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Under the Banyan Tree – From the gas station to the stock exchange
0 Plays1 second ago
Herald and Fred make their way through our quarterly stack of quirky facts from the world of Asian equities.
Click here for appropriate Disclosures, including analyst certifications, and Disclaimers that must be viewed with this podcast: https://www.research.hsbc.com/R/101/JNKSNTK
Stay connected and access free to view reports and videos from HSBC Global Investment Research, just search for #HSBCResearch on LinkedIn or click here: https://www.gbm.hsbc.com/insights/global-research
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Transcript
Introduction to HSBC Global Viewpoint
00:00:01
Speaker
Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.
00:00:13
Speaker
Make sure you're subscribed to stay up to date with new episodes. Thanks for listening, and now onto today's show.
00:00:28
Speaker
Hello and welcome to another episode of Under the Banyan Tree with myself, Harold van der Linde, Head of Asian Equity Strategy.
Quirky Statistics in Asian Markets
00:00:36
Speaker
And me, Fred Newman, Chief Asia Economist here at HSBC. This is the podcast where we put Asian markets and economics in context. And this is a particular podcast we always look forward to. That it is indeed. We've got our latest compendium of quirky facts and stats from the world of Asian equities.
00:00:53
Speaker
From the world's most expensive place to fill up your gas tank, to record IPOs and a country where there are twice as many stock trading accounts as people. That's all coming your way right here under the Banyan Tree.
00:01:06
Speaker
So, Harold, is that time of the quarter, i have to say, almost, because we have, again, your top 10 statistics that right you kind of selected for us, kind of the eye-popping statistics when it comes to regional markets and economies? Basically, while we are reading reports over a quarter, you come across statistics and think, this is a funny one. i didn't know that. And then we write it down.
00:01:28
Speaker
Yeah, and they really make you think. So yeah one here, the first one start off with, and of course that relates partly to the disruptions from the Gulf War, and you looked at where in the world it actually costs the most to fill up your gas tank. That is, if you still have a gasoline car, how much would it cost to fill it up? How much is, where is the most expensive gas? Yeah, well this was a surprise to me. Maybe it wasn't a surprise to you because I don't own a car in Hong Kong, but Hong Kong is by quite a margin by far the most expensive place to fill up your tank. It's about four US dollars per liter. Let's say over three three euros per liter. While in Europe itself, I think it's about two and a half euros per liter. So that's that's for our American friends. That's about $15 per gallon. Whereas in the US, obviously, it's approaching $4 per gallon. And you already see people being, you know, um being stretched quite a bit. So, you I guess it makes sense in Hong Kong
00:02:28
Speaker
Because, of course, what makes it expensive is the the taxes that are imposed on it. And in Hong Kong, it's a crowded place. They try to discourage you to use a car, right? So that makes sense.
EV Advancements in China
00:02:38
Speaker
and And that's one of the reasons, actually, why you have this enormous uptake of electric vehicles. It's not the only reason. Yeah. And and and I mean, and there's another stat in the report that actually fits into that. um i was told, I haven't seen it, but that The ah searches in the US, Google searches for how can I buy an EV over the last month have gone up dramatically. And that makes sense. Now, one of the other stats in our report is about the batteries. So in mainland China, there are now car companies such as BYD. They've launched a new model.
00:03:10
Speaker
whereby you can charge your car, your EV, your battery, in about five minutes. I think it's about 70%. But remember, in about eight or nine minutes, it's pretty much full, and you could drive another 400 kilometers on that battery. So that's about the time you have a cup of coffee at a gas – well, yeah, it's not a gas station, I guess, anymore, but a charging station. You have a cup of coffee, you're done with it, and – You go on your way. You go your way. Of course, you need to have those charging stations, and that requires a lot of voltage. They're actually building 20,000 in China alone, and they're planning to do something similar in Europe. So the company, BYD itself, builds out these charging stations. Yeah, yeah, but that's the prerequisite, right? You need to have a charging station, because it's not like for these fast chargers you need much more power going through. And so you need special charging stations. You can't just do it on regular. And it's all possible because there's really dramatic improvements in battery technology, right? Now, that's interesting. There's a lot of developments in batteries. Obviously, they're getting much, much better. That should address range anxiety, as it's called, particularly if you live in a country where you have longer driving distances. And there are new developments. There's a Finnish company that just early this year made a big splash because they have a so-called solid-state battery. which charges exceedingly fast, is among the cheapest to build. But also, interestingly, if you live in Finland, it is a battery that maintains its charge even if it's minus 30 degrees Celsius. Which is helpful. Which is helpful. Because it's quite a normal average day in Finland. And it goes up to 100 Celsius. So it has a much bigger range. And so that, I think, suggests also what you just mentioned with BYD, that actually making enormous progress on battery technology. And actually, just building onto that, you remember we spoke with NECA, our sustainability expert, in a couple of podcasts ago, about that actually the solar and wind capacity in Asia is in place, but we need the batteries in order to manage that supply. And as you just pointed out, these battery technologies are improving very fast.
Hong Kong's IPO Market Resurgence
00:05:18
Speaker
So there's also implications for renewable energy and other industries across the region. There is. And also the other thing that... this current episode, right, the rising gas prices around the world, you know, there's a temptation to think it will normalize and then maybe we'll go back to gasoline cars. It's only a temporary boost maybe for the electric vehicle sector. But if you think back to the oil price shock in the late 1970s, that was actually a permanent boost for Japanese producers because they had cars that were much more efficient in the usage of gasoline. And that led to the rise of the Japanese And that was what essentially led to Japanese cars kind of gaining market share permanently in places like the U.S. So there can be a permanent kind of shock or a permanent shift from these movements. Exactly. Combine that with new batteries. Exactly. That could be the case this time around as well. Now, you know, those are fascinating stats. And you get another here on tankers, but we won't go into that. But something else that really caught my eye is Hong Kong IPOs. So Hong Kong is a big equity market. It was a bit kind of sluggish for several years. Last year came roaring back. you have a statistic in here about the initial public offerings, the IPOs done so far this year. What is that? No, exactly. So an initial public offering is a company that is not listed, says we want to list on the stock exchange. So you do your first offering to the market, the initial public offering IPO.
00:06:51
Speaker
The number that we've seen in the first three months of the year exceeds the total number of listings in London for the full year, last year, 2025. So there's an enormous number of companies listing. ah Why is that the case? Well, first of all, we didn't have IPOs for a couple of years during the COVID year, so it's fairly quiet. And they're catching up, you're saying? I think there's a catch up, but the bigger thing is, of course, as in other parts of the world as well, there's a lot of companies who are building out their AI businesses. and ah companies have built particular models and they need money to build out their business. And initially it's the founders who put a bit of money and then some friends, but eventually if you need another $10 million or $100 million dollars to build it out, yeah, where do you go? And then you list your company on a stock exchange. So it's also this AI boom.
00:07:42
Speaker
And of course what also happens is that, and we've spoken about this in the past as well, mainland Chinese investors are putting money into the Hong Kong stock market. a lot of cash so what What does this say then, the grand scheme of things, um for Hong Kong as a financial center? but I guess historically it was New York that had most listings. New companies went to New York to raise money. London, a big center for raising cash capital. is this Does this then mean that really Hong Kong is starting to compete with the and the big
Korean Stock Trading Enthusiasm
00:08:13
Speaker
financial centers? would actually phrase it differently. I think before COVID, Hong Kong was already leading. So it took a lead position during COVID.
00:08:21
Speaker
It didn't. It is now back. That's the first thing. But also what this shows is that Hong Kong is the preferred offshore financing center for mainland Chinese companies. They go to Hong Kong, not to Shanghai, to raise capital. But let me ask you here. You say the number of IPOs, does that equate also to the money raised? So um let's say there might be, you know,
00:08:46
Speaker
hundreds of small companies or dozens of small companies at LISP, but if they only raise a little bit. In terms of size and volume also. It's size and volume. But sometimes you have really big IPOs. That's why we're looking at numbers here, because sometimes you have one real big IPO that really dwarfs all the other ones. And we had that last year. though Now, let's stick with ah with the equity theme. And you have another statistic in here that talks about retail investors in Korea. um You know, when we think about investors in the stock market, you have big pension funds, you have hedge funds, you have insurance companies. But you also, of course, have the average person on the street who buys and sells stocks. What did you discover about the retail investors in Korea? Well, the Koreans, there's enormous amount of stock trading accounts outstanding in Korea. And if you then divide that by the population in Korea, you think every Korean, and I'm including babies here, every Korean literally has two stock trading accounts.
00:09:47
Speaker
So if you would narrow that down to... People between 18 or say 70 or so, it it would be even higher, right? But so there's a lot of stock trading accounts. Part of that has to do that people want to participate in these ipo so there's been a bit of a flurry of IPOs. of IPOs in Korea as well. And if you participate as one person, person A, they might say, okay, we'll give you 10 shares. Everybody gets a number of shares. But if you then have a second account and you call yourself Mr. B in that account, something somehow like that, or you have a small company, then then Then you can get another 10 shares. So people have been really – there's been this friendship of trying to get access. So there's enormous amount of trading accounts. Yeah, you you you write that there's more than 100 million retail trading accounts in Korea. That is more than double the population, that is right. And remember that this is important because what we see in the markets now, and we spoke about this in one of the previous podcasts, we see a lot of movements and flow dynamics. We see people, foreigners selling and leaving the region at the moment, and it's the locals that are buying this.
00:10:49
Speaker
And that is exactly, say all these trading accounts, there's a lot of local activity in Korea in particular.
Shanghai Property Market Recovery
00:10:56
Speaker
So, Danette, but it's not just a Korean thing, right? I know you told me in the past that Taiwan is, for example, a very retail-driven market, much more than the U.S. is and other parts. Yeah, that's right. But also mainland China, for example, you have a lot of ah people that have a retail account or a trading account. What differs in Korea is the sort of risk that they're willing to take on more so than in Taiwan. So they borrow more on margins or they participate in what we call leveraged ETFs and of leveraged investments whereby if if the stock goes up 5%, actually your investment goes up 10%. But of course, if stock goes down 5%, your investment also goes down 10%. But they're willing to take on more risk generally in in Korea.
00:11:34
Speaker
So fascinating. We talked a lot about equity markets. We talked about electric vehicles, the price of gas. Last question for you, and that is you have at the very end here statistic that suggests maybe a faint light. at the end of the tunnel for the mainland Chinese property market. That's right. So it is a faint distant galaxy, would almost say, that you can only capture with a very At least it's not a black hole. Well, it's not a black hole. That's a good one, Fred. Yeah, so what we've seen in the middle of March, actually what we've seen over the last year is a steady increase in what we call secondary sales in property. Secondary means you can buy a property that's newly built. So you're the first owner, you buy it from the developer, that's primary. Secondary means I buy your flat or you buy it from somebody else. And what we've seen in Shanghai A steady increase by people buy more and more flats every week, there's more. But in middle March, suddenly there was a further tick up. And that's the first time that we actually have more trading in the Shanghai property market than what we've seen over the last basically six, seven years before COVID. So this is that market is recovering and we're getting now to the sort of big transaction volumes that we had at the very start. Now this is only the Shanghai market which is probably just 0.3% of the Chinese property market. But why is Shanghai important here?
00:13:05
Speaker
I think because you would expect if there is a sense of a recovery in a property market that it would come first in the prime locations, in the prime cities where most of the wealth So and that it would be Shanghai. So you would expect them to see similar sorts of trends in other major cities, think about Beijing maybe, Shenzhen, before it starts to go into the... So it's partly psychological then. If if the the big cities are starting to move, then it trickles down... It could trickle down and that could be the first time you say, yeah well, if it happens in Shanghai, it could happen in other places maybe as well. And um this could mean, well, we see nationwide that property prices in China are still coming down. They're not coming down as much anymore. And there's now a sort of general feeling that, hey, maybe this is where we're at the bottom. getting to And maybe by the end of year, we're actually seeing across China prices starting to increase again.
00:13:59
Speaker
See, that's why you are into equities, my friend. The eternal optimist strikes again. There are faint, faint signs and not a black hole at the end of the tunnel for Chinese property. Harold, fascinating as always, and we'll keep an eye on all of these things, not least on the Chinese property market. So we'll check in again on your top 10 stats next quarter, I suppose. Fantastic. Thanks a lot, Fred.
00:14:24
Speaker
Well, that's a wrap for this one, ladies and gents. Many thanks as always for joining us under the banyan tree. Please do like and subscribe if you haven't done so already. And give our sister podcast, The Macrobriever, listen for the latest news and views shaping markets worldwide.
Podcast Conclusion
00:14:39
Speaker
From all of us here in Hong Kong, we have a great rest of the week. We'll be back again soon.
00:15:07
Speaker
Thank you for joining us at HSBC Global Viewpoint. We hope you enjoyed the discussion. Make sure you're subscribed to stay up to date with new episodes.