Investment Firms Urged to Be Aware of Differences as They Launch Products and Services in Singapore, Hong Kong, Taiwan and South Korea
Investor attitudes in four key Asian countries have major differences as well as similarities that should be kept in mind by investment firms seeking to penetrate these markets, according to a study from BNY Mellon, a global leader in investment management and investment services, and Oxford Metrica, an analytics and advisory firm.
These similarities and differences also apply to distribution channels and other factors shaping these markets, the study said.
One example highlighting the differences is the preference for Hong Kong retail investors to invest with low-cost fund complexes that meet the full range of their needs, while those in Taiwan look to specialist managers in various categories.
Among other findings, the study notes the high investment costs faced by retail investors in South Korea compared with the low investment costs of South Korean institutional investors. It also notes the importance placed on investment performance in Singapore and Taiwan versus the perceived security of investing through well-known branded firms in Hong Kong.
"Our new study highlights the differences and similarities between investor attitudes in Singapore, Hong Kong, Taiwan and South Korea, as well as distribution channels and asset classes, which should be a focus for investment firms seeking to attract clients in these key Asian markets," according to Daron Pearce, global investment manager segment head for Investment Services at BNY Mellon.
Entitled Optimizing Sales in Asia, the study offers current and prospective players in the Asian cross-border funds market insights into investor preferences to help inform their marketing and strategic priorities.
Singapore, Hong Kong, Taiwan and South Korea are all markets where the European UCITS structure is widely accepted – and as such represent accessible entry points for non-Asian investment managers seeking to sell such funds into the region.
"Sales success in Asia's major cross-border funds markets requires a deep understanding of the different factors that inform retail and institutional demand," says Pearce. "As one might expect, retail investors are generally more price sensitive than institutional investors. However the interplay between price, product range and performance is finely balanced across all markets analyzed and, as such, close attention to the realities of individual markets is required by fund promoters."
The study draws upon a robust quantitative analysis of pricing, product range and performance in the purchasing decisions of institutional and retail investors. Data was provided by Lipper, a Thomson Reuters company. Highlights of the report include:
Price sensitivity is not universal. Retail investors in Singapore, Hong Kong and South Korea who invest across borders are highly sensitive to pricing by investment firms. However, this price sensitivity is not as strong in Taiwan, where the retail market exhibits higher fund prices, on average, than either Singapore or Hong Kong. South Korean institutional investors enjoy the lowest fund prices across the four markets. In addition regulatory changes in South Korea are designed to attract inflows of international assets.
Product range preferences vary from utilizing a one-stop shop to specialist expertise The study notes the one-stop shopping solution appeals to Hong Kong retail investors, who tend to gravitate to firms that can provide funds suitable through different market cycles. In contrast, Hong Kong institutions generally favor expertise from niche providers. Retail investors in Taiwan and, to a lesser extent, South Korea, also appear to prefer funds offered by specialist providers. The study also notes the retail market in Taiwan offers greater product diversity than is offered to retail investors in Hong Kong.
Performance: beating the benchmarks. For institutional and retail investors in Singapore and Taiwan (and, to a lesser extent, South Korea), there is some evidence that a fund's relative performance to the index is an important component of the purchase decision. In Hong Kong, brand security appears to hold greater weight than outperforming the benchmark over the longer terms. Cumulative returns over one-year, three-year and five-year time periods are shown to be a strong driver of sales for retail investors across all four markets.
In addition to providing detailed quantitative analysis, the study uses interviews with BNY Mellon clients and insights from BNY Mellon regional executives to provide supporting qualitative commentary on market trends and developments to illustrate the domestic context within which fund purchase decisions are made.