Opportunities abound in Asia

By Carla Hoorweg

October saw the FSC lead its third funds management delegation to North Asia.  Led by Finance Minister, Senator Mathias Cormann, the mission’s objective was to explore opportunities in the region for Australian asset managers.  

Japan and Korea share many challenges with Australia, an aging population, decreasing workforce participation, looming pension and healthcare liabilities. A key theme of the roundtable discussions and business to business meetings was about working together to overcome these challenges.

Korea and Japan are also in unique but attractive positions from an investor perspective.  

Significant changes are on the horizon for Korea’s pension market, which have in part been modelled on Australia’s superannuation system.  The new structure requires more frequent deposits to Individual Retirement Pension accounts for a wider range of employees.  A wider set of investment criteria will create opportunities for asset managers to demonstrate value for the country’s 26 million workers.

In Japan, 20 years of deflation and a focus on paying down debt means businesses and households are sitting on enviable cash reserves.  Prime Minister Abe’s return to government ensures continuation of his Abenomics reform agenda, that encourages institutional investors to diversify out of Japanese government bonds and into offshore investments. 

Japan and Korea share significant opportunities for increased tourism over the coming years, with Korea’s Pyeongchang set to hold the Winter Olympics in 2018, while Japan will host the Rugby World Cup in 2019 and the Summer Olympics in 2020.

They also both share the challenge of the public tension between the US and North Korea.  A tension which seems to occupy the minds of Western media broadcasters far more than the Korean and Japanese business people our delegation encountered. 

The question that should be asked is, how can Australians work with Korean and Japanese partners to provide value for money financial services?
Our respective governments have begun laying the regulatory bedrock which will soon become a super-highway between our economies.  Free trade agreements with both Korea and Japan provide two-way access for a variety of financial services.  

Korea, Japan and Australia’s participation in Asia Region Funds Passport from January 2018, will be the first step toward a diverse array of regionally created investment products for mum and dad investors. A pilot scheme for the Funds Passport is in development, to test the processes and cross border interconnectivity. 

These regulatory initiatives may seem like baby steps now but the path will soon become well-trodden.  The question for your business is when will you start to explore these opportunities?