April 23, 2020
Written by NYU Shanghai Graduate Admissions
On April 2, the NYU Shanghai Graduate Admissions Office held an online webinar, with a keynote speech delivered by Mr. Han Lin about the impact of COVID-19 on the global financial market. Mr. Han Lin shared his insights by observing the COVID-19 impact from a financial perspective, and how students can prepare themselves for a financial career under this situation in both the speech and Q&A sessions. Here is a brief summary of the webinar.
Observations of the COVID-19 on the Financial Markets
It's early to know what Covid-19’s global economic impact might be, but we have some early indications based on looking at China to date. For example, in 1Q-end, China industrial production fell steeply, as did real estate investment and retail sales. The growth rate of total debt to GDP has tapered a bit, but that may not be the case going forward. Moreover, non-performing loans will likely increase in the China financial system.
We should expect to see governments take as many preemptive measures as possible on both the monetary and fiscal side. For instance, central banks around the world have already loosened monetary policy, or increased asset purchases to help provide a buffer for the economic system.
Financial institutions have an important role in facilitating these stimulus measures. By all accounts, they seem to be in a stronger financial position to do so. There are different ways to measure that strength. One example is the capital adequacy ratio (CAR), which measures the equity capital relative to risk-weighted assets. Since 2007 to the present, the CAR percentages have gradually increased over time and that does suggest that financial institutions have a larger capacity to withstand financial shocks, at least compared to the past.
So, when might the market reach bottom? In fact, nobody knows. What we see is that as more companies suspend earnings guidance, activities like M&A that depend on a valuation, are slowing down. We do know that markets tend to be forward-looking so we can expect a market recovery before the actual on-the-ground situation improves. But whether this recovery looks like a V, L, W, U or even a “Square root” is anyone’s guess.
Prepare Yourself of a Financial Career in This Environment
First, when you face a problem, try to see if there are structurally similar problems that have been dealt with in the past. For example, the current COVID-19 crisis is indeed unprecedented in many ways, but historically there have been other epidemics, as there have been other financial crises. Of course, no situation is the same, but being able to compare and contrast examples provides a useful context for planning and risk management.
Reading broadly in the social sciences and history improves the chances of recognizing similar problems and their solutions. It helps that NYU Shanghai is part of a broader ecosystem of superb Arts and Sciences courses, which complement its Analytics and Quantitative finance programs so that you come out a more balanced thinker.
Secondly, numbers aren't everything, but they are better than nothing. Modeling is a very helpful skill to learn. Sometimes a data analysis can lead you to illogical conclusions, but the process, itself, forces you to understand your assumptions which becomes very important when addressing complex issues with multiple variables.
The NYU Shanghai Data Analytics and Business Computing, and Quantitative Finance programs put you through the rigorous discipline of how to go through the modeling process. What you want to attain is the ability to distinguish between data that have a coincidental relationship versus a real cause and effect relationship.
Thirdly, people like good stories. Being able to put your numbers together in a very clear and compelling narrative is a career builder. The NYU Shanghai programs are superb in training students on how to combine the analytical skills with the speaking and presentation skills, all of which are the hallmarks of any great leader.
Q&A:
Are the programs in NYU Shanghai cater to finding jobs in Asia, specifically, or will there be opportunities to work in the US as well?
Mr. Hanlin: The visa process is a government function so I can’t speak to that. What I can say is that the NYU programs are world-renowned, so there is no doubt that you will receive a top-caliber education which will open doors and put you in touch with helpful alumni.
What is the most essential hard skill for students to have in order to be successful in learning finance?
Mr. Hanlin: I would say understanding data (and their limits) as well as learning how to explain it. Throughout your career, you may go through different phases. For example, at the entry level, a strong technical base will help distinguish you. As you move up an organization, your managerial abilities with people or projects become important. At more senior levels, strategic thinking and a clear plan for driving your organization forward are critical. In all these phases, you want to have the combined skills of understanding financial data and knowing how to combine that together into a story so that you can present clearly, whether you have 30 seconds or 3 hours. When you are able to articulate your points with clarity and conviction, you're going to do very well whatever career you choose.