This Fund Thinks Southeast Asia Looks Ripe For Investment, And Here's Why (2024)

S&P Global Market Intelligence predicts that the Asia-Pacific region will dominate the world's growth in the coming year, generating positive real GDP while the U.S. and Europe likely fall into a recession. With that dominance comes a wide array of opportunities for investment in key Asia-Pacific markets.

Asia-Pacific region to lead global growth in 2023

According to S&P Global, the Asia-Pacific region will see real GDP growth of about 3.5% in 2023. The region produces 35% of the world's GDP with support from free-trade agreements in the region, supply chain efficiency and competitive costs. S&P Global expects the Asia-Pacific region to play a significant role in preventing a worldwide recession and restricting the economic pullback to developed markets like the U.S. and Europe.

A recession in the U.S. could be good for the investment environment in the Asia-Pacific region. The Financial Times noted that U.S. recessions starting in 1990 and 2007 triggered significant capital inflows to emerging markets following a period of risk aversion similar to what we've seen recently.

For example, the international capital markets supplied about 1% of emerging markets' GDP after almost a decade of pulling money out. By 2010, those inflows had grown to 2% of GDP.

As the Asia-Pacific region looks poised for growth in the coming years, some asset managers are already in position to take advantage of the ripening opportunities in certain markets.

Opportunities in emerging markets

In a recent interview, David Yong, CEO of Evergreen Group Holdings, which manages the Evergreen Fund, explained how recent and current events have impacted the opportunity set in the Asia-Pacific region. He noted that emerging markets strongly outperformed developed markets before the COVID-19 pandemic and recent geopolitical tensions.

Additionally, Yong sees the potential for even higher long-term returns due to the rapid growth rates in the area. He highlighted the diversification opportunities offered by emerging markets, although with excellent opportunities comes risk as well.

"With the current volatility in the macroeconomic environment, risks to financial stability include inflation, deterioration of the economic outlooks, high borrowing costs, and volatility in the commodity markets, just to name a few," Yong explained. "Yet, investors have continued to diversify across these emerging markets, recognizing that they are more resilient to external vulnerabilities. Having said that, it is very important for investors looking to get exposure in emerging markets to weigh their risk-to-reward ratio."

He added that exchange-traded funds or mutual funds offer the easiest, most accessible ways for investors to start diversifying into those emerging markets. Yong also suggested that investors can selectively search for opportunities involving collateral in the firm of assets pledged to credits or those with sizable cash reserves.

However, he advised investors to ensure prudent risk management amid the current macroeconomic conditions. After all, stock exchanges and other investment vehicles in emerging markets are still in their infancy, presenting a challenge for retail investors in conducting due diligence.

Growing strength in Asian consumers

Specifically, Yong sees opportunities in micro-financing in Singapore and other parts of Indochina. For example, he pointed to untapped potential in financing in Asia's underbanked regions. Microfinancing has provided the large percentage of the Indochina population that doesn't have bank accounts with access to a systemic lending institution. Yong highlighted the growing strength of the consumer as a key contributor to the growth of the financing industry in the Asia-Pacific region.

"As an emerging market progresses, there is often rapid income growth which brings the rise of a consumer class with it," he explained. "A marketplace full of consumers hungry for new products and services is conducive for new companies to germinate. Here, we saw the opportunity to enter the market and provide financing to these rapidly growing companies. With the right offerings in a strategically chosen market, a business can expect revenue to grow steadily."

Evergreen is expanding beyond conventional, traditional ways of financing, setting its sights on creating a seamless ecosystem using fintech and digitalization. Yong said they are pioneering a disruptive model capable of reshaping the microfinancing industry using financial technology.

Opportunities in the Asian real estate, automotive and content markets

He also pointed to growing interest in the real estate market within the world of finance.

"Financing can serve to aid international development and financial inclusion in terms of societal impact," Yong said. "As global ideologies of housing and home ownership evolve, financial inclusion has created a trend of turning away from income generation to microfinancing to fulfill housing demands and needs. Coupled with the rise of privatization of financing, we saw the upside potential within the real estate market in developing countries and emerging countries to generate passive income in meeting these demands."

Currently, Evergreen is focused on private financing deals with developers. The firm holds residential, commercial, and industrial assets in Singapore, Vietnam, Cambodia, and Korea.

Yong also highlighted Singapore as a market with opportunities in the automotive market, particularly in the repairs and ancillary claims business.

He explained that Singapore has a higher accident rate than other similar, high-wealth countries like Canada and Japan due to the scarcity of land and dense population. Yong added that Singaporeans are required to purchase automobile insurance in order to be able to drive there. As a result, the Evergreen team saw additional opportunities in that market.

Evergreen also sees opportunities in the Korean content industry. Yong said the successful release of the popular Netflix NFLX original Squid Game and the global success of K-pop groups like BTS and Blackpink. Evergreen has been collaborating with South Korean entertainment companies in Southeast Asia.

One of the firm's investments in this market is the KOSDAQ-listed company Rainbowbridge World. Evergreen signed a memorandum of understanding with Rainbowbridge to distribute its content and profit from the increasing global demand for Korean content.

The importance of ESG in Southeast Asia

Yong cited three primary factors that drew Evergreen to Southeast Asia: regular cash flow, sustainability and social responsibility.

"Not every business is able to offer the advantage of regular cash generation," he explained. "For our financing business, the interest of almost every deal is charged on a monthly basis. For automotive, the claims typically take from three to six months to complete. Hence, we decided to go into financing and automotive because it would be able to improve our cash flow on the group level."

Of course, every business must be profitable to survive, but Yong feels that ESG factors are far more important over the long run. In addition to the impact on the environment and society, he believes a sustainable business model is one that is responsible and has a positive impact on the global or local scale. The Evergreen team linked their microfinancing investments to the "S" part of ESG.

"Microfinancing is one of the most effective ways of creating positive impact in a sustainable manner, providing locals with the financial support they need," Yong said. "Evergreen works closely with the local governments in supporting their financial policies, as well as closely with the local community in numerous outreach programs to promote and support societal goals."

The key issues facing the Asia-Pacific markets

Of course, no area of investment is without concerns. For example, Yong sees several issues affecting the Asian microfinance markets. He highlighted the social costs on communities when businesses lose sight of their corporate social responsibilities, choosing instead to prioritize profits. Additionally, he warned that problematic social norms that are deeply rooted in the region, like discrimination and gender inequality, often plague its microfinancing markets.

Over-indebtedness is another critical concern with investing in the Asian markets. According to Yong, some microfinancing firms fail to perform the necessary due diligence in their race for profitability. Without those checks, the default risk increases dramatically, especially if the borrower lacks financial or business training.

Yong believes these issues can be addressed by tightening the regulations that govern microfinancing and setting more stringent rules for loan issuance and borrower eligibility.

Another issue facing Southeast Asia is the lack of global connectivity. Aside from the big entertainment companies like SM Entertainment and YG Entertainment, smaller entertainment firms deal with challenges finding the right partners to work with to distribute their content throughout Southeast Asia.

The region also faces cultural and language barriers. However, as more Korean entertainment companies partner with Southeast Asian companies, a bridge between the two areas is strengthening. Evergreen expects these growing partnerships to open more doors for the Korean entertainment market to expand throughout Southeast Asia.

This Fund Thinks Southeast Asia Looks Ripe For Investment, And Here's Why (2024)

FAQs

This Fund Thinks Southeast Asia Looks Ripe For Investment, And Here's Why? ›

This Fund Thinks Southeast Asia Looks Ripe For Investment, And Here's Why. Contributor. S&P Global Market Intelligence predicts that the Asia-Pacific region will dominate the world's growth in the coming year, generating positive real GDP while the U.S. and Europe likely fall into a recession.

Why invest in Southeast Asia? ›

Improved FDI policies, new regional agreements on Industry 4.0 transformation and a bigger focus on EVs, renewable energy and supply chain resilience are among the reasons – read on for 8 takeaways from the ASEAN Investment Report 2023.

Who is the biggest investor in Southeast Asia? ›

The U.S. is the leading investor in capital projects in Southeast Asia, spending $74.3 billion on plant construction and other projects between 2018 and 2022, according to the Financial Times' fDi Markets tracker of cross-border investment. It is followed by China, which invested $68.5 billion in the same period.

Which country is best for investment in Asia? ›

Here are analysts' top markets to invest in for 2024. Analysts predict that India, Japan and Vietnam will be the best positioned markets in Asia-Pacific for the first half of 2024. Companies have been adopting a "China plus one strategy," and investors are looking at other countries in the region to park their money.

What is the best ETF for Asia? ›

The 5 Best Asia Pacific Equity ETFs by 2023 Performance
TickerFundExpense Ratio
CHICGlobal X MSCI China Communication Services ETF0.65%
KFVGKraneShares CICC China 5G & Semiconductor Index ETF0.65%
KSTRKraneShares SSE Star Market 50 Index ETF0.88%
FLTWFranklin FTSE Taiwan ETF0.19%
1 more row

Why is Asia good for investment? ›

New income opportunities

Improving corporate governance and stronger management focus on shareholder returns are also supporting higher dividend payouts, making Asia an increasingly important source of income for global investors.

Why is Southeast Asia important to us? ›

The Southeast Asia region is of great geopolitical, economic, and strategic importance for both the Asia–Pacific region and worldwide. It also plays a part in the confrontation between the United States and China, where each power seeks to strengthen its influence.

Who is the No 1 investor in world? ›

Warren Buffett is widely considered to be the most successful investor in history. Not only is he one of the richest men in the world, but he also has had the financial ear of numerous presidents and world leaders. When Buffett talks, world markets move based on his words.

Who is the richest person in East Asia? ›

Mukesh Ambani, the chairman and managing director of Reliance Industries, is the richest man in Asia.

What is the easiest country to buy a house in? ›

The easiest countries to buy property abroad
  • Spain.
  • Portugal.
  • Poland.
  • Panama.
  • Colombia.
Nov 7, 2023

Where can Americans own land in Asia? ›

Malaysia is one of the easiest countries in Asia to make a foreign investment into. It's one of the few countries in the continent where foreigners can own freehold property with very few restrictions.

Which country is best to invest in 2024? ›

The Best Global Equity Markets (2024)
Country Indexin 20243 Years
Japan MSCI Japan+8.08%+16.98%
China MSCI China+7.56%-38.06%
Canada MSCI Canada+5.22%+26.83%
Austria ATX®+4.78%+21.25%
27 more rows

What is the ETF with the highest return? ›

100 Highest 5 Year ETF Returns
SymbolName5-Year Return
XNTKSPDR NYSE Technology ETF18.58%
UPROProShares UltraPro S&P50018.52%
PTFInvesco Dorsey Wright Technology Momentum ETF18.33%
QQQInvesco QQQ Trust Series I18.27%
93 more rows

What is the largest ETF in Asia? ›

The largest Asia-Pacific ETF is the iShares MSCI Japan ETF EWJ with $16.36B in assets. In the last trailing year, the best-performing Asia-Pacific ETF was DXJ at 51.07%. The most recent ETF launched in the Asia-Pacific space was the Rayliant SMDAM Japan Equity ETF RAYJ on 04/04/24.

What is the fastest growing ETF? ›

Compare the best growth ETFs
FUND(TICKER)EXPENSE RATIO10-YEAR RETURN AS OF APRIL 1
iShares Russell 1000 Growth ETF (IWF)0.19%15.78%
iShares S&P 500 Growth ETF (IVW)0.18%14.34%
Schwab U.S. Large-Cap Growth ETF (SCHG)0.04%15.95%
SPDR Portfolio S&P 500 Growth ETF (SPYG)0.04%14.45%
3 more rows

What is special about Southeast Asia? ›

A distinctive feature of Southeast Asia is its cultural diversity. Of the six thousand languages spoken in the world today, an estimated thousand are found in Southeast Asia.

Why are companies moving to Southeast Asia? ›

Industries focusing on overseas markets with large or rapidly growing middle class, may prefer to relocate to Asean economies with their low labour costs and preferential trade agreements, including with the US.

What makes Southeast Asia unique? ›

One of the most diverse regions in the world

ASEAN is home to hundreds of different ethnic groups, each with their own distinct culture and traditions. Southeast Asia is a region of enormous linguistic diversity where thousands of languages are spoken.

Does Southeast Asia have a good economy? ›

Southeast Asia's economies exhibited robust performance in the fourth quarter 2023. GDP grew in all economies, with growth in Indonesia, Singapore, Thailand, and Vietnam increasing during this period, while Malaysia and the Philippines recorded slower growth (Exhibit 1).

Top Articles
Latest Posts
Article information

Author: Kieth Sipes

Last Updated:

Views: 6425

Rating: 4.7 / 5 (47 voted)

Reviews: 94% of readers found this page helpful

Author information

Name: Kieth Sipes

Birthday: 2001-04-14

Address: Suite 492 62479 Champlin Loop, South Catrice, MS 57271

Phone: +9663362133320

Job: District Sales Analyst

Hobby: Digital arts, Dance, Ghost hunting, Worldbuilding, Kayaking, Table tennis, 3D printing

Introduction: My name is Kieth Sipes, I am a zany, rich, courageous, powerful, faithful, jolly, excited person who loves writing and wants to share my knowledge and understanding with you.