“The [Covid-19] lockdown has had a massive effect on the markets, and in terms of the recovery, our members are more cautious on the form it will take compared with others [globally] in the financial services industry,” said Mary Leung, CFA, head of advocacy, Asia-Pacific, CFA Institute, a global association of investment management professionals.
The survey found that 42% of Asia-Pacific (Apac) respondents expect large-scale bankruptcies, while 50% of them believe that the crisis may induce growing unethical behavior in the investment management industry, compared with 45% worldwide.
Moreover, “the pressure that the current crisis poses to market practitioners in terms of their professional conduct can potentially be a cause of concern; half of survey respondents believe that it is likely the current crisis will result in unethical actions in the investment management industry,” she said.
Indeed, 41% of of people surveyed in Apac believe that regulation on market conduct should not be relaxed to encourage trading and liquidity — although, 35% think that regulations should be loosened.
Respondents were made up of 13,278 CFA Institute members worldwide, who were surveyed between 14 April and 24 April this year, as markets bounced back from their mid-to-late March troughs. Participating Apac markets included Australia, mainland China, Hong Kong SAR, India, Japan, Malaysia, Pakistan, and Singapore.
The findings were published in in a report called “Is the Coronavirus Rocking the Foundations of Capital Markets”, released this week.
Leung highlighted respondents’ anxieties about market volatility and distortions to asset pricing, the timeliness and efficacy of government policy responses, and the long-term impact on the investment management industry.
“The likelihood of asset mis-pricing is a major concern, either because of poor market liquidity or as a result of intervention by central banks to support some securities which provides them with an artificial backstop,” she told FSA.
According to survey respondents, liquidity in equities and bonds in both developing and emerging markets has fallen as a result of the pandemic. At the headline level, figures in Apac are in broad alignment with global figures but this belies intra-regional disparities: 33% of respondents in Apac (compared with 31% globally) believed that liquidity in developed market equities and government bonds was down, with India and Japan leading at 43% and 42% respectively, compared with 23% to 25% in Malaysia and Australia.
Additionally, respondents hold strong views on what regulators should and should not do: 72% believe that companies that receive emergency support during the crisis should not pay dividends or compensate executives with bonuses, 72% are against a ban on short-selling, 81% are hostile to the imposition of security market holidays, 60% are opposed to allowing companies to delay reporting to changes in their financial conditions, and 86% think ETFs need to be examined for their potential systemic impact.
Over the long-term, Apac survey respondents expect bankruptcies across the asset management industry, which should lead to further consolidation (36%). Meanwhile, automation is likely to increase in order to reduce costs (39%).
“While it is too early to predict effects on employment, about the same percentage of respondents see no change in their firms’ hiring plans (43%) or their firms adopting a hiring freeze (42%), with 13% saying that their firms were downsizing their workforce,” said Leung.
A CFA Institute survey of institutional and retail investors during October and November 2019 found that 46% in Apac were confident that their fund or wealth managers could navigate their investments during a crisis. However, less than a quarter of investors questioned in Hong Kong shared that optimism.
