Transcript
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.
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Speaker: This podcast was recorded for publication on the 27th of March 2025 by HSBC Global Research. All the disclosures and disclaimers associated with it must be viewed on the link attached to your media player.
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Speaker: Hello, I'm Piers Butler and welcome to the Macrobrief. I'm here in central Hong Kong on the final day of the HSBC Global Investment Summit. Over the past three days, we've hosted clients from all over the world who've heard from a stellar lineup of politicians, economists and thought leaders.
Speaker: So on today's podcast, we're going to talk through some of the key takeaways from the conference and panel discussions. To do that, I'm joined by our global chief economist, Janet Henry and Fred Newman, our chief Asia economist and co-host of our sister podcast, Under the Banyan Tree.
Speaker: Janet and Fred, great to see you here and thanks for talking to me. Good to see you, Piers. Thank you, Piers. So I am sure you're both slightly running on MT after two and a half very packed days at the yeah GIS.
Speaker: There were so many great presentations. It's hard to know where to start. Particularly as to quote you, Janet, there is so much new material to process since the new U.S. administration came to power.
Speaker: But maybe let's start with our chairman, Sir Mark Tucker's opening remarks. The headlines reported him as saying that we were witnessing the end of globalization. But I took away that he then went on to say that this didn't mean deglobalization, but reconfiguration, and therein lies the opportunity.
Speaker: Did you see that confirmed in all of the presentations and the clients you met at the at the conference? Absolutely. ah Trade reconfiguration is certainly ah the new term. you know were A lot of very large companies and enormous global investors were here.
Speaker: um As much as everyone's talking about uncertainty, unpredictability, companies cannot stand still. So trade reconfiguration, so countries looking for new trade routes,
Speaker: whether it's goods and services. you know Obviously, a big theme in this in this this event has been AI and services as well. It's not just about goods trade. So lots of discussion about new markets, new routes, um and indeed, you know what we've seen in recent months is new trading relationships, whether it's bilateral or regional. For instance, Europe um with Latin America, um as well as other bilateral trade routes. Yes, I absolutely saw it confirmed.
Speaker: So Fred, on day two, it was our CEO George Ed Helry who opened the day and he spoke about new corridors of growth and changing trade and investment patterns.
Speaker: Can you perhaps give us some examples of that that were discussed in the various presentations? Well, one very prominent example is of course the Asia-Middle East corridor. And what we mean by this is really the trade, investment and people relationships that are deepening between economies like mainland China, for example, India, Southeast Asia, and the Gulf states, Egypt as well, Saudi Arabia, United Arab Emirates. And what we see here is increasing interest by Asian-based companies to invest in that region.
Speaker: We also see banks. based investors for example looking at investment opportunities in in the east and of course we see more and more people exchanges and a particularly strong relationship is unfolding between India and the United Arab Emirates for example because here it's bilateral investment, bilateral trade but of course a lot of people movements as well. And so in a nutshell I think what the the tenor was at this conference was this idea that we may be gradually moving away from a very US-centric world where companies in Asia are looking not necessarily just at the US anymore for opportunities but are looking to develop other markets elsewhere and the Middle East features prominently in that.
Speaker: And actually, to pick up on that, Piers, what I would say, ah you know, what Fred's talking about, a lot of it's within the emerging world. And and obviously, there has been a lot of discussion on that Asia-Middle East corridor.
Speaker: But a real feature for me in in our meetings, because Fred and myself and and all the global research analysts have been kept pretty busy um on one-on-ones with investors.
Speaker: And one feature of a lot of the meetings that I've had, a number of clients have actually asked about um Europe. both directly in terms of what's happening in Europe, but also the new relationships that Europe might seek to achieve.
Speaker: You know, will it be guided by the US or actually is Europe going to have a completely independent policy um towards China, for instance? And on that note, one of the highlights of these sessions was Mario Draghi, former Prime Minister of Italy and former President of the European Central Bank.
Speaker: What were his thoughts on some of the recent events in Europe? I'd say he was quite optimistic about certainly the ah the recent events in Germany. um you know It is quite consequential and he did describe it as something of a game changer in terms of i guess the rearmament of of Europe and particularly um in Germany, but also the the massive infrastructure project.
Speaker: He was cautious about saying that Germany isn't always good at spending quite as much as it promises. It's almost, I think he said, forgotten um how to spend. So you do need to see the impact coming through.
Speaker: um Probably not much this year, probably more next year. But I think what he made very clear as well was that a lot of the things that were in his report, in many ways, should have been done 10 years ago.
Speaker: And actually, that was just the starting point. and And in particular, he did talk about the need for a capital markets union in Europe and an equity based capital markets union. you know He made this widely quoted point and that you know in Europe, most of the corporate finance, about 90 percent of it comes from banks.
Speaker: In the US, about 90 percent of it comes from capital markets. and that actually a lot of European startups, ah particularly in the in the higher tech sectors, they were being lured to the US market as a source of capital and very strong growth. So it was all about completing the single market, particularly for services, breaking down borders, building out the capital markets union.
Speaker: And he eased maybe the additional very interesting point that you know you can't always get unanimity in Europe. You might have to just proceed with a certain group of countries that were willing to proceed.
Speaker: It's interesting listening to Janet that some of this advice that Mr. Draghi might give to Europe, we can also apply to Asia, because all regions are thinking about resilience, about standing on their own feet. And so this idea about having more dynamic capital markets, for example, something's very prominent in China right now, trying to develop these capital markets. So some of these conversations are mirrored in Asia as well, trying to unleash more economic dynamism. And absolutely, we've already seen it in in Canada.
Speaker: um Obviously, um in Canada, there's a new prime minister and we're looking towards the Canadian election. But already, Mark Carney, who obviously we know well in the yeah UK, having been the the governor of the Bank of England, he's already said the first thing he wants to do is break down the provincial borders in Canada. And again, this was a theme that Draghi was talking about. You know, it's the internal frictions within the European market.
Speaker: It's similarly... in Canada different tax rates different licensing requirements if you can remove internal frictions then actually you can improve competitiveness and you can actually offset some of the trade friction. Fred you want to add to that? Yeah I think it's interesting that maybe there's an impetus here where we find the world is regaining its appetite for reforms because Janet you've talked about these things I think for decades now and You know, there's some of reforms that were on a wish list of economists.
Speaker: and And suddenly, um what really, and I think they came out of the conference as well, that, you know, there are challenges that businesses and governments are facing, particularly outside the U.S., with changes in U.S. policy. But it's almost galvanizing a little bit of a reaction elsewhere to think about...
Speaker: different trade relationships, internal resilience, more fiscal spending for example. and So I come away from this conference with a sense of optimism about how the rest of the world will actually deal with the challenges, impending challenges that will be posed by the US rethinking of trade policy. Absolutely. and And they are not underestimating the challenges, but as you say, it is galvanizing them to actually think about how they can help themselves.
Speaker: Now, Janet, just ahead of the GIS, you released your latest global economics quarterly, where you revised down slightly your global economics forecast. What was behind that? And coming out of the GIS, you still feel the same way after these days of, you know, it's it's ah it's a tough one these days to make an economics forecast. A week is actually a long time in economics forecasting these days.
Speaker: The moment today is a long time um because it is extraordinary. Yes, we lowered our numbers a bit. I guess back in December, we'd already started to incorporate some impact from tariffs on our global numbers, including on China. You know, we are looking for a fall in Chinese exports 2025. in China, We've also had another round of policy stimulus continuing what's happened since October last year.
Speaker: so So the downward revisions that we made to our global growth forecast for this year, the latest ones, it was primarily a little bit to Europe. Obviously, Europe has got the beginning of a fiscal stimulus, but we have had to incorporate some impact from tariffs.
Speaker: And also growth has been a bit weaker. So we've lowered Europe a little bit for this year, but revised it up for next year because of the fiscal stimulus. But the biggest downward revisions, a little bit to the US, but really it's the rest of North America.
Speaker: It's Mexico and Canada, where we had to lower our forecast more significantly before tariffs. But, you you know, it it is a moving target. you know I guess the ballpark figure we used for Europe was the idea of about a 10% across-the-board tariffs.
Speaker: But if the latest news is that it's going to be more like 20%, then I think it's fair to say that that isn't the last set of revisions we will be making in the year ahead. Fred, this time last year, the mood at the GIS was very much that Hong Kong was back as an international finance center after its pandemic travails.
Speaker: And perhaps we were maybe a little over-optimistic about the China recovery, but it feels like today China is back. Would you agree with that? I think there is a fundamental shift in the way people talk about the China opportunity. um We had in recent years, obviously, economic challenges in China. There were certainly a sense by investors and businesses that things were not going according to plan.
Speaker: What is interesting to me is that coming into this year one would have thought that these concerns are being amplified by the challenges around trade, but rather the opposite has happened. That um many investors are looking at again, opportunities in China. One key point here was um the technology sector, the announcements around DeepSeek, a new Chinese developed AI model, kind of reminding people how innovative really China is, how dynamic is in many areas. um Another thing that has changed probably is really the rhetoric from the Chinese government itself.
Speaker: talking more about consumption growth, even you know suggesting that there might be a need for rebalancing in China, which is something that many economists had hoped we would be talking about at some point in China, but there seems to be a sense that there's more stimulus coming through to prioritize consumption.
Speaker: and um And that really also plays into this idea that we were in a very US-centric world in terms of investment. Certainly the last few years US markets are very, very well.
Speaker: Investors are looking for Where else can I take exposure? there is It's not necessarily that you know people discount the US entirely, that'd be a mistake, but certainly to say there is pockets of resilience and growth and and and opportunities to exploit. And I think that that surprised me certainly at this conference of how investors really look to other areas of the world for opportunities now. And it's no longer just the US, it's the main game in town when it comes to you know investing your money.
Speaker: Janet and Fred, I think we've run out of time, but thank you for joining us today. I hope you get the opportunity to get a bit of rest before having to process the next tariff announcement, but I'm not sure you will. Don't forget that we've posted three short videos on LinkedIn where our economists and strategists talk through some of their highlights from each day of the summit. To watch those, just head to LinkedIn and search hashtag HSBC research.
Speaker: or email us at askresearch at hsbc.com if you have any questions or comments. So that's all from me here in Hong Kong on this special edition of the podcast from all of us here on the team.
Speaker: Thanks for listening. We'll be back next week with another edition of the Macrobrief.
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