Volatility tops financiers' worry list

 Responding to the question “what is your outlook for global economic performance in 2015?”, only 29.8 per cent of survey participants at the Asian Financial Forum (AFF 2015) said they were optimistic, while 67.7 per cent were neutral and 2.5 per cent were pessimistic.
Some 2,500 bankers, fund managers, CEOs, market regulators and policy-makers from around the world are attending the AFF, a two-day conference that kicked off in Hong Kong yesterday. The theme of this year’s forum is “Asia: Sustainable Development in a World of Change”.
Respondents were asked to name their top concerns from a list of five issues facing the world economy today.
The issue currently of greatest concern to them is the financial-market volatility created by diverging monetary policy among the major central banks, and particularly the latest action by the Swiss National Bank, which last Thursday removed a three-year-old cap on the value of the Swiss against the euro. 
Increase in geopolitical tensions caused by the threat of terror attacks in Europe following the massacre at the Charlie Hebdo magazine office in Paris, and the Russia-Europe conflict, ranks as the second most serious issue for them. The collapse of energy and commodity prices is another cause for concern, while the financial community is also worried about the possibility of a hard landing for the Chinese economy after an average 10-per-cent annual growth rate over the past decade.
As Europe and Japan have not yet emerged from economic stagnation, survey participants said they were also uneasy about the threat of widespread deflation.
Although the US economic recovery has strengthened, KC Chan, Hong Kong’s secretary for financial services and the treasury, said that these factors reminded everyone of the headwinds facing the global economy.
Xiao Gang, chairman of the China Securities Regulatory Commission, said China and Hong Kong needed to deepen financial-market integration following the establishment of the Hong Kong and Shanghai market connection last November.
While the combined Asian gross domestic product is about half of global GDP, the continent’s financial-sector development lags far behind that of developed economies, he said.
Timothy G Massad, chairman of the US Commodity Futures Trading Commission, warned against the unregulated swaps market, which he said had expanded significantly and was now estimated to be worth about US$600 billion (Bt22.8 trillion).
The Group of Twenty economies has undertaken reform of the financial market, but implementation will be executed by individual countries, which may have different laws and regulations, he said.
Since the 2008 global financial crisis, market regulators in the US have focused on transparency, information disclosures, accurate financial reporting and preventing fraud and market manipulation, he said.
However, if the derivative and swaps markets were well supervised, it would benefit everyone from farmers to industrialists, as they would have effective tools with which to hedge risks, he added.
Steven Maijoor, chairman of the European Securities and Markets Authority, raised concerned at the forum about Europe’s heavy reliance on the banking sector for funding, leading to risks concentrated in these financial institutions.
The 28 member states of the European Union have initiated capital-market reform, aiming to diversify funding sources from banks to another channels, such as initial public offerings, securities, private equity, venture capital and crowd funding, he said.
However, due to the long history of bank funding in Europe, it is very difficult to change the market structure in Europe, he added.