Bonsai: A miniature view of global markets

Long-Term Approach

Bonsai are renowned for their longevity; the juniper bonsai tree at Mansei-en, Japan is over 1,000 years old. The tradition dates back to at least the 6th century when Imperial ambassadors and Buddhist students brought back cuttings from China. Cultivating a bonsai requires great patience, planning and perseverance. And strong roots and healthy soil are essential for long-term strength.

Skilful financial institutions must also take a long-term perspective, helping clients to navigate volatility and future proof their business. By nurturing relationships, it is possible to not only understand clients’ tactical needs but also their long-term strategic goals, facilitating proactive support.

Climate

“Bon-sai” means “planted in a container”; whether indoors or outdoors, bonsai are grown in pots. This makes controlling the plant’s roots and nutrient supply easier. But careful monitoring is critical; leaves are lost if roots dry out, and rot if they are water-logged. Care, including soil composition and humidity, should reflect the tree’s natural habitat.

Global markets also tend to overreact to macroeconomic and geopolitical news. A skilful and experienced financial institution helps clients to identify periods of irrational exuberance or undue pessimism, selects the appropriate strategies and instruments, and acts with agility and speed to leverage opportunities.

Expertise

Bonsai require unique knowledge; the Yamaki family has six generations of experience in caring for their Japanese White Pine, famous for surviving Hiroshima. Contrary to popular belief, bonsai are genetically identical to larger trees or shrubs; only the skill of the bonsai gardener controls their size. Every pinched bud, pruned root, wire position, drop of water, and decision about soil or pots can impact the tree’s health and appearance.

In global markets, clients depend on sector and asset class specialists. By combining their deep knowledge with an understanding of the broader context, it is possible to deliver the best outcome for clients. Financial institutions must commit both time and resources to develop talent and connect teams around the world.

Technology

Bonsai experts have myriad specialist tools, ranging from traditionally-made pruning shears to high-tech soil PH sensors; knowing what to use, and when, requires sound judgement. Perhaps the greatest bonsai challenge is to create a natural appearance by shaping branches and roots with wire. Perfect examples conceal this framework while ensuring that the lower branches receive support and are discouraged from growing upwards.

In global markets, technology and tools must also be deployed with skill and precision. Digital ecosystems, comprehensive databases and cutting-edge technology can be used to improve forecasting. And a mix of data-driven insights and human capabilities can enable real-time analysis that gives clients an edge. Artificial intelligence can even predict future weather patterns and market movements, improving risk assessment, modelling and reaction times.

Seasonality

It is critical to understand how bonsai’s needs change – the required proportions of various nutrients and minerals vary over the year. Equally, tasks such as pruning, wiring and root trimming differ by season and species. For instance, evergreen species such as red cedar should be pruned in the autumn because the tree's growth occurs during the spring and summer months. And to produce stunning autumn colour in deciduous trees, it is best to defoliate in early summer.

Global markets experts appreciate that stocks, bonds and other financial instruments follow recognisable short- and long-term patterns that must be scrutinised. Analysing these changes and anticipating evolutions in fiscal policy, interest rates or corporate reporting can make the difference between success and failure.

Timing

Creating a micro masterpiece requires precise timing. Gardeners must be attentive to reduced uptake of water or early loss of leaves, which can indicate a need to re-pot. Spotting early signs of disease is also essential if a tree is to flower or fruit. At the same time, aesthetic decisions have lasting repercussions. A perfect snip today – or a hasty mistake – could determine the shape of a bonsai years in the future.

Global markets are about acting with conviction when risks or opportunities emerge. It is only possible to make decisions by planning meticulously for both predictable and unpredictable developments. In M&A transactions, currency and interest rate execution and hedging, and especially in more volatile emerging markets, preparation and patience are crucial to success.