Australia and Asia: One can't do without the other

When ING put the Barings Asia stockbroking business up for sale at the end of 2003 there wasn't much interest. The business had seen better days and the Asian investment banking market remained subdued, several years after the regional crisis. Asia (ex-Australia) represented less than a fifth of global market capitalisation and less than a quarter of equity capital raised in 2003.

There were few examples of companies successfully expanding from Australia into Asia and a move to Hong Kong in early 2004 wasn't an obvious career move for several of us. But Nicholas Moore (now our chief executive) believed that, with hard work and the right people, this securities platform could be leveraged into a broad investment bank in Asia and beyond. Thanks to the fantastic team we've hired across the region, he's been proved right.

The Macquarie business grew through incremental steps. First we worked on small transactions in sectors like infrastructure, resources and Reits (real estate investment trusts), where the Macquarie name already had some resonance; we did infrastructure funds in Korea and then funds around the region. After a couple of years we won the trust of clients for larger and larger deals. In 2010 we will likely see Macquarie as one of the lead managers on the largest IPO in Hong Kong for the third year in a row. In 2004, when we set out our business plans for the board, we were hopeful of success, but to see it happen has been truly special.

Favourable winds have helped. The Asia-Pacific region has changed dramatically in the past 10 years. Equity capital raisings in Asia have grown 11% per annum compound over the past decade versus 4% per annum in London and New York; M&A activity has grown 18% per annum versus an average decline of 9% per annum. Asia now represents almost one-third of global market capitalisation, but more than 40% of equity capital raisings and there are an increasing number of global companies headquartered in the region (or moving their headquarters here). In 2009 we saw for the first time more equity raised via IPOs in Hong Kong than in New York and London combined, and in 2010 it's the traditional hubs of investment banking that are experiencing a crisis. Asia has become a great environment in which to expand a business. 

The business integration of Australia into Asia has moved from moribund to active. There are now few major Australian companies not reviewing their strategic options in Asia and buyers are also moving strongly the other way. More than a hundred investments from China and many billions in dollars have been approved without condition in the past three years, and a handful of very large deals have come close to fruition. Chinese investors remain active in Australia and their acquisition strategies are becoming more sophisticated as they gain experience (and get better advisors). But Macquarie is also helping Japanese, Korean, Indian, Taiwanese, Hong Kong, Malaysian, Indonesian, Philippine and Singaporean investors grow their investments in Australia and is showing Australian firms a path north.

Perhaps even more remarkably, Macquarie's domicile in the Asian time zone has actually become one of the significant drivers of our growth in Europe and North America. Instead of illustrating that we "come from the wrong side of the world", it's become a calling card with clients from Chicago to Calgary that we earn three-quarters of our income from the Asian time zone and have our strongest relationships here in the region. It's no longer an impossible contradiction to be an Asia-based global investment bank.

Of course, financial markets in America and Europe will remain important and we look forward to Macquarie's continued growth in these places. That said, the inexorable shift in the centre of gravity of global finance to the Asian time zone will continue into the next decade. And I'm sure FinanceAsia will be there writing the many exciting stories that emerge as it does.

Andrew Low has been head of Asia for Macquarie Capital since 2004. In January 2010 he returned to Sydney to also take on the additional roles as chief operating officer and global head of financial institutions for Macquarie Capital Advisers.