Posts Tagged ‘Asia Investment’

Financial firms across the globe are branching out into the Chinese investment market. In recent months numerous firms have launched funds in China, including BlackRock, UBS Asset Management, Vanguard and Fidelity International.

Chantal Grinderslev of Z-Ben, an investment management consulting firm based in Shanghai, said: “”You can no longer ignore China. You have to plan on being there.”

According to data from Z-Ben, assets under management at Chinese private funds increased 54.6% last year, reaching $398 billion. Between 2005 and 2015, institutional assets in China climbed 500%, starting at $1.1 trillion and hitting $7.1 by the end of 2015.

UBS Asset Management received a license to manage private funds in China this past summer. The firm’s managing director and head of China strategy and business development Aries Tung explain in an email: “China is a key growth market for UBS Asset Management. Our goal is to be a leading asset manager in China for both onshore and offshore investors. The license allows UBS Asset Management to start managing money for mainland institutional and high-net-worth investors in the world’s second-largest economy for the first time.”

In July, the Boston Consulting Group predicted that China will become a leading source of “significant” gain over the next few years. Their report states: “The Chinese market and its investors are becoming more sophisticated. An aging population and the growth of wealth are expanding demand for dedicated products, including target-dated funds and ETFs.”

According to EisnerAmper’s Timothy Speiss, “China could very well be number two or number three in hedge funds and private equity within the next two to three years.”

Embraer, the Brazilian major airframe maker, has had a presence in Asia for a little over a decade. According to the company, China is now the world’s second largest market for aircraft. Embraer’s Beijing office, as well as a joint venture to build ERJ 145 jets in Harbin, are now showing their true value. The company operates primarily from Singapore, but has managed to expand its presence throughout the entire Pacific Rim.

Embraer CEO Frederico Curado explained that the company’s decision to invest heavily in the region has proven worthwhile. He added that the decision was made with careful planning, and implemented following a specific strategy- splitting the company’s marketing efforts into two regions: China, and the rest of Asia.

“I think it was the right call to separate our focus,” Curado said. “China is a specific market and demands a specific focus… I think the decision was key to our success in China.”

“China is still a planned economy,” he added. “For example, business jets have a major application within the airlines, so take Air China, take Hainan, take China Eastern, they all operate business jets within their infrastructure, so things are kind of tied. I think in China one business helps the other maybe more than in other places… There are new players coming. For example, Minsheng, one of our customers and a large operating lease facility, they belong to a bank. The market is just really growing right now; the major players are establishing themselves now; it’s a perfect moment to be there.”

New research from Jones Lang LaSalle’s Hotels & Hospitality Group has revealed that hotel investment volumes in Asia have increased 145% since last year.

Mike Batchelor, Managing Director of Investment Sales at H&H, Jones Lang LaSalle, said: “Hotel trading performance in Asia has experienced a significant turnaround over the past two years and nowhere more so than in Singapore. This quarter’s landmark transaction of the Grand Park Orchard Hotel and adjoining Knightsbridge retail podium heralded the single largest asset deal in the city’s history. Going forward, we are aware of approximately $1.3 billion in exchanged contracts that will contribute to a very strong pipeline over the remainder of the year.”

“As investor confidence in the region continues to rally, the availability of investment grade hotels is becoming increasingly scarce as, as a result, we are seeing buyers turn their attention towards markets such as Thailand, Seychelles and the Maldives,” he added. “The Maldives is proving a particular hotspot where contracts have just been exchanged on what will be our fourth transaction in the country in as little as two years.”

He continued, “While the market is beginning to feel some restriction from a limited pipeline of hotel listings, the unrelenting strength of demand across both private and institutional investors will ensure that transaction volumes remain healthy. Given the volume of hotel deals that are due to settle before year-end, we are increasing our regional full year total sales projection from $3.5 billion to $5.5.billion, confirming 2013 as the strongest year since 2008.”

The market reopened this week with the Hang Seng Index 1.6% higher than it was before the holiday. The Nikkei Stock Average also climbed 1.4% in Tokyo, reaching one of its highest levels in over five years.

The increases may be the result of a record finish for the Dow industrials and the S&P 500 as U.S. economic data looks up.

“The share-market rally across the world is putting the ‘don’t chase a rally’ adage to the test, as bourses continue to record territory,” said Matthew Sherwood of Perpetual. “Quality is essential in this market, as prices are distorted, and the foundations aren’t strong.”

Akira Amari, Economy Minister of Japan, has stated that further weakness in the yen may be harmful. As a result, the local currency is rising.

“Japan’s turbo-charged stimulus measures have helped contribute to a solid gross domestic product growth outcome in the first quarter and to the rally in risk assets, but much needs to be done in terms of reforms to help sustain growth,” explained Credit Agricole’s Mitul Kotecha.

 

A recent survey launched by the Airport Show reveals that the West Asia region has extremely high potential for growth and investment over the next five years. In fact, $90 billion is projected to go into the industry between 2013 and 2020.

The survey, which was held just before the inaugural Global Airport Leaders’ Forum, shows that 64.4% of the respondents voted for the West Asia region. 16.7% voted for Asia Pacific, while Central Asia and African regions won 5.2% of the votes.

The West Asia region is expected to handle 400 million passengers over the next seven years, including 98 million by Dubai airport.

The survey said: “An investment of $90 billion is projected to go into aviationindustry in the Middle East by the year 2020.”

Airport Show event director Daniyal Qureshi stated: “Senior executives from across the international aviation industry have contributed to the survey and we believe the survey results will contribute significantly to the important discussions at the Global Airport Leaders’ Forum and help highlight the key challenges and opportunities industry leaders face today.”

A new report has revealed that Asia is the leading entity when it comes to investing in and protecting drinking water and other natural resources. The report states that all the region’s countries invested over $8 billion to enhance water security back in 2011.

Conducted by US non-government organization Forest Trends, the “State of Watershed Payments of 2012” study was released last Thursday. It reveals that $7.46 billion were invested in 83 watershed projects in Asia alone.

This approach, known as investments in watershed services, or IWS, considers the natural landscape and the social and economic conditions. These factors often impact the health of the natural environment.

The projects go by other names as well, including payments for watershed services, reciprocal agreements for water, water funds, eco-compensation, benefit-sharing arrangements, source water protection, green infrastructure investments, etc.

Michael Bennett, senior researcher at Forest Trends, explained:

“Growing pressure on limited freshwater resources is one of the factors why there is an increasing trend in watershed investment in Asia and the rest of the world.”

He added that water is especially critical in China, and has a significant impact on their future economic growth.

As markets remain shaky around the world, foreign businesses have begun to see the potentials of China’s market. As a result, foreign firms are launching China-focused products and brands in hopes of wooing the nation. Apple’s “Designed in California, Made in China” T-shirt is a perfect example. When a new store opened in Shanghai, they changed the slogan to “Designed in California, Made for China.”

“This Made-for-China phenomenon is just one of the many sub-trends spawned by the macro trend of economic and consumption power shifting toward emerging markets,” a report from Trendwatching.com said.

Lu Haiqing of Tesco China called China the “last untapped market on Earth.” He added that “any wise and rational enterprise will have no choice but to come to China, no matter if they like it or not.”

Tesco endeavored into the Chinese market in 2004, and has since opened more than one hundred outlets. “More than 4 million Chinese consumers shop at Tesco China every week and the trend of trade-up is obvious,” Lu said.

Still, despite the positive sides to the market, cashing is a real difficulty.

“The Chinese market is vast and unique. It’s so special that merely dumping an existing management scheme, which succeeds elsewhere, is doomed to fail here,’ Lu said.

According to QIC, the institutional investment manager, “big gains” can be made with quantitative investment strategies in Asian emerging markets.

“Emerging markets have been the focus of plenty of attention in the past few years; however, for a host of reasons investing in them has been a hit-and-miss affair,” explained QIC Quantitative Management managing director Michiel Swaak. “But more recently the situation has changed. Better, more consistent accounting standards mean the quality of data coming out of Asian markets has improved dramatically, providing the raw material required to establish meaningful models and identify opportunities that are most likely to deliver consistent alpha for investors.”

QIC first launched its quantitative Asia Pacific Market Neutral Fund in the summer of 2009, which has since proved especially lucrative.

 “We firmly believe that quant players have the jump on the market for a number of reasons. In our case, in addition to our extensive research and analysis capability, our team has many years of dedicated Asian experience,” Swaak said. “We’ve used that to develop a systematic trading process, which captures the relevant data as the markets continue to evolve, then feeds it into our flexible portfolio management infrastructure.”

QIC’s report states that the fund applies “comprehensive risk controls to all aspects of the portfolio, including net, gross, country, single-stock, currency, beta and risk factor exposures” in order to reach market neutrality.

“We believe our approach forms the blueprint for successful alpha investing in Asia, and we’re pleased to be able to offer an Australian dollar-denominated investment to Australian clients while we still retain the first-mover advantage,” Swaak said.

East Java has been attracting investments as a result of its good infrastructure. The country’s economy grew more than 7% in last year’s third quarter, with two commercial and four pioneer airports.

Now, ten Korean and Japanese companies are relocating their plants from Southeast Asia to East Java, pulled in by the quality of its infrastructure. The firms deal in labor-based industries including furniture, footwear, industrial waste management and fertilizer.

Chairman of East Java’s Investment Coordinating Board (BKPMD) Warno Harisasono welcomed the newcomers and their plans.

“They earlier had their plants in the Philippines, Thailand and Vietnam,” he said. “Now we will encourage those firms to realize their investment in middle parts of East Java, such as Madiun, Mojokerto, Kertosono and Jombang, as trans-Java toll roads, slated to be built in 2012, will pass through the areas.”

According to government data, foreign investment in East Java reached $4.02 billion last yearly, double the amount listed in 2010.

The Asia-Pacific leader of Blackstone Group L.P. recently announced that the firm views China and Southeast Asia as the top two hot spots for Asian investments next year.

“Certainly China will remain a core focus for us. We are long-term very bullish about China,’ said Michael Chae. “Southeast Asia, and Indonesia in particular, we also think it quite interesting.”

He went on the add that Asia is still strongly tied with the West, and that volatility in both global and Asian markets is impacting investment moves now, and will continue to do so throughout 2012.

“There’s an above-average level of uncertainty around macro conditions in this region and globally, which makes it a really intellectually interesting time to be alive and to be investing,” Chae said.

Investments in growth markets such as China focuses on consumption, he said. Blackstone, therefore, will put an emphasis on consumer retail, healthcare and healthcare products, leisure and pharmaceuticals.

“In China and some of the other emerging markets in Asia, this is sort of a truism by now for investors, domestic consumption growth, growth of the middle class and urbanization themes,” he said.