My new “new” Asian Gateways
Over the past two weeks I’ve been working in Asia — Hong Kong, Taipei and Singapore — assessing market opportunities for my employer, SecondMarket. A few interesting observations out of this work:
- The Expat Model of Fund Management and Financial Services is Dying: I was last in Hong Kong exactly five years ago (for the Hong Kong 7s); when I was here last, energy and capital were flowing East, exuded by western (American, W. European) funds and fund managers. Then, my flight over from NY (as my flight over from Boston a few years earlier had been) was packed. Fund managers snapped up talent bellering that: “HK as the gateway to China” — a bridge for capital formation and indirect investment into “Greater China”. Now, purportedly, Och-Ziff, Soros, etc., who so eagerly opened presences here in the 2004-2007 boom window have wound down their operations. ExPat Club and School enrollment is apparently plumetting (someone really ought to create a private school enrollment indicator to measure the health of global financial centers — from what I’ve seen it would work brilliantly in NY, London, HK, and Singapore) and I had half a dozen local friends ask whether we’d be willing to hire here — sending me the CVs of their formerly top-ranked banker, HF and PEq friends (all expat). Perhaps most tellingly, the business class section on my early-week, Cathay Pacfic flight from JFK to HK was 2/3rds empty. And I’m writing this from the Cathay Pacific business lounge in HK, preparing to get on my flight back to NYC, and I’m one of a handful of whitefaces in a packed lounge, preparing ethnically Chinese business to board their flights to Tokyo, Sydney, Kuala Lampur and Dubai. If I had to make a bet, the former expat model in financial services/fund management here (HK) and potentially also in Singapore may be in a potentially terminal tail-spin. Why employ expensive non-Chinese speaking foreign talent to allocate capital or advise companies when locals are better-suited and oftentimes cheaper? A correlary of this argument might be that western Fund-of-Funds and Advisors will be of increasing importance, as they guide western capital through local intermediaries to find primary opportunities on the continent. Anyone — who speaks Chinese — want to start a Asia FoF with me?
- The Asian Upper-Middle Business Class is Here to Stay — and They’re Better Positioned Than the “Global Western Businessman”: Across Asia the Tycoon class have longed been watched with envy. Likewise, western consumer-focused businesses have eagerly tracked the rise of the Asian middle-class. But what about the Asian upper-middle? — the equivalent of the 10-branch store owner who drives an M3, golfs avidly, and whose kids drink themselves senseless before going to USC business school and taking over the family business? The Asian version is probably better-positioned, because they speak Chinese, were oftentimes educated (at least partially) in the west so they are globally comfortable, and also because there are SO many more business opportunities. As an expample, a Chinese-speaking contact in Singapore is producing films in China and India, investing in restaurant management in Dubai, and banking across the SoPac — and he’s part of a two-man show! The very immaturity of many local markets provides a HUGE opportunity for a local, saavy, hard-working business people…whereas the US only needs so many new “bar-club” owners, franchisees, or multi-branch commercial insurance agency-owners.
- The Business Community That Matters is Still Small: The only good news I found out of my trip (thinking in terms of a westerner who might want to do business here) is that the folks here who matter as a western business-person are countable, known, and, if you find the right “bridge-head” (usually a US-based, western-trained Asian biz person who’s operated here) not that hard to access/sway to work with you. True, these locals may be richer, better-educated, and more mutlilingual than you, but provided you are rep’ing a reasonable product or idea, they’ll listen to you — they are, after all, good entrepreneurs.
A few concluding tirades: we in the US need to develop more products that are reasonably-priced and sticky for Asian consumers. Music and luxury brands alone doesn’t cut it. We need to develop strong distribution relationships with local partners on the ground here — because in-person matters, and the chance we’re going to learn Chinese and come out here is slim-to-none, and we need to ever-more focus on Education — language, technical, cultural — not only so we can have some chance of keeping up, but also so we can continue re-exporting western-educated (secondary, tertiary) Asian-based business people who are friendly to us. Otherwise their markets are going to let them beat us. It’s just a numbers game, after all.