For any
individual or corporate investors, Emerging Asia remains as one of the most exciting
region to invest in. Today, I am going to offer you 3 reasons on why this is
so, and 3 potential issues that investors should look out for.
1. Sustainable growth
The growth
rates of the Emerging Asian economies remain strong by global standards. This is
in spite of the significant slow-down over the past few years. China should
continue to grow at least 6%, a number to die for if you ask any mature
economies. The question is will it continue? Likely yes, once you look across
at the fundamental drivers of the growth: young population, rapid urbanization,
formation of middle income families and so on.
2. Sector
opportunities
Many Asian
economies are undergoing a process of diversification. China is moving towards
service-based economies. India is industrializing and investing in
infrastructure. Indonesia is trying to diversify its resource-based economy.
This creates plenty of sector opportunities – industries that grow at even
faster rates than the broader economies.
3. Political
changes
For many Asian
countries, things are finally changing for the better. The democratic election
of Aung San Syu Kyi’s government in Myanmar promises to bring a new life for
the country. India and Indonesia finally elected competent leaders as their
government. Of course, there are always exceptions, for example the Philippines
and Malaysia.
Moving to issues
that an investor might look out for:
1. Corporate
governance
Many companies
in Asia are not run in the best interest of minority shareholders. Government-linked
companies often invest according to national interests. Many family-owned
companies have underutilized balance sheets. Shareholder activism is virtually
non-existent. The key to investing? Avoid the bad apples.
2. Leveraging
Avoid companies
with too much debt. In an emerging market, anything can happen anytime, in a
big way, so investors need to be prepared.
3. Technology
Do not underestimate the prevalence of technology in Emerging Asia. Go to China, you will see how well people are integrated with technologies such as mobile payment and ride hailing apps. The bottom-line is, disruption do happen to business at a fast pace in these countries.
Do not underestimate the prevalence of technology in Emerging Asia. Go to China, you will see how well people are integrated with technologies such as mobile payment and ride hailing apps. The bottom-line is, disruption do happen to business at a fast pace in these countries.
