As China’s GDP growth slowed down to a new norm of around 6.5 percent, other ASEAN countries such as Cambodia, Myanmar, Laos, Vietnam, and the Philippines have all achieved stronger growth than China in 2018, according to Asia Development Bank.
Combined, ASEAN countries represent a substantial economic development bloc. As of 2018, the total population of the ten member states was over 651 million, close to half of China’s or India’s population. Its combined GDP, rat about US$3 trillion, is larger than India’s. The average Human Development Index of ASEAN was 0.701, meaning that the bloc as a whole was categorised as developed.
In a way, ASEAN’s level of development makes it the ideal investment target in a Goldilocks kind-of-way. Countries in North Asia, including the higher tier cities in China, are largely developed, and future growth will depend as much on entrepreneurial ingenuity and technology. Most economies at this stage of development will see a gradual slowdown in GDP growth.
India, on the other hand, may still be early in its development cycle to see a massive growth of its middle class. ASEAN, however, is at the stage of development that may see it replicates China’s rise of middle class (and that of the Asian Tigers in the 1990s and Japan in the 1970s) over the next decade.
For example, we have seen pioneers benefiting from ASEAN strategies today. For example, the largest convenience store chain in Vietnam is owned by a Hong Kong listed company. Apparently, once-considered luxury items such as chocolates and lattes are now selling as well in Vietnam as they are in Hong Kong or Taipei.
As a fund manager, we have also seen an increase in interest for investment projects in ASEAN countries, stemming from a wide range of investors, including both institutional and family office clients. Interested clients also range from Anglo-Saxon countries to those originating from Greater China.
Some of the interests from North Asia may stem from the Chinese Government’s Belt and Road Initiative. For example, Hong Kong now has dedicated scholarship funds that offer full scholarship to students in selected ASEAN countries.
The earliest beneficiaries of the scholarship have recently graduated. While data is scarce, anecdotal evidence suggests that some of these students have indeed started their working career in Hong Kong. Through such programs, North Asia has established more connections with their ASEAN counterparts, further advancing connection in society.
One additional factor that sparks investor interests is the availability of investments. Ten years ago, most investment opportunities in ASEAN, especially those outside of Thailand, Malaysia, Indonesia and Singapore, are either private equity deals or locally-listed companies. Neither are easy targets for international institutional investors nor retail investors in developed markets like Singapore or Hong Kong.
But with the pioneers of ASEAN slowly establishing themselves, we have found that opportunities, both listed and unlisted, have become more accessible and available today. Investors interested in ASEAN can find exposure through their domestic stock market.