Horizon spotting in ASEAN

Horizon spotting

Horizon spotting in ASEAN

In February 2016, Hogan Lovells held its inaugural ASEAN Horizon summit, an event that broke the mold of legal conferences. The summit provided thought-provoking discussions on key trends for the South East Asia region for the next twelve months and to target commercial opportunities stemming from the same. In doing so, the summit established a platform for private equity practitioners, together with other business leaders, to explore new, or increasingly relevant, opportunities in ASEAN. For 2016, we spotted growing opportunities in FinTech as well as creative solutions for distressed situations, particularly for the private equity community.

Parallels with developments in FinTech in other parts of the world

FinTech, being the application of technology to the provision of financial services, saw meaningful investment from the Singapore investment community in 2015; with Temasek Holdings being part of the US$150 million capital raising by UK-based peer-to-peer lender Funding Circle as well as the Monetary Authority of Singapore committing S$225 million from 2015-2020 to growing the FinTech segment of the start-up ecosystem in Singapore.

But how do investors in this region leverage opportunities in this space without encountering the regulatory or other hurdles which the pioneers of FinTech encountered? FinTech is not a new concept. Starting first in Silicon Valley, Asia is now playing catch up. So why not leverage that experience? Veronica McGregor, a partner in Hogan Lovells' Silicon Valley office, joined the summit to discuss her first-hand experience of the impact the non-banking technology players have had on the finance industry and how Asia can develop into a globally competitive FinTech leader. And what does the Year of the Monkey have ahead of it from a FinTech perspective? The general view was that the key trends for 2015 will be the battle for payments and m-commerce ecosystems, Regtech and Blockchain.

Positive opportunities arising from distress?

The availability of cheap debt in the recent past enabled people to over-leverage their businesses and create unsustainable business models. As this debt is coming due for repayment, we are starting to experience distress in the market. This is more than just about low energy prices. Beyond commodities, areas to watch include retail, leisure and real estate. Within the resource space, there are real opportunities for asset break-ups and investments in companies which support the mining and resource industry such as shipping, offshore drilling and site service providers.

Working with governments and regulators to tackle compliance issues

With M&A opportunities existing in distress situations, such as portfolio sales by banks, we expect to see more opportunistic new entrants in the market, similar to Australia's experiences 5 to 6 years ago. With new entrants to the market, increased understanding of regional compliance issues, understanding the region and its existing players is key. And FinTech emerging in the region, one lesson learned from Silicon Valley is that innovators don't follow the herd and are not afraid of breaking the rules and challenging the status quo.

The summit tackled these issues, taking a different angle to the issue of governance and corruption, by looking at how businesses could influence regulators and help to ensure that the weight of new regulation is proportionate and enforceable. It was apparent that one key to approaching compliance and regulation is taking action before regulations are passed, rather than asking governments to modify legislation after it is enacted. And more importantly, regulators in the region appear receptive to this approach.

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