects in China.
The Internet and technology are also touted as
an essential productivity tool for what was classically
a paper intensive process in trade finance. Many
suppliers, buyers, banks and insurance companies are
still involved in a very paper intensive process that
requires extensive human interaction and oversight,
which can lead to errors and delays in the trade
process. Technology such as e-commerce and the Internet
are helping to mitigate these hurdles.
Alter
cited a 2000 study that found that an estimated 7.2
percent of all global trade, or US$420 billion, is lost
in paper inefficiencies in the trade process each year.
By using the Internet and e-commerce capabilities that
technology offers, organizations such as JP Morgan are
looking to increase their competitiveness by bringing
the key players of this process closer. By minimizing
the paper-chase and hurdles facing brokers, shipping
companies and customs, etc, JP Morgan is looking to
streamline the trade finance process, reduce
inefficiency and thus overall costs. Alter discussed
systems used by JP Morgan that allow "buyers and sellers
to get 24/7 online trade outstanding details, document
images, real-time reports that show which countries or
buyers are paying on time, and which exporters are
shipping on time".
The Third Annual Trade
Finance in Asia conference ended on Wednesday, and
covered myriad Asian finance concerns in Japan, Korea,
Greater China and Europe.
(Copyright 2003 Asia
Times Online Co, Ltd. All rights reserved. Please
contact content@atimes.com for
information on our sales and syndication policies.)
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