From Hormuz to Hong Kong: How the Iran War is Redirecting Capital to Asia | Milken Symposium Hong Kong | Tank Talks Asia

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Rania: So I would say that Asia is a story of transformation, economic transformation, demographic transformation, social transformation, a very important growing middle class, which is important, not just for Asia, but also for the rest of the world.

Manisha: Hello and welcome. It's Tank Talks Asia. I'm Manisha Tank, and we're at the AsiaWorks studio in Singapore, bringing to you a very different episode today. So the FOMO has been flying around because I've been away for a while, and in the meantime, Yeen and Andrew have been traveling and they went to a big event in Hong Kong, and I wanna find out all about it so that you can all find out about it.

Here they are at the table with me. This is fun. I enjoy seeing the both of you. It's not so lonely for me. Yeen, big event. What was it?

Yeen: I traveled for the Milken Institute to the Global Investors Symposium in Hong Kong. This is our third time back in Hong Kong hosting a large scale, public-facing event.

This event is different from our first episode, the Asia Summit. It's more intimate, smaller in scale, and it focuses and invites and convenes business leaders, Chief Investment Officers, asset owners, capital allocators to come and debate and discuss capital in a changing world, which is this year's theme.

Andrew also joined us at the event. How was your experience, Andrew?

Andrew: It was quite interesting, you used the word intimate. I really got the sense that actually it's quite an intimate event. You know, movers and shakers, lots of very influential people. And I managed to speak to a whole bunch of people whilst we were there.

But some very clear themes came out in the conversations that I had. We set up our little mobile studio, our pop-up studio there. And there was a lot of media there.

Manisha: Well, I was away, as you guys know, I was traveling around Europe and I got to geek out on the things which I love, a lot of European histories, so I'm visiting all of these beautiful palaces and things, but I kept getting updates on WhatsApp from you guys as you were doing your production planning.

And even though I was having an amazing time, the FOMO was insane because some of the people you were talking to were so interesting. I just thought, I love these stories. I wanna hear about what's happening. Obviously over that time, war in Iran, the focus has been on the Middle East. Right.

Something I got really curious about was what has that meant for Asia? Certainly if I'd been there, that's a question I would've asked, and I know that you got into it. Right?

Andrew: Well, I mean, I think that, you know, the Iran war was the elephant in the room. I mean, it was what everybody was kind of talking about, or maybe kind of not talking about, because they were trying to focus on the business of what they do, but there's no way of getting away with it, especially in that world of investment.

But one of the really interesting people, who I think sort of sets the scene for the whole thing, that I spoke to was the former Egyptian minister, Rania Al-Mashat. And she was extremely interesting, talking about her interpretations of what's going on over here. And she had a really, really interesting sort of viewpoint on obviously the impressive growth of Asia, but also at the same time how what's going on in Iran is affecting this region, affecting China.

But she had quite interesting viewpoints on what news she'll be bringing with her back to Egypt, when she went back after the event.

Manisha: Alright, let's have a listen.

Rania Al-Mashat: For us from emerging and developing economies, the Asian, economic transformation story is beyond impressive. It's beyond impressive because there are tangible results.

over was Vietnam. This was in: 2003

So I would say that Asia is a story of transformation, economic transformation, demographic transformation, social transformation, a very important growing middle class, which is important, not just for Asia, but also for the rest of the world.

I would say what China has done on the renewable side, is quite remarkable. And it probably is giving it also a step ahead when it comes to overcome or mitigating some of the impact of this energy shock. But again, disruptions are plenty, but the worst of all disruptions is war. The uncertainty that's generated by war is quite sizable.

And this is coming on top of what we were just coming out of, which is what happened on trade and protectionism and all of that. And we were just saying countries are becoming more resilient and firms and companies are, you know, adapting to these changes. So where we are today is one which is quite, you know, multidimensional. You have a fragmented global order.

Andrew: When you go back to Cairo after your experiences here in Hong Kong, at Milken in Asia, what kind of story, what's the headline that you'll be bringing back with you when you go back to Egypt?

Rania Al-Mashat: From the discussions that are happening here, there is a view and a sentiment that capital is moving into Asia on the back of what's happening in the Middle East and that Singapore and Hong Kong are winners when it comes to capital flight back into Asia, where there's more stability, more predictability and so forth.

And the big question is with what's happening in the Middle East now, is there going to be a long-term change in perception, or is it, again, short-lived? I think that's the biggest worry on everybody's minds.

Manisha: You know what strikes me about Rania's comments? It's the sense that this war in Iran, it's like poking a hornet's nest and it's shaken things up in other parts of the world that perhaps we took for granted or we didn't think about before.

And, you know, she's alluding to this, this idea that actually capital that was in the Middle East is now coming to Asia. Am I right in getting that sense?

Andrew: Absolutely. You know, places like Dubai, you know, their whole sort of existence is based around the fact, low, no tax, but they're supposed to be safe.

They're supposed to be safe havens for investments, safe havens to set up companies, build businesses, but that's all changed. Nobody, nobody knows when it's going to end. And that is actually a positive for this part of the world. Capital is now being redirected to Asia.

Yeen: Yeah, with the war in the backdrop, I agree that now capital has a two-way street. It doesn't only flow to Middle East, but contrast that with the capital flowing into Asia. We now see more opportunity for some of the emerging markets and the investment opportunity that born out of that capital inflow.

When we talk about Asia, we cannot escape talking about China. I understand that Andrew, you spoke to Professor Ben Shenglin, who is the founding dean of Zhejiang University, as well as our resident senior fellow, Perry Wong, who was the managing director of China at the Milken Institute. What was the conversation like?

Andrew: I think both him and Perry, they kind of blew my mind a little bit, to be honest with you, Manisha. What they had to say was like really, really, really eye-opening.

Prof. Ben was talking a lot about digitalization. China's basically bypassed the whole credit card era with the digitalizations of payments, you know, with WeChat Pay and the QR code and that sort of thing.

Manisha: That's incredible to think just like cash, straight to digital.

Andrew: A hundred percent. It's fascinating, but obviously on a much bigger scale as well, the fact that the digitalizations of payments is really benefiting, you know, government sized investments and the movement of capital.

The thing which I think was also very interesting about what he was talking about was the fact that China has a mandate that comes down from the government when it comes to investment, when it comes to building huge companies, which is completely different to what we see in the US.

Simply put, in the US you have large AI companies at the moment, huge tech businesses, which are built for profit. Well, that's not the case in China. The huge tech industries and companies in China are built with a mandate for the government that is, it has to be for the people. And that has profound effects in the way that these industries operate and how they look for the future.

Manisha: Well you definitely got me hooked, I want to hear from Ben.

Andrew: What's the biggest shift you're seeing in Asia right now, that the rest of the world is underestimating?

Shenglin Ben: What has been underestimated in Asia probably, is the profound impact of digital transformation. The digital platforms like WeChat Pay in China, these are transforming enormously.

Andrew: What does that infrastructure that you are talking about, the digital payments infrastructure, what does that mean for capital? Where is it moving in Asia and how is it moving?

Shenglin Ben: The digital infrastructure is underpinning a lot of applications for various scenarios, various industries.

The biggest bank from China, from ICBC, they are not increasing their number of employees. They are trying to concentrate to make sure their technology is applied a lot more effective.

Believe it or not, in China or in Singapore, when you make the payment or transfer money to a friend, it's much easier than probably in the United States.

Andrew: So Asia's leading the way in this new digital payments infrastructure. What is China doing right, that the western world is doing wrong?

Shenglin Ben: We focus on development because we came from a very, you know, underdeveloped stage. We knew if we couldn't actually feed our 1.4 billion people, then the social stability would be a problem. And by the way, the purpose of any government is to serve the people.

Andrew: So that's very interesting. So development as opposed to perhaps things like being driven by profit, for example.

Shenglin Ben: Fewer profit, yes that's the problem as well. So that's why we are trying to focus on the common prosperity, making sure no people will be left too much behind ok.

Manisha: I speak to so many Americans who have visited China and then they'll tell me, I was blown away by the fact that they don't use checks.

You know, it's just like you, we never thought 10 years ago though, we'd be having that conversation. Right. So anyway, what Ben was saying, therefore, so fascinating. Okay. You also spoke to Perry Wong, which Yeen was pointing out earlier. What was his overall take?

Andrew: His overall take's really super simple. Don't underestimate China, but specifically don't underestimate China's ability to recover from everything. Namely things like the property sort of debacle that's been going on there. Don't underestimate their ability to overcome that and bounce back.

What would you say is the single biggest shift that you are seeing in China right now, that perhaps the rest of the world is not noticing or perhaps underestimating?

Perry Wong: I think people would point to how the Chinese government would promote growth in property market again, because after all, there's a big economic segment of the system.

You have to prop the market back so that people have confidence to spend money again, right? After COVID and then geopolitical issue and the turmoil in the Chinese property markets. Now what is the government going to do?

Andrew: They have to revive it, don't they?

Perry Wong: They have to revive it, have to promote it again. But what if I make my argument by saying the Chinese government is not coming, they are not going to prop up the market for you because they see it as if you are in the market, or anyone in the market, and you want to speculate, that's your business, we are not gonna help you.

So then the burden got shift back to the builder and to people who like to own three or four houses in different markets to store their wealth. So the government say, no I'm not gonna come in to bail you out this time.

So the burden got shipped back to, somewhat, to the market, let the market to digest it, and the Chinese government will only do to stabilize the banking system, the financial system, because those are important.

Andrew: What you're describing here is very kind of Scottish enlightenment. It's very sort of Adam Smith, isn't it?

Perry Wong: Yeah. You got to, oh, actually, if one goes to the universities in China to look at what the professor asked the student to study since the late seventies, would be Adam Smith's famous article. That's very fundamental. So how you build wealth for the nation and so that pretty much is the foundation for a lot of people who are interested in where the wealth come from.

Yeen: So that's Perry. Perry's a good friend who imparts wisdom and dinner for me from time to time. But talking about Asia, on top of China there's another economy that's super interesting that I think we should look at. Third largest population in the world and has so much potential. And in fact, was ranked top one or two in Southeast Asia as the emerging market that has the most potential as an investment destination.

During the conference we had the Chief Investment Officer of Indonesia Investment Authority, Christopher Ganis. Andrew, you also speak to him.

Andrew: He was a fascinating guy, obviously in charge of an awful lot of money.

Manisha: Yeah, I mean, that's huge, those funds are huge.

Andrew: I think that he had two things which were really interesting. Number one, he had a lot to say about the way that the world is at the moment. The fact that we live in a sort of, in a very deglobalized world, you know, deglobalization is almost in full effect.

Manisha: And so on a par with the title of the conference as well, this idea of living in an uncertain world. So deglobalized, I mean, it's uncertain because most of us are not used to that, right?

Andrew: But also at the same time, there's the sort of second point was the fact that Indonesia is no stranger to this effect. You know, Sukarno, you know the first president of an independent Indonesia developed, you know, created this non-aligned movement, which was, you know, countries that weren't participating in the sort of western world, capitalist sort of democracy type thing.

But what he said was that these types of organizations like ASEAN, and that's what he spoke about, ASEAN, are increasingly and should be much more important to countries in this part of the world, especially when it comes to dealing with the challenges that we see in the world at the moment.

Manisha: Oh, I'm so intrigued. All right. Let's have a listen.

Andrew: What's the single biggest shift you're seeing in Asia right now that the rest of the world is underestimating?

Chris Ganis: I think the pace of deglobalization that we are seeing an acceleration towards a multipolar world where companies, governments is trying to diversify supply chain, trying to diversify supply of raw materials, energies and everything.

But on the back of it, it's all about creating resilience. Specifically selfishly, from my point of view, this is actually a good time for Indonesia. Now, we have the ability to try to participate more in the global trade system that is now being re-racked, being readjusted.

With 280 million people, over than 55% of our GDP comes from domestic consumption. It continues to be the core strength. But it would be remiss for me to say that this core strength is, makes us invisible. Right? This is still resilient, but we need to ensure that it continues to be resilient amidst the global volatility that we are experiencing right now.

So I think understanding how do we ensure that this domestic consumption continues to be buoyant and as well continue to lead to stability, is the first critical step.

But that requires a lot of synchronization between fiscal, monetary, government, local government. And private investors. And that's what our key role is for Indonesia Investment Authority.

So we were founded in: 2020

Andrew: And where are things really working at the moment for the Indonesian Investment Authority? What region, what part of the world? Where is your focus? What's going well?

Chris Ganis: The largest investment to date is healthcare, right? We've invested in pharmacies, we've invested in hospital, we've invested in drug manufacturing. But when we think about the future, right? When, as it relates to, you know, the most recent, major geopolitical events in the Middle East, right? Maybe green energy and transformation will be one of the key sector we have to focus on as people are starting to think about energy independencies.

And that will require a bit more renewable investment, which has not been as much scale when on a comparative basis to the fossil energy.

The way I think about the most current event is the answer is actually not just in Indonesia, it's collaboration in ASEAN, right? I think ASEAN will be the key for us to create a resilient economy. Because when you take a step back, when our forefathers invented ASEAN, 60 plus years ago, it is actually a quite brilliant idea.

In every crisis, in every structural change, supply and demand, it will create opportunity. How do we react to it? With the proper fiscal, monetary, government support, government incentive, and collaboration with our neighbors is where the detail, very important.

Manisha: Slight sidebar. I'm a little bit dazzled today because I spent my Sunday going to something in Singapore called Hyrox, and I don't know if you've both heard of it, but I'm getting some smiles back. Okay. I'm getting some acknowledgement. All right.

It's fitness madness for those who are into it and it's sort of one kilometer run, with fitness stations in between. This was something a member of my family was doing so I went along to watch and there was an Asian hiphop star there, Jay Park. So everybody was going absolutely mad.

Andrew: Was it at the national stadium as well?

Manisha: It was a national stadium here in Singapore. Amazing event. I know that one of your guests has done the Hyrox

Andrew: And he was there. He was there, you probably didn't see him amongst all of the other Hyrox athletes.

Manisha: Oh was he now? Okay.

Andrew: Yeah, Adrian Li. I actually got to know him in China and it was a real coincidence that he was there at the event, we bumped into each other. I would say, obviously, I think he's a perfect person for us to talk to there, because he's an entrepreneur. He's at the sharp end of, you know, investing actually in Indonesian tech businesses. He runs his own VC company and, you know, he built a very successful education tech company in China and then set his sights on Indonesia to build his company in Indonesia.

But he had so much that was interesting to talk about, you know, sort of back to what Rania was talking about earlier, you know, capital inflows are now moving into Asia, away from the Middle East into Asia. But he's so bullish about Indonesia and the opportunity that Indonesia holds and what he had to say was fascinating.

Adrian Li: Southeast Asia represents one of the most compelling, fundamental structural investment opportunities in the world right now.

So if you look at Southeast Asian nations as a whole, GDP growth across the nations is probably around five to 6% depending on which countries.

And President Prabowo is trying to get Indonesia to hit 8% GDP growth. So certainly you have solid and stable GDP growth across these nations. If you look at their fiscal balance sheet, for example, governments are relatively, compared to some other places in the world, under leveraged as well.

So they are on a stable platform to be able to support growth. And of course, when many other parts of the world, even China today is also dealing with demographic problems where they don't have enough young people coming in to work. These countries, Southeast Asia are continuing to grow. And so ultimately that's going to continue to be an engine of growth.

GDP per capita is also growing. So you're seeing this new bracket of consumers coming up. So the mass affluent, let's say, coming in to power the economy to that next level. And that opens up incredible opportunities for investors to come in and work with businesses that can capitalize on that.

Andrew: Is the future bright?

Adrian Li: I think as an entrepreneur, the future is always bright. We're optimists by nature. But I think that again, if you look at the fundamentals of where Southeast Asia is and where you expect it to be in 10, 15 years time, because that's the time horizon we're looking to compound our investments in, Southeast Asia's future is looking incredibly bright.

Manisha: Oh, I do like his positivity. I think if you're gonna get through something like Hyrox, you've got to be a really positive person.

Andrew: Yeah. He also used to do Iron Man as well.

Manisha: Wow.

Andrew: I mean he, you know, he is a very, very driven individual, but, and actually just, just one small thing there. The timescale that he's talking about, 10 to 15 years, I think that that's fascinating and I think that that really plays into, I think what we're trying to achieve with this podcast, it's helping people sort of understand the fact that, in so many ways, the train has kind of left the station when it comes to the economics of Asia, specifically Southeast Asia, GDP growth and that sort of thing.

And nothing's going to stop that growth in GDP, but the timescale is very naturally going to be around sort of ten or 15 years. And I think that's super important. I think it frames the future success of this part of the world and the fact that it's actually going to happen very well.

Manisha: Yeah. And I think it's something the rest of the world needs to be really cognizant of. I think it also reflects though that things are also going to change on a societal level in Asia as well. People will embrace new careers. You know, there's always that Asian moniker, isn't it? That, you know, Yeen, you actually said this on an episode about being a doctor or a lawyer, I think it was our first episode together. Right?

But attitudes are really changing. Societies are really changing as well in their sort of social constructs. I don't think it should be lost on us that this symposium was in Hong Kong. Hong Kong has seen so much change over the last decade or so, but I think people are also making different decisions about what they wanna do with their lives right.

Yeen: Hey, I can resonate with that. Growing up, Hong Kong is seen as such a massive cultural output hub. People in Southeast Asia, in Vietnam, they grew up watching Hong Kong dramas. And, I think someone spoke to us, very interesting, her name is Zabrina Lo, senior editor from Tatler.

Andrew: I mean, she kind of really embodied that sort of perception change that you're talking about and you are right. You know, Hong Kong has this sort of legacy of being, you know, movies, arts, culture.

Yeen: Still is.

Andrew: Yeah, still is. I mean, Hong Kong has amazing museums, amazing galleries, amazing artists. It has one of the best, you know, the Hong Kong Philharmonic’s one of the best orchestras in the world. And Zabrina in her position with Tatler Magazine, she sort of reports on that. She's so lucky.

But I think that what she was able to frame really well was that idea that perceptions are changing. Because even though Hong Kong, and Singapore to a certain extent, are known as sort of arts and culture hubs, still the perception is here why are you pursuing, you know, the generational perception of pursuing a job in that sort of field is, well, it doesn't make any money. But Zabrina had something to say about that, which was quite interesting.

Zabrina: I do think that, being a musician, being an artist, being a gallerist nowadays is more common than you would think. I'm in my thirties and around my generation of friends, quite a number of them are actually considering to be professional musicians.

They do think that there is definitely a lot more opportunities to develop their career, both within Hong Kong and also abroad. A lot of them actually went abroad to study music and then came back to Hong Kong because they see that there are a lot more opportunities. Hong Kong has a number of very good orchestras, chamber orchestras, full on, you know, like large scale orchestras. And there are a lot of, you know, like quartets as well.

And, I do think that especially for the F&B industry, hospitality industry, even when it comes to, you know, like a lot of other industries, they are also trying to introduce a lot more art programs to their events, which is great to see. And I think that definitely gives a lot of platform for rising emerging artists to, you know, like showcase their talent and develop their career.

Manisha: So look, having heard all of that, I really feel like we need to be doing longer form interviews with some of the folks you spoke with. It's such interesting conversations.

Andrew: Well, we did do a number of interviews about media and sort of culture and arts, and there is a longer interview with Zabrina, but Yeen and I had an idea whilst we were there that we would do an episode on the media because of the panel that we both attended. Right?

Manisha: What was this, what was this panel about?

Yeen: Oh, it's the private round table hosted by us on the Asia’s business of media landscape and its evolution.

Manisha: Ooh. I tell you what, that was fun. I really enjoyed, look we need to do this again. This was fun. And stop giving me so much FOMO, you know, you get up to such interesting things and you wait till I've gone away to do it.

Yeen: We'll have you next year, Manisha.

Manisha: Alright. It's a deal. It's a deal. Anyway, that is it for this episode. Thank you all for being with us and why are we grateful, Andrew?

Andrew: We're grateful because you've made it through to the end of the episode, and we're so grateful when you do that. And Yeen, what should we be doing?

Yeen: We have all the information you're ever gonna need in our show notes. Please also like, subscribe and comment on any of our content online or offline. Thank you.

Manisha: That's it for now. From the AsiaWorks studio in Singapore, that's Tank Talks Asia.

Tank Talks Asia is an AsiaWorks production and the views and opinions shared by our guests are their own.