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AIA focuses on long-term investment
Phuong Thao
Wednesday,  Nov 8, 2017,16:57 (GMT+7)

AIA focuses on long-term investment

Phuong Thao

Mark Konyn, Group Chief Investment Officer for AIA

AIA, a leading pan-Asian life insurer listed in Hong Kong and active in 18 markets, will focus on long-term investment as part of its strategy to strengthen the global financial system, said Mark Konyn, Group Chief Investment Officer for AIA.

With his deep industry experience, Konyn has been invited to be a panelist at the APEC CEO Summit 2017 in Danang to discuss the roles of governments and business in promoting resource efficiency and sustainable economic growth.

Speaking at the summit, Konyn mentioned a Time Magazine’s cover story, published in February 1999, which declared an official end to the Asian crisis by anointing a “Committee to Save the World” consisting of Alan Greenspan, Bob Rubin and Larry Summers.

Nearly 20 years after the Asian crisis and on the eve of the APEC Summit in Vietnam, it is a good time to look forward as well as backward to examine how the world was “saved” in the past and the role that Asia can play in reducing the risk of future crises by tackling the root causes, he said.

A key aspect of the Time Magazine scheme was the devaluation of Asian currencies and the build-up of foreign exchange reserves.

China added nearly US$2 trillion to its foreign exchange reserves in between the 1997 and 2008 crises, with ASEAN adding another US$350 billion. Asian economies followed the prescription diligently and recovered relatively quickly with proven resilience since.

A decade later, Ben Bernanke, another “savior”, was lauded following the 2008 sub-prime crisis in America.  Before the 2008 sub-prime crisis morphed into the Global Financial Crisis (GFC), Bernanke had identified a “glut of Asian savings” as being responsible for artificially suppressing global interest rates.

Today, it is increasingly recognized that instead of a “glut of Asian savings” there actually always has been a dearth of domestic Asian investment.

“Today’s domestic Asian investment options are still limited with many Asian markets lacking the depth and maturity to service the region’s growing appetite for assets. In this landscape, where will we find the region’s next scalable, secure investment opportunity?”

An obvious candidate is infrastructure. The ADB, OECD, G-20, McKinsey, and others have now recognized a large and increasing global “infrastructure gap” estimated at over US$8 trillion, which is the result of two decades of under-investment at home by Asian economies, with the significant exception of China.

What is less widely discussed is how the insurance industry can play a significant role in reducing this gap. Infrastructure represents an ideal asset match for life insurers and pension funds, which have long-term liabilities.

Matching long-term infrastructure assets with long-term insurance and pension liabilities creates a natural home for Asia’s famous glut of savings. It presents a genuine alternative to deploying Asian savings into low-yielding bonds in the US, Japan and Europe.

In turn this will reduce the risk of the financial system coming under further stress by balancing the stock of savings with productive investment opportunities that have a longer lasting impact on the real economy.

Another 100 million households will enter the ranks of the middle class (defined as incomes above US$10,000 per year) in just the next three years in Asia. Meeting the demand of Asian middle class households for life insurance and pension products, while financing sound infrastructure investment would propel Asian economic development to the next level and improve people’s living standards from generation to generation.

Thus, Asia is ideally placed to mobilize insurance investments into infrastructure assets, thereby creating new means to tackle the looming and potentially troubling dearth of domestic investment.

APEC Finance Ministers, through the APEC Financial Forum, have endorsed a plan, to which AIA contributed, to promote infrastructure investment.

“We encourage our industry peers in Vietnam and across Asia to engage in this effort and together help safeguard the financial system from future shocks whilst improving the economies across the region,” Konyn added.

With almost 100 years’ experience across 18 different markets in Asia, AIA is committed to playing a leadership role in driving economic and social development across the region. AIA acted as a Platinum sponsor for the APEC CEO Summit 2017 in Danang.

AIA has a market capitalization of over US$90 billion and has been operating in Asia for almost 100 years. Konyn is responsible for over US$180 billion in assets under management and has been based in Asia for 28 years having begun his investment career in London.

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