Opening Remarks by Ms Jacqueline Loh, Assistant Managing Director, Monetary Authority of Singapore at the EDHEC-RISK Days Asia 2012 Conference at Marina Bay Sands Conference Centre on 9 May 2012
Mr Olivier Oger
Dean, EDHEC Business School
Professor Noel Amenc
Director, EDHEC-Risk Institute
Distinguished guests, ladies and gentlemen
1 Good morning. I am delighted to join you today at EDHEC Risk inaugural Days Asia Conference. With the large turnout of speakers and participants from different backgrounds and domain expertise, I am confident that we can look forward to a fruitful conference.
Key observations from the crisis
2 The global financial crisis continues to cast a shadow on the global economy and financial markets. Volatile conditions are expected to persist for some time as countries around the world take steps to address the various structural vulnerabilities exposed by the crisis. This volatility stems from a combination of factors:
- the level of commitment to challenging domestic reforms;
- the extent to which emerging markets can remain the pillar of economic growth globally; and
- the potential spillovers from unconventional policy responses to the crisis, the prolonged period of low interest rates, and the timing and method of exit from these measures.
3 Amidst this challenging macroeconomic climate, a range of regulatory reforms, undertaken by governments and regulatory authorities, are under way. To name a few, Basel III reforms will strengthen banks’ capital requirements and introduce new liquidity and leverage requirements on banks. In the OTC derivatives space, markets will be fundamentally reshaped, with clearing and reporting requirements. Financial institutions will need to enhance their risk management practices and systems to keep pace with these changes.
4 Over the longer term, these wide ranging reforms will enhance financial stability, and allow financial institutions and markets to ride through shocks that may arise from time to time. In the near term however, there are concerns over the cumulative impact of these reforms on several fronts, including the uncertainty to business models of financial institutions, the impact on pricing and availability of credit and the impact on economic growth and market liquidity.
Asian growth and opportunities
5 Against this backdrop of subdued global growth, a low yield environment and heightened risks, Asia continues to present good investment opportunities and a good environment for financial activities. Buttressed by sound economic fundamentals, improvements in fiscal discipline and enhanced resilience of financial systems, the region has emerged from the crisis relatively unscathed.
6 Asia’s strong fundamentals make it an increasingly important and attractive investment destination. Several surveys have shown that as investors search for returns in an environment of slow global growth, investment portfolios are likely to be increasingly structurally rebalanced towards this region. At the same time, Asia is also growing as a source of wealth for financial intermediaries including banks, asset and wealth managers, and the demand for financial services and solutions is expected to increase. These factors point to significant opportunities for the further development of capital markets in the region.
The role of financial research and EDHEC
7 As we know, investment in Asian markets is not without risks. In order to navigate successfully in Asian markets and alternative asset classes, it is imperative that market participants build deep investment skills and risk management expertise, and continuously review and upgrade these capabilities. A concurrent deepening of markets, growth in investment activities and deepening of risk know-how can help to entrench the positive feedback effects between financial sector development and financial system stability over time.
8 This is where financial research can play an important role through:
- facilitating a deeper understanding of the drivers of and inherent risks in the emerging financial markets in Asia;
- facilitating innovation and development of new products and solutions to address the unique needs of investors here in Asia; and
- driving cutting edge approaches for managing the myriad of risks.
9 The EDHEC Risk Days Asia Conference has a highly relevant and interesting agenda ahead. Key topics include a post-crisis framework for investment management, gaining exposures to emerging markets, deep dives into various aspects of equity investing, and the opportunities and risks in alternative investments such as hedge funds and infrastructure finance. This will certainly add to the body of knowledge about Asia.
10 Many in academia engage in important blue-sky research with the purpose of exploring new theories and ideas. While this is critically important, it is equally necessary to bridge the gap between theory and application, so as to impact market practices more directly. The strength of the EDHEC-Risk Institute lies in its “Research for Business” philosophy, its focus on direct application and alignment with business needs.
11 Since the establishment of the EDHEC-Risk Institute Asia Centre in Singapore, EDHEC has contributed significantly to the Singapore financial research ecosystem. Apart from publications in top journals, EDHEC has also introduced a new Executive PhD Programme in Finance, tailored to meet the myriad of industry practitioners needs for professional and leadership development. The Institute also engages industry partners extensively. It has undertaken numerous industry projects in the areas of asset allocation, asset liability management, and operational risk management to name a few. EDHEC has also been active in sharing its research findings through industry seminars and lectures. All these have certainly promoted a deeper understanding of Asian markets, systems and risks.
12 In conclusion, as financial systems continue to evolve, there is increasing need to better understand how markets operate, and how investors and institutions respond to opportunities and risks. I am confident that EDHEC will remain an important part of this journey.
13 With this, let me congratulate EDHEC on the first edition of the EDHEC Risk Days Asia Conference in Singapore. I wish you all a fruitful two days.