2025-02-19 12:02
Key takeaways Singapore’s 2025 budget strived to balance between providing generous short-term support to Singaporeans and supporting long-term priorities. Despite the increased social welfare announcements, the government guided towards a fiscal surplus of SGD 6.8bn (c. 0.9% of the GDP). We view the budget as supportive of Singapore’s short- and medium-term growth outlook. In the budget announcement, Prime Minister Wong acknowledged the cost-of-living pressures and announced several measures to support Singaporean households including SGD 800 vouchers for all Singaporean households and additional vouchers ranging from SGD 600 – SGD 800. The budget also focused on long-term priorities like R&D, clean energy, infrastructure, upskilling of population and measures to prepare for an aging society. We see the budget as supportive of growth and expect 2.6% GDP growth in 2025. We retain our overweight stance on Singapore equities. The budget announcements are mildly positive for Banks (the largest sector by index weight) and retail REITs. Despite the recent rally, Singapore equities trade at reasonable valuations and offer an attractive dividend yield. The measures to boost the attractiveness of Singapore’s stock exchange may lead to greater capital inflows in the longer run. What happened? Singapore’s Prime Minister Lawrence Wong announced the 2025 budget on 18th February. The budget, which comes ahead of the country’s 60th anniversary of independence, was broadly in line with our expectations as it strived to balance between providing generous short-term support to Singaporeans and keeping an eye on long-term priorities. In his first budget as the Prime Minister, Mr. Wong acknowledged the cost-of-living pressures and announced several measures to support Singaporean households. PM Wong also announced support measures for companies grappling with higher costs. The government would offer a 50% rebate on corporate taxes capped at SGD 40k. Dubbed as “Onward Together for a Better Tomorrow”, the budget was also notable in its focus on strengthening the medium-term growth potential of Singapore. The budget announced additional top-ups for the National Productivity Fund (SGD 3bn), Future Energy Funds (SGD 5bn) and Changi Airport Development Fund (SGD 5bn). Additionally, PM Wong announced SGD 1bn to fund a national semiconductor fabrication facility and a SGD 1bn Private Credit Growth fund to finance high-growth local businesses. To upskill the workforce and prepare for an aging society, the government bolstered the SkillsFuture program, allowing part-time training with fixed allowance for citizens above the age of 40. The government also extended the senior employment credit scheme by one year, offering wage offsets for companies hiring Singaporeans above the age of 60. Additional support for seniors in the form of top-ups through the MediSave scheme was also announced. Overall, the plans are to spend SGD 124bn in 2025. While Singapore may not be directly targeted by the US for trade tariffs, given that Singapore runs a trade deficit with the US, uncertainty around global trade is a headwind to an open economy like Singapore. In our view, the budget leaves room for the government to provide additional support for the economy should downside risks increase due to global trade uncertainty. Overall, we expect Singapore’s economy to expand by 2.6% in 2025, closer to the upper end of the 1-3% range indicated by the government. Investment implications The budget largely reinforces our bullish stance on Singapore equities, which have outperformed Asian and ASEAN counterparts since the start of 2024 on the back of strong fundamentals, which remain in place. The enhanced cost-of-living support measures should support domestic consumption. The measure to provide tax relief to smaller companies and to provide wage offsets to companies hiring senior employees should further boost employment. The measure is a marginal positive for banks as it should result in lower credit stress. The proposed tax incentives for companies listed in Singapore and fund managers who invest “substantially” in Singapore-listed equities may result in additional capital inflows. Singapore equities have outperformed ASEAN and Asian equities since the start of 2024 Source: Bloomberg, HSBC Global Private Banking and Wealth, as at 18 February 2025. Past performance is not a reliable indicator of future performance. While the banking sector is likely to face modest margin pressures due to lower interest rates, we believe their focus on wealth management and expansion to neighbouring countries should help offset some of these headwinds. The real estate sector, especially REITs, should benefit from lower yields as most of the major central banks and the MAS ease monetary policy. Singapore equities are still trading at reasonable valuations. This combined with their attractive dividend yield could lead to greater investor interest, especially from investors seeking to generate regular income. Outside of financials and property, other sectors such as telecoms and utilities are also picking up traction as yield plays. https://www.hsbc.com.my/wealth/insights/market-outlook/special-coverage/singapore-budget-2025-something-for-everyone/
2025-02-18 12:01
Key takeaways Trade tensions with the US may have an impact on China’s growth, but could be a blessing in disguise… …if they help to accelerate structural reforms, among which fiscal reform is a high priority. The key objective is to enhance fiscal sustainability and streamline central-local fiscal relationships. China data review (January 2025) China’s headline CPI inflation improved to 0.5% y-o-y in January, given a boost from an earlier Chinese New Year (CNY) holiday, which started in January this year instead of February last year. Core CPI y-o-y growth improved for the fourth consecutive month, up 0.6%, as strong travel activity during the holiday helped boost services consumption. On the producer front, PPI deflation remained unchanged at 2.3% y-o-y as weak demand for industrial products may have weighed on prices. China’s January NBS PMIs showed a broad-based contraction in the manufacturing sector, a fall in construction, and a moderation in services activity momentum. While the earlier CNY holiday may have impacted activity as workers returned to their hometowns, these effects should be mostly mitigated by seasonal adjustments. Thus, the softer activity print means more needs to be done to help revive activity. We anticipate a strong policy push this year, led by fiscal stimulus, although the details will need to wait until March’s Two Session. Credit growth saw a strong seasonal start to the year in January driven by a surge in longer-term corporate lending (RMB4.8trn) as well as more elevated than usual government bond issuances (RMB693bn). An improvement in household longer-term lending is also an encouraging sign. The monthly increase in total social financing (RMB7.1trn) reached a new record high, while growth stayed steady at 8% y-o-y. That being said, durability of the boost to credit remains to be seen and we think policymakers will need to step up support in order to help cushion growth against increased global headwinds. Speeding up reforms to counter external risks While external uncertainties and rising trade tensions may present more challenges to China’s economy, they may also serve as a catalyst for more forceful fiscal easing and structural reforms. Among the policy initiatives laid out by the Third Plenum last year, fiscal sustainability was considered an important long-term objective, and essential for restoring local government fiscal discipline and tackling debt risks. We believe more details will be announced at the National People’s Congress in early March. Fiscal reform to accelerate In July 2024, the Third Plenum pledged to deepen China’s fiscal reforms and the meeting laid out three key themes: enhancing the budget system, refining the tax system, and streamlining the fiscal relationship between central and local governments; the latter received the most attention. While the recent RMB12trn local government debt swap is a positive step to addressing near-term financial pressure for local governments, more needs to be done to achieve fiscal sustainability and prevent recurrence of local government debt pressure. Among the various measures, establishing an incentive-compatible framework between central and local governments will play a vital role. This may include lifting the revenue share for local governments and increasing central government spending responsibilities. Indeed, with the recent economic slowdown and housing market correction, local governments have seen their traditional income sources decline for four years by a total of RMB3.8trn. Source: Wind, HSBC Source: Wind, HSBC Reforming tax collection Tax reform will be the cornerstone for streamlining the central and local government fiscal relationship. An example is shifting the collection point for consumption tax from production to consumption and giving a share to the local governments. This should boost local tax collection and incentivise local governments to focus more on consumption. Reforms may also aim to better align with new types of business (e.g., the digital economy), support key sectors (e.g., green development), and simplify the tax system by increasing the share of direct taxation. Enhancing budget management The Third Plenum suggested that all types of government resources should be placed under budget management for efficient resource allocation and enhancement of fiscal discipline, including both on- and off-budget revenue and spending. On the expenditure side, zero-based budgeting (where all expenses need to be justified each new fiscal year) will be advanced after rolling out several pilot projects, while a performance-based approach is expected to be adopted to improve budgetary management. Source: LSEG Datastream Note: *Past performance is not an indication of future returns. Priced as of 14 January 2025. Source: LSEG Datastream https://www.hsbc.com.my/wealth/insights/market-outlook/china-in-focus/speeding-up-reforms-to-counter-external-risks/
2025-02-18 12:01
Key takeaways We see an attractive re-rating opportunity for Chinese equities as DeepSeek’s breakthrough is unlocking a new phase of AI investment, adoption and monetisation across the country, causing new growth engines to support activity and boost private consumption. To tap into China’s emerging AI autonomy and monetisation opportunities, we upgrade Chinese equities to overweight from neutral, which also raises our allocation to Asia ex-Japan equities to overweight. The development of China’s AI autonomy further spurs market expectations of productivity gains through upgrading the AI ecosystem, which could lead to a more sustained and broad-based recovery of growth and equity valuations. We see room for potential earnings upgrades for MSCI China, led by technology. Within Asia ex-Japan, we now prefer China over India due to China’s distinctive AI re-rating driver and compelling risk-reward profile, conservative foreign investor positioning and a significant valuation discount. We favour AI enablers and adopters, including Chinese industry leaders in the internet, ecommerce, software, smartphone, semiconductor, autonomous driving, and humanoid robotics sectors. We also like beneficiaries of stronger corporate spending in AI infrastructure and applications. What happened? On 17 February, a high-level symposium was chaired by Chinese President Xi Jinping with prominent tech leaders, which reflected a significant policy pivot towards a friendlier and more supportive government stance to bolster the private sector and support tech innovation. The symposium came at a critical juncture when the domestic economy is fighting against deflation pressures, property market stress and global trade uncertainties. The last time President Xi hosted a similar high-level symposium with private entrepreneurs was in November 2018. In a speech delivered at the symposium, President Xi reassured government policy support for the technology sector and urged private enterprises to invest more in tech innovation. We expect the National People’s Congress (NPC), which will start on 5 March, to roll out more policy initiatives to support tech innovation and AI investments, which are heralded as “new productive forces” and rising economic growth engines for years to come. The very rapid rise of DeepSeek has shifted investor sentiment, as it has demonstrated China’s under-appreciated capability to deliver significant technological innovation despite US export restrictions on advanced chips and technologies. The tech-heavy Hang Seng Index (HSI) and Hang Seng Tech Index (HSTECH) have rallied 15.3% and 23% YTD, respectively, driven by the DeepSeek excitement. However, the Hang Seng Index and MSCI China are still trading at 10.3x and 11.3x 12-month forward P/E, respectively (i.e. 54% and 50% discounts to the 22.6x forward P/E of the S&P 500 Index). Investment implications The development of China’s AI autonomy further spurs market expectations of productivity gains through upgrading the AI ecosystem, which could lead to a more sustained and broad-based recovery of growth and equity valuations. We also see room for potential earnings upgrades for MSCI China, led by positive earnings momentum in the technology sector. Accelerating deployment of AI applications should underpin upside potential in earnings expectations. In addition, further fiscal stimulus measures to be announced at the NPC session in March could provide support for domestic consumption recovery and property market stabilisation. The Hang Seng Index and MSCI China are trading at steep valuation discounts to S&P 500 and Mag-7 Source: Bloomberg, HSBC Global Private Banking and Wealth as at 17 February 2025. Past performance is not a reliable indicator of future performance. As a result, we upgrade Chinese equities to overweight from neutral, which also raises our allocation to Asia ex-Japan equities to overweight from neutral. Within the region, we now have a stronger preference for China versus India due to China’s distinctive AI re-rating driver and compelling risk-reward profile underpinned by the conservative positioning of foreign investors and significant valuation gaps with the global and regional peers. We favour beneficiaries of DeepSeek’s low-cost, open-sourced AI models, which are expected to accelerate mass deployment of generative AI devices, autonomous driving, and humanoid robotics across China in a scalable way. With favourable industrial policy support, we expect strong corporate spending in AI infrastructure, enablers and applications, including cloud services, e-commerce, AI smartphones, AI laptops, consumer electronic goods, semiconductors, OEMs, software and AI agents. The three state-owned telecom giants have quickly integrated DeepSeek’s AI models into their infrastructure and products. Chinese smartphone companies will also benefit from the integration of their phones with the localised low-cost, high-performing AI models. China's autonomous driving and humanoid robotic technologies command strong competitive edges at the global stage. China’s EV and robotics industries are well positioned to benefit from the AI breakthrough. So far, the Chinese equity rally is not broad-based and concentrates mainly on tech stocks. This means investors will continue to look for broader policy stimulus. We also believe that more convincing demand-side fiscal stimulus measures are required to support a broader earnings improvement beyond the AI supply chain. Hence, we favour Chinese internet and technology leaders for growth and quality Chinese SOEs for high dividends. US tariffs remain a key risk for Chinese equities, which cannot be ignored but so far China’s trade headwinds have been less of a challenge than market originally feared. The risk of escalation of trade tensions remains a concern as there is lingering uncertainty after the 10% incremental tariffs have been imposed on all Chinese goods. Still, we believe China’s relatively restrained retaliatory response suggests that there is room for trade negotiations. https://www.hsbc.com.my/wealth/insights/market-outlook/special-coverage/upgrade-of-chinese-equities-to-overweight/
2025-02-17 12:02
Key takeaways Tariff headlines appear to be less provocative for FX markets. Perhaps, markets assume that some deals could be struck... …which creates an upside risk for the USD. The law of diminishing returns seems to be in play, as tariff-related headlines seem less provocative for FX markets (see the chart below). Source: Bloomberg, HSBC On 1 February, US President Donald Trump announced a 25% tariff on imports from Canada and Mexico (a 10% tariff on Canadian energy) and a 10% additional duty on Chinese products. The US Dollar Index (DXY) jumped briefly following the weekend’s tariff headlines. There is still a great deal of uncertainty about how the situation will unfold, with moves on Mexico and Canada delayed to 4 March (Bloomberg, 4 February 2025). The DXY erased its earlier gain. That being said, the new 10% tariff on all Chinese imports to the US came into effect on 4 February and China’s tit-for-tat import taxes on some US goods came into effect on 10 February. The DXY hovered around the 108 level (Bloomberg, 10 February 2025). The USD was basically unchanged on the day against most other G10 currencies, despite US President Donald Trump’s confirmation on 11 February that the 25% tariffs will be imposed on US steel and aluminium imports without exceptions, and with an indication from Trump that they may go higher (Bloomberg, 11 February). Markets also shrugged off various promises of retaliation, including from politicians in Canada and the EU. Perhaps, FX markets are once again assuming a deal will be struck with key trading partners before they actually go into effect on 4 March. Whether one views the lack of market action as complacency or pragmatism, it creates an upside risk for the USD, should these latest tariffs end up being implemented. It also shows that the risk of a tit-for-tat escalation is prominent, heightening the stagflationary threat for the global economy. It is also worth noting that the prior premium in the USD relative to its rate differential, potentially reflective of a Trump policy uncertainty premium, has been mostly erased. Whether the premium re-emerges may hinge on whether tariff threats transform into tariff reality. FX markets will probably remain tied to headlines about US policies, like reciprocal tariffs. We still believe the USD is likely to strengthen further, amid the divergence in both growth and monetary policy between the US and other economies, among other factors. https://www.hsbc.com.my/wealth/insights/fx-insights/fx-viewpoint/usd-and-tariff-headlines/
2025-02-17 07:04
Key takeaways US core CPI surprised to the upside, rising by 0.4% month-on-month in January. The bond market, having initially sold off in reaction to the CPI, has calmed down and largely reversed its losses. A key attraction of frontier markets is portfolio exposure to smaller, rapidly growing economies. Mexico has found itself at the centre of a rise in global policy uncertainty recently. Chart of the week – China’s household wealth exposure to property It’s been a good start to the year for investors in China’s stock market. The MSCI China index is already up over 9%, outperforming the wider EM index and the US. This follows a very good performance in 2024 as Chinese authorities’ ramp-up of policy support helped reverse a prolonged period of weak sentiment. A big driver of recent gains has been a rally in China’s tech companies. The unveiling of DeepSeek late last month has triggered a reappraisal of the sector’s profits outlook and potential feedthrough to AI innovation and adoption in the country’s vast consumer market. Also, data on Lunar New Year spending has been strong, and is reflected in a higher-than-expected January CPI print. Deep discounts versus global peers imply potential for large upside moves on better-than-expected news. After DeepSeek, there is potential for accelerated AI adoption across many industries. And last year’s late rally in the US dollar and big pick-up in global yields look to have run out of steam, boding well for the overall EM asset complex. Nevertheless, with a big chunk of China’s household wealth tied up in property, the real estate slump remains a major challenge, and with it the threat of sustained deflation. Recent policy measures have helped stabilise the situation, but more demand-boosting stimulus will be required to keep growth on the right track and maintain positive momentum in markets. All eyes will be on next month’s National People’s Congress (NPC) meeting. Market Spotlight Asian credit outlook Elevated all-in yields and tighter spreads helped deliver a strong performance in Asian credit last year. And despite a recent pick-up in global policy uncertainty, macro tailwinds could make 2025 another strong year for the asset class. Asian markets benefit from the twin-drivers of relatively high GDP growth and benign inflation. But there are other key themes, too. One is China’s continuing path to recovery. Its outlook hinges on navigating external headwinds and domestic imbalances with policies to boost domestic demand and cut industrial over-capacity. A clear pro-growth, pro-market policy stance could help – and we’re expecting more details on policy support in March. That ongoing stimulus could have spillover effects for the rest of Asia and provide a cushion from global headwinds. Meanwhile, the region’s credit market also benefits from the strong growth, rising trade flows, and insulated nature of domestically oriented economies like India and parts of ASEAN, including Indonesia and the Philippines. These economies are less sensitive to global trade, making them potentially more resilient to external shocks. The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Past performance does not predict future returns. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector, or security. Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Source: HSBC Asset Management. Macrobond, Bloomberg. Data as at 7.30am UK time 14 February 2025. Lens on… CPI surprise US core CPI surprised to the upside, rising by 0.4% month-on-month in January. Some of the strength reflected outsized gains in some components – used car prices jumped 2.2% m-o-m, vehicle insurance rose by 2.0% m-o-m and airfares were up 1.2%. Strong demand for new and used cars in recent months – potentially in anticipation of tariffs – may be supporting prices and insurance premiums. Airfares look more like a case of a bit of noise in the data, what some economists have called ‘residual seasonality’. Absent these factors, core CPI would have risen by a more palatable, albeit still robust, 0.3% m-o-m. Luckily for the Fed, it targets PCE. The CPI data, when combined with the produce price release, has led economists to conclude that core PCE is likely to have risen by 0.2-0.3% m-o-m in January, following prints of only 0.1-0.2% in the previous two months. In that sense, while the Fed won’t be overly happy with the January inflation data, it will also want to see whether it follows the same pattern as recent years – a strong start that fades away. The bond market, having initially sold off in reaction to the CPI, has calmed down and largely reversed its losses. Africa as a growth leader A key attraction of frontier markets is portfolio exposure to smaller, rapidly growing economies. According to the IMF, the average GDP growth rate for frontier economies is 4% over the next five years, well above 2.2% for the US, and 1.2% for the big-four eurozone economies. Vietnam – a big weight in the frontier index – has a well-documented structural growth story centred on attracting FDI amid the recent trend of global “friendshoring”. Bangladesh has become a key textiles exporter. But perhaps less talked about is the impressive growth now being seen in many West African nations, with Côte d’Ivoire, Niger, and Benin expected to grow in excess of 6% per annum over the next five years. A big part of this growth will be driven by recent hydrocarbon development, which brings with it a dependence on global energy prices. And regional politics remain difficult. Nonetheless these growth numbers signal a region with growing economic clout – supported by a young and growing population – and with it an emerging consumer base. As these economies mature, investor allocations and market liquidity are likely to increase. Mexican market outlook Mexico has found itself at the centre of a rise in global policy uncertainty recently. After regional political discussions in early February, volatility in the peso subsided, and the currency rebounded. That upbeat reaction spilled into the stock market, where equities saw a pick-up, and in sovereign bonds, where there was a modest fall in both two- and 10-year yields. However, volatility and investment uncertainty are expected to continue. In FX, the peso has room to depreciate to buffer any shock in terms of trade, and if so, financial authorities may intervene to secure orderly trading conditions without targeting any specific FX level. But peso weakness could pose upside risks to inflation and downside risks to economic activity. These factors are likely to shape policy direction from Mexico’s central bank. The base case view is that while Banxico is ready to decouple slightly from the Fed and cut rates by ~1.50% this year, the uncertain outlook could frustrate efforts. Past performance does not predict future returns. The level of yield is not guaranteed and may rise or fall in the future. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector, or security. Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. Source: HSBC Asset Management. Macrobond, Bloomberg, Datastream. Data as at 7.30am UK time 14 February 2025. Key Events and Data Releases Last week The week ahead Source: HSBC Asset Management. Data as at 7.30am UK time 14 February 2025. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector or security. Any views expressed were held at the time of preparation and are subject to change without notice. Market review Global policy uncertainty continued to overhang risk markets, with the US DXY dollar index weakening. US Treasuries ended a volatile week modestly lower, underperforming Eurozone bonds and UK gilts following higher-than-expected US CPI data, as Fed Chair Powell reiterated that there is no urgency to cut rates. US equities rose, with the Russell 2000 lagging both the Nasdaq and S&P 500. The Euro Stoxx 50 index posted strong gains, bolstered by better-than-expected Q4 earnings, while the German DAX reached an all-time high. Japan’s Nikkei 225 performed well amid a weaker yen. Other Asian markets were mixed, with the Hang Seng leading the region amid optimism about the AI/tech sectors, followed by South Korea’s Kospi, and the Shanghai Composite also extended its rallies. However, India’s Sensex index fell. In commodities, gold and copper were on track to close higher, while oil finished a choppy week with moderate gains. https://www.hsbc.com.my/wealth/insights/asset-class-views/investment-weekly/chinas-household-wealth-exposure-to-property/
2025-02-14 07:04
Key takeaways Biomimicry is a field that emulates designs and processes in nature to create new technologies and a greener future. Turbine blades incorporate features from humpback whales for efficiencies and a new clothing fabric mimics lotus leaves. As a fast-growing field with research and patents growing rapidly with supportive policies – this is nature investing with a twist. Biomimicry is a field that emulates designs and processes in nature to create new technologies and a greener future. Examples include adhesives inspired by gecko feet, metal detectors influenced by sharks, and night vision goggles drawn from snakes that can detect warm-blooded prey in complete darkness. As a fast-growing field with research and patents increasing rapidly, and supported by policy, this is nature investing with a twist. Did you know? A Zimbabwe shopping centre uses termite mound-inspired ventilation to lower its reliance on air conditioning by 90% Engineers increased electricity generation by 10% after incorporating designs similar to bumps found on humpback whales into wind turbine blades 3% of biomimetics publications in 2016 related to sustainability, but rose to 7% by 2020, indicating an increasing focus on sustainability in the field Research articles and conference papers focused on biomimicry research increased by 60x from 1995 to 2020 28% of biomimicry sustainability research publications from 2004 to 2021 were focused on resource efficiency, the largest by category 20% of ‘biometric sustainable design’ publications from 2004 to 2021 were published in China, the largest by country Inspired by nature Biomimicry observes how things work in nature by studying the forms (shapes & structures), processes (behaviours & methods) and systems (interdependence & ecosystems) of plants, animals and ecosystems, translating them into innovative and sustainable solutions. The field seeks to improve human-derived processes in areas including energy efficiency, sustainable materials and strength and durability. Mimicking nature’s forms – more efficient turbines with tubercles By incorporating into wind turbine blades, a design similar to tubercles (bumps the size of golf balls) found on humpback whales, engineers can reduce drag as it allows the blades to spin faster with less resistance, generating 10% more electricity. Whale-fin inspired wind turbine blades Source: HSBC (based on Wenliang Ke at al., 2022) Mimicking nature’s processes – butterfly wings inspire more efficient solar cells Researchers studied the light-absorbing black wings of a certain butterfly, finding tiny, random holes that scatter sunlight for better absorption. By mimicking this design, researchers created thin silicon solar cells with similar holes which can absorb light regardless of the angle. Butterfly wings inspired solar cells Source: HSBC (based on Siddique et al., 2017 Mimicking nature’s systems – lotus-leaf inspired clothes Scientists are developing fabrics that mimic the lotus leaf’s self-cleaning properties, which helps to reduce water usage for washing, and ultimately reduces the fabric’s footprint. Lotus leaf inspired fabrics Source: HSBC (based on Becky Poole, 2007) A rapid evolution Biomimicry research has seen a surge in interest over the past three decades, as evidenced by a 60x increase (1995-2020) in research publications across a wide range of scientific disciplines such as materials science, chemicals and engineering. This shows the power of bio-inspiration, and the applicability of biomimicry in helping to advance science and technology. Proactively fitting in with sustainability However, not all biomimicry research is considered as sustainable. A 2023 study by Jatsch et al. finds “an urgent need to ramp up sustainable design within biomimetic research”. The study found that only 3% of biomimetics publications in 2016 related to sustainability, but this portion rose to 7% by 2020, indicating an increasing focus on sustainability in the field. Of the research papers that do explicitly contribute to sustainability, many different areas are being explored with efficiency a key focus. Jatsch et al. also note that the largest contributors to carbon emissions globally (China, US, India, Europe) are also the lead contributors to biomimetics research that actively includes sustainability. Classification of research publications (2004-21) into different sustainability aspects Source: Jatsch et al., 2023 The race to be inspired There has also been a substantial increase in biomimicry patents since 2000. A 2023 study by Haejin Bae finds that “biomimicry technology is in a growth phase that is expected to continue in the future and that South Korea and the United States are leading the development of this technology”. Bright future Artificial Intelligence AI could accelerate progress in biomimicry and enable more accurate and complex analysis through data processing, simulation, modelling and pattern recognition. For instance, researchers at Arizona State University are turning their attention to social insects like ants and bees. By studying their behaviour – how these insects communicate, solve problems and adapt to their environment – researchers are designing robots that can work together in factories and other situations such as aiding in disaster areas. Policy landscape The future for biomimicry appears positive as more policies are aimed at fostering innovation and sustainable development. More governments are now recognising the potential for biomimicry and are implementing national-level policy initiatives to support research and development in biomimicry. Working with nature We think policy support for biomimicry will grow as biodiversity continues to rise up the global agenda. For example, some emerging economies are exploring how to leverage their local biodiversity for innovation, to create supportive ecosystems for biomimicry R&D, and to facilitate international research collaboration. One important angle is the integration of benefit-sharing frameworks that ensure the economic benefits derived from biomimicry are aligned with biodiversity conservation. This involves creating legal frameworks that protect biodiversity hotspots, ensuring that biomimicry practices don’t harm natural ecosystems. Conclusion As we continue to discover the vast potential of biomimicry, its impact will undoubtedly continue to grow, pushing advancements across diverse sectors and technologies. The Biomimicry Institute has a Ray of Hope Prize Accelerator offering support for “high-impact nature-inspired startups”. Companies and investors that embrace these technologies can become frontrunners in shaping a more sustainable future. With consumers increasingly looking for more sustainable solutions, biomimicry presents a natural investment opportunity. By investing in bio-inspired technologies, investors and corporates can not only achieve potential financial gains but also become catalysts for positive change as they help to drive the transition towards a greener economy and a healthier planet. https://www.hsbc.com.my/wealth/insights/esg/why-esg-matters/biomimicry-learning-from-nature/
