Strategies in the coming year will be closely linked to the next interest rate moves in the US and their impact on risk appetite, says Mriganko Mukherjee from EY. However, there are several short-term opportunities arising from the current market conditions, in particular credit, distressed debt and special-situation investments.
Asset managers in Southeast Asia are facing volatile market conditions, including growing indications of a recession in many markets and rising interest rates, which have impacted allocation towards Asia, noted Mriganko Mukherjee, incoming ASEAN wealth and asset management sector leader at international consultancy EY.
«Inflow of capital into ASEAN continues to grow steadily and Singapore is well-positioned to be the gateway to the region. Indonesia, Vietnam, the Philippines and Thailand in particular are attracting investments across asset classes. In the short-term, the region is also poised to benefit from reduced allocations to China,» Mukherjee said.
Rethinking Hiring Strategy
One factor that continues to be an important issue for asset managers in the region is talent management, said Mukherjee. Managers need to re-think strategies to hire and retain talent post-pandemic, with a particular focus on hybrid work.
«Large managers continue to outsource most non-core functions and have the necessary infrastructure, both internal and external, to deal with increasing costs. Smaller managers may have to consider M&A opportunities to be able to leverage a common pool of mid- and back-office resources to be able to continue to focus on their investment strategies, products and investor outreach,» Mukherjee added.
Insurance Challenges
Some of the main issues impacting insurance companies in Southeast Asia include rising interest rates, which will potentially affect premium income growth in 2023, as well as rising inflation and pressures from the cost of medical supplies and other goods increasing the cost of claims payout. Insurers will also have to deal with regulatory and financial reporting changes, specifically the advent of IFRS 17 and ESG reporting, said Brandon Bruce, ASEAN insurance leader at EY.
«The fact that more and more insurers in the region are looking at technology, data and analytics capabilities as enablers to modernize and push their businesses forward is definitely a bright spot to look forward to in the coming year,» said Bruce. Mergers and acquisitions in the industry will continue, he added, with emphasis on stronger incumbents or new market entrants building a solid business in this part of the world, either by acquiring legacy businesses or via joint venture tie-ups.
Stringent Claims Control
Companies favor keeping costs under control, and they can likely be seen putting additional focus on ensuring more seamless services by enabling technology across the delivery chain, as well as re-strategizing the distribution base by enriching product offerings to the customer directly and via digital sales portals.
Insurers will also look to maintain stringent claims management and controls and implement new tools to understand where the leakages are and plug them by understanding the drivers and main causes creating them, introducing better analytics capabilities and tightening processes.
Sexy as it May Sound
«Looking ahead, it will make a lot of sense for insurers to consider investing in a stronger digital presence. However, the problem with digital — sexy as it may sound — is that you must get the model right, partner with the right ecosystem providers, provide the right solutions and the right product suite that will cater to the client’s needs,» said Bruce.
