Hong Kong, September 2024 - Our CEO and Chief Investment Strategist, Sharon Watkins, recently attended Asia’s premier and longest-running investor forum to unpack the critical macro, geopolitical, and strategic issues that will shape portfolios in the years to come. Hong Kong was bustling as always. Conversations were open and dynamic.
The conference explored a variety of today’s most pressing big-picture themes, including pervasive market divergences, such as the blurring boundaries between tech and most other sectors and widening gap between the U.S. versus the rest of the world. It probed the resurgence of protectionism, examining institutional and grassroots efforts to legitimize trade barriers. AI's rapid ascent took centre stage, with discussions zeroing in on monetization strategies for large language models. Furthermore, the conference looked at how much scope there is for emerging markets and Asia to take the lead in the next global growth cycle.
This year’s speakers included renowned names in finance and economics, political and geopolitical experts, and specialists in technology, health, environment and a wide range of social issues – all with insights to challenge our worldview and offer new perspectives.
Frank Luntz — our CONNECTS 2018 keynote speaker — shared sobering polling data highlighting the deep polarization in American society. He emphasized that the 2024 election will be decided by seven key states, with only 5% of voters still undecided (and unhappy with either candidate). Luntz predicted a close Harris win but noted that either outcome would bring significant changes in policy and market volatility. He highlighted concerning trends, including 72% of Americans feeling angry and 83% believing the country is more divided than ever — with 34% of people having permanently stopped talking to someone due to political disagreements.
Then there’s the elephant in the room: geopolitical uncertainty. Bilahari Kausikan, Former Permanent Secretary for the Ministry of Foreign Affairs of Singapore, argued that contrary to how sensational news cycles would have us believe, current geopolitical tensions are not unprecedented and represent a return to historical norms. These events are “known unknowns” that can be managed. He emphasized that the U.S.-China rivalry is not a new Cold War, as both countries are competing within the same global capitalist system. Their deep economic interdependence creates opportunities for other nations to strategically position themselves in this new multipolar landscape. Dialogue and understanding the different cultures are paramount to the solution.
Speaking of humanity… Dr. Andrea Maier discussed the potential for extending human healthspan and lifespan through targeted interventions like precision geromedicine. 60% of people aged 60 have two or more chronic diseases and take on average four to five pills each. Maier emphasized the importance of personalized approaches based on individual genomic and microbiome profiles, noting that extending average life expectancy by just one year in the U.S. could yield $38 trillion in economic benefits.
Nir Eyal, author of "Indistractable," argued that the ability to focus is a crucial competitive advantage in today's fractured world. We can either retain “traction” (movement towards purposeful goals) or remain crippled by “distraction” (anything that disrupts us and takes us away from our goals). Eyal extolled the importance of understanding and controlling internal triggers that lead to distraction, such as boredom and anxiety, and provided practical strategies to maintain focus.
On the subject of living well: Post-Covid economic growth saw an immense interest in personal luxury goods, especially in the Chinese-Asian market. Overall, the industry grew at a 6% cagr between 2006-2019 — two times the global GDP — and 22% cagr from 2020-2022. Despite the recent market slowdown, Daniel Langer expects the global luxury market to grow at a steady 7% cagr between 2022-2030 — but, with 50% of luxury brands disappearing out of the picture by 2030, emphasizing the importance of brand agility and customer focus. Langer stressed that luxury brands must move beyond the traditional “4 Ps” marketing model of product and price to the “4 Es”: Emotion, Experience, Engagement, and Exclusivity. Luxury is often described as the art of perpetual surprise — the next decade will reveal the winners and losers.
On the energy side, Pablos Holman looked at nuclear’s immense untapped potential, with new reactor technologies capable of converting dangerous nuclear waste into useful energy, utilizing the vast stockpiles of depleted uranium that currently exist worldwide. This advancement could potentially provide the world with thousands of years of power, indicating that nuclear energy will likely play a significant role in the future global energy landscape.
Steve Lee delivered a standout keynote on the current state of bitcoin, digital assets, Web3, and “The Ownership Economy”. Institutional investors are increasingly embracing digital assets, with major companies adding Bitcoin to their balance sheets and the approval of spot Bitcoin ETFs in the U.S. boosting market confidence. As a technology, cryptocurrencies and their underlying blockchain infrastructure offer decentralized, transparent, and secure methods for transferring value and information without intermediaries. This has potential applications far beyond digital currencies, including supply chain management, identity verification, and smart contracts. Crypto as an asset class — i.e. Bitcoin, blockchain, Real World Assets (RWAs), and everything else — has emerged as a new investment category with heightened adoption. RWAs are digital tokens that represent ownership of physical or traditional financial assets, such as real estate, commodities, stocks, bonds, and even intellectual property. This tokenization process is unlocking new opportunities for liquidity in previously illiquid markets. Interestingly, RWAs on-chain are accelerating, reaching $11.73 B total with 91,833 asset holders and 101 asset issuers.
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Finally, Melvin Glapion provided valuable insights on red flags to watch for in earnings calls. Key warning signs include changes in call timing, reduced disclosure, accounting changes, aggressive language, and failure to respond to basic questions. Glapion noted that companies often bring earnings forward when problems are looming and delay them when issues have already occurred. Glapion also highlighted the risks of excessive focus on non-GAAP metrics and buybacks funded by increased debt.
Bottom Line
Sharon’s time in Hong Kong — a melting pot of old and new, East and West — reinforced her own macro analyses from OUTLOOK: we are indeed in a decade of transitions. The depth of research presented at the Investors’ Forum was a good reminder that, no matter what headlines say, data can colour the underlying situation. If you have any questions or would like to connect with our team, please don’t hesitate to give us a call.