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May 5, 2014

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Home » Business » Finance Special

DBS set to slip into 'pilot' seat of new trade zone

SINGAPORE-BASED DBS, the biggest bank in Southeast Asia, is positioning itself to take advantage of what it sees as big potential as the Chinese yuan becomes more international and economic ties between the two countries grow.

DBS recently made a takeover offer for Societe Generale’s private banking operations in Singapore and Hong Kong, as well as some parts of the French bank’s trust business in Asia.

“Since 2009, wealth management has been one of the initiatives that we want to expand because of the rising middle-class and wealth creation in Asia,” Chng Sok Hui, chief financial officer of DBS Group, said during a recent interview with Shanghai Daily.

Chng is a chartered financial analyst, a certified financial risk manager and a chartered accountant. She has worked more than 30 years at DBS. Prior to her current position, she was managing director and head of risk management between 2002 and 2008.

She is a board member of the Housing and Development Board of the Ministry of National Development in Singapore. She also serves on the Accounting Standards Council and the Board of the Inland Revenue Authority of Singapore under the Ministry of Finance.

In her interview with Shanghai Daily, Chng discussed China’s yuan reform process, the new Shanghai free trade zone and the secret to becoming a successful woman in the business realm.

Q: How is DBS faring in the private banking business in Asia?

A: We are very proud to be among the top 10 in Asia. Our private banking business achieved S$901 million (US$717 million) in revenue last year. That is a growth about 20 percent from 2012.

So the momentum is there, and the opportunity came to us to acquire the Asian private banking business of Societe Generale. This transaction would increase our assets under management by US$12.6 billion.

Our private banking business is currently about 11-12 percent of overall revenue. Our target is for wealth management business to contribute 15 percent in the near term.

We recognize the growth of wealth creation in Asia. There’s a need for us to invest in this growth.

Q: How would the acquisition impact your private banking business in China?

A: The expansion of the group’s private banking business would allow us to provide better services for high net-worth clients in China.

Q: How do Singaporean businesses view holding assets in yuan?

A: The Chinese yuan is gaining wider usage outside of China. A high percentage of trade is already done in yuan. We have noticed a lot of interest in yuan loans since Singapore began yuan clearing operations. We have yuan corporate loans to support companies investing in China. In Singapore, yuan-denominated loans grew almost 25 percent last year to 300 billion yuan (US$48 billion). Singapore now accounts for about 60 percent of trade finance outside the mainland and Hong Kong.

Dim sum bonds is another area where there is mounting interest in using yuan for fundraising.

In 2012, we were the 20th biggest dim sum bond underwriter. By the first quarter, we ranked the third after Standard Chartered Bank and HSBC.

Q: Do you think the recent depreciation of the yuan will damp market interest in yuan assets?

A: The depreciation is one signal that the authorities want to send to the market. The yuan can no longer be a one-way bet. In the longer term, I expect the yuan to appreciate and to be more volatile. I don’t think the recent depreciation has damped sentiment. The offshore yuan markets will remain buoyant despite the weakening. Demand is still strong and will outstrip supply.

Last year, total offshore yuan bonds around the world amounted to 263 billion yuan. In the first two months of this year, it was close to half of that. I think the momentum will continue.

We have seen a lot of yuan centers being created outside China’s mainland. There are Hong Kong, Singapore, Taiwan and London. The interest in offshore deposits will lead to demand for yuan bonds as well. As China plans to make the yuan a reserve currency in years to come, the necessity to create yuan investment products will see increasing demand for the currency.

Q: DBS has held many seminars to promote Shanghai’s pilot free trade zone. What products and services are you “piloting” for the customers?

A: The Shanghai free trade zone is still very new and has a lot of potential. Policies are still being worked out. There’s indication that some of the rules might be relaxed to promote new ideas.

I think the whole idea is for us to work with our customers to create the energy, momentum and ideas to make this pilot project successful. I think China is “walking the talk” and putting the plan into implementation. This is just the initial phase.

What we can do for our customers today doesn’t necessarily indicate the full potential that the pilot zone will realize in the future. A number of customers have already established business relations with us through our free trade zone sub-branch. We’ve done our first trade finance deal and the first interbank refinancing transaction in the zone.

As more clarifications on the zone are given in the future, we will provide more products and services to our customers.

We had about 300 customers from the mainland, Hong Kong, Taiwan, Singapore, Malaysia and Vietnam attend our last seminar in Shanghai. We look forward to doing more innovative business with them.

Singapore was allocated a 50 billion yuan quota under the Renminbi Qualified Foreign Institutional Investors program last August. We have seen a lot of keen interest from financial institutions and asset management companies seeking to invest in the capital market in China. In 2013, Singapore overtook other advanced economies as the largest source of foreign direct investment in China, according to China’s Ministry of Commerce. In Shanghai alone, Singapore was the third-largest investor in terms of actual investments last year.

Q: It’s quite rare to find a successful woman in a prominent position in the financial services industry. What’s your advice for young people aspiring to follow in your footsteps?

A: I was very fortunate that DBS gave me a scholarship to attend university. I joined DBS after graduation. I had many opportunities to rotate through many departments. I have done 10 different jobs in the past 30 years. I think it’s very important for young people to have a mindset aimed at growing and learning.

You need balance during different stages of a career. You can’t run at the same pace all the time. I was able to raise four children. I think family support is very important. In Asia countries, we should be very grateful that families give us peace of mind that we can take to work. Women cannot do it all by themselves. For me, my mother was the main caregiver when my kids were growing up.

Everyone has to manage a career at a pace that matches the level of support they enjoy. It’s also helpful for young people to look at things in “zoom-in and zoom-out” perspectives. Just like a camera lens, you can zoom in to look at details and zoom out to see the bigger picture.

It’s a skill you have to acquire during the course of your work.


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