Zhu Kuang Lee, Chief Digital, Data and Innovation Officer, Securities Services, HSBC, summarised the value this way: “Clients are now looking for banks such as HSBC to act as infrastructure providers. Digital platforms offer a way for them to participate in the new digital ecosystems without having to switch from their current banking partner.”
Digital platforms are also increasing the potential use cases of innovations such as distributed ledger technology (DLT) in the capital markets. Although nascent, there is promising momentum around DLT acting as a single asset register for an asset manager or broker-dealer, which would enhance capital efficiency and give clients controlled access to real-time data. DLT is also being explored for clearing, settlement and reporting in the over-the-counter securities and derivatives markets.1
Given Asia’s rising interest in tokenisation and digital assets, DLT applications may be expanded to facilitate trading in the future. Doing so could reduce operational and capital costs, as well as generate liquidity by connecting more issuers and investors.2
Growth in ESG investing continues apace
Parallel to the activity described above are exchange and infrastructure developments aimed at making international investment into Asia easier and more attractive. Key to this is positioning Asian exchanges to be more globally-sensitive in areas such as disclosure, trading times and settlements, which have historically been barriers to international participation.
As platforms continue to gain momentum in the delivery of securities services, investors and asset managers also need to stay aware of the trends around ESG investing in Asia. Affecting every link in the investment chain, ESG is now a key factor in investment strategies being driven by market preferences and shifts in the regulatory environment.
However, there is a still a gap in investors embedding this into their decision making. For example, HSBC’s ESG sentiment survey in June 2022 found that over 40 per cent of financial services professionals have sustainability as a primary or secondary fund objective, yet the level of incorporation of ESG into investment decisions among the majority of respondents significantly lags the intention to do so.