Investment appetite in Southeast Asia

Posted by Patrick Thornton-Smith on 17 October 2017 |

Investment appetite in Southeast Asia

 

Aside from the small matter of Brexit, the UK political climate is currently dominated by a debate over the future validity of the capitalist model driven by the free market economy. This is no platform to further this discussion however it is interesting to see how the model is thriving in other parts of the world.

 

For some time, China has been at the centre of the Asian growth boom but there is increasing activity and interest in the economies of its many southerly neighbour states.

 

The broad ‘APAC’ tag encompasses a huge area from Japan to Australia and includes almost 50 countries and regions including many global powerhouse economies to minute collections of island states. This article considers a lesser known regional acronym: Asean, the Association of Southeast Asian Nations. Originally founded by Indonesia, Malaysia, the Philippines, Singapore and Thailand the association now includes Brunei, Cambodia, Laos, Myanmar and Vietnam.

 

In the 1990s, the ‘Tiger’ economies of Malaysia, Thailand and Vietnam went through a boom and bust cycle ending when Thailand floated the baht in 1991, triggering the Asian financial crisis. Thereafter China filled the gap of growth, and what growth.

 

Now, some years later there is much renewed interest in the Asean economies fueled by impressive growth statistics. In 2016, the Philippines economy expanded by 6.9%, Vietnam 6.2% and Indonesia 5%. According to the CIA World Factbook, there are some interesting demographics around population size and average age. In the Philippines, with a population of 103 million, the average age is just 23.4 years and Vietnam 92 million/30 years. By comparison the average age in the UK is 40.5 with Germany and Japan almost 47. So, what does this mean for the economies of these countries?

 

Most have suffered from wars, civil strife and economic turbulence and now they emerge with a large, young and hungry for wealth population. The World Bank projects that the Vietnamese middle class populace will make up 33 % of the overall by 2020, up from 20 % last year. These are ambitious economies embracing the free market model across a vast range of activities from manufacturing, internal infrastructure projects, transport, leisure, construction, technology, export, service industries and finance. Vietnam has two trading bourses in Hanoi and Ho Chi Minh City to provide access and liquidity to both local and international investors. The head of international sales at Saigon Securities talks of Vietnam as ‘the last untapped emerging market.’ The growth statistics of the Philippines and Indonesia indicate it is not isolated.

 

Overseas investors have seen spectacular growth via a wide range of emerging market funds in the region and domestically, local banks have expanded to offer customer access to investments alongside the increasing number of brokerages and, for the rapidly increasing wealthy, family office and private wealth managers. The global banks are never far behind when such wealth is being created.

 

This speed of growth and a young, wealthy, hungry consumer population is starting to show signs of an investment appetite not only for domestic share ownership but for luxury and collectible assets. What is becoming apparent is that many wealthy investors in the region are looking to these ‘passion assets’ not just as trappings of ostentatious wealth but as means to increase their capital. The days of mixing Petrus with Coca-Cola are long gone, we now see a growing and sophisticated investor mentality. At Cult Wines we are increasingly attracting clients and partnerships with wealth managers from these countries. These investors are building into their investment models and portfolios a wide range of traditional and alternative assets whereas in some western economies the approach to personal alternative asset investing is still somewhat slower.

 

It is not only these economies that are fuelling this growth, nations like Cambodia and Laos are showing signs of a secondary wave of free market enterprise. Counties like these are rich in natural resources and some have governments committed to deregulation and plans to attract both private and public development capital. Add these elements to a young and hungry population and we can see a broader and perhaps more sustainable series of growth waves from the region.

 

There are also signs of a wider co-operation between the huge global economies and their smaller but rapidly expanding neighbours. The high-speed rail link between Singapore and southern China via Bangkok by 2030 indicates not only a wide embracing of the free market initiative but a cross nation cooperation for an even more powerful region. How the UK will fare over the next few years is unknown but without doubt the Asean countries are on a path of free enterprise and growth. No lengthy debate over HS2 and the connectivity of the ‘Northern Powerhouses’ either.

 

 

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