Asia Investment

Asia the Next Place to Invest, According to HSBC Chief Investment Strategist

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HSBC Private Bank chief investment strategist Jose Rasco recently discussed his views on the market with Sara Silverstein of Business Insider. His outlook on U.S. equities was positive, but he believes that investment in Asia is most likely to yield results this year.

The U.S. is certainly strong, he said. “We think that given the strength in earnings and the strength in GDP and the stability of inflation, and the Fed moving slowly, we think that the US is a good place to be,” he explained, “but if you want to invest in an area where you’re going to see growth, and that’s one of the reasons to invest in equities right, is we want to be in Asia. We see growth there in excess of 6% in China, 6.5-7% in China, in excess of 7% in India, positive demographics in India, and a great deal of spending on an infrastructure and technology so those are very positive drivers for us.”

Rasco indicated that infrastructure is particularly promising, especially in China. He explained that as countries throughout Asia become more digital, more opportunities arise to create jobs and meet new market demand. “In addition, you’re seeing in China the same thing,” he said, “a great deal of spending on infrastructure, the One Belt One Road for example, which is a massive infrastructure project — trillions of dollars a year for the next ten years, and they are building roads, essentially think of Marco Polo on a bullet train, and that’s what we’re seeing. We’re seeing the time of goods to market is being reduced dramatically by this project. Think of years ago, if you had been alive when the Chinese were building the Great Wall, would you not want to invest in the timber and cement companies that were making it? That’s what we’re in the middle of right now. So we like China for that infrastructure, because don’t forget when you invest in infrastructure, you create jobs, wealth, and you keep inflation under control.”

Tech Fitness Industry Growing in Asia

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The Asian market for wearable fitness technology has boomed, and investments in the industry have increased significantly as a result.

According to CB Insights, a venture capital research firm, “the proliferation of mobile, a burgeoning middle class and pro-fitness government policies are enabling the rise of fitness tech in China and India.

“For example, in June 2016, the Chinese State Council issued a plan to implement a national fitness strategy to improve the physical fitness and health levels of the entire country by 2020,” CB Insights’ report stated.

The report added that India’s National Skill Development Corporation is supporting a K11 Academy of Fitness Sciences to instruct new personal trainers as well.

Cb Insights intelligence analyst Anagha Hanumante explained: “Investors are realizing that there is a great opportunity to tap into the fitness category, because consumers are spending a lot of money on these services, along with associated products, such as apparel and adjacent services such as nutrition.”

 

Guangdong Opening Economy to Foreign Investors

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Guangdong is moving forward with a plan to further open its economy to foreign investors. The government has put forth ten new rules aimed at improving the conditions for the manufacturing, service and financial sectors. The rules address issues such as foreign capital admission, land use and tax collection.

According to the Asia Times, “some 30% of restricted areas which were previously limited to foreign investors will no longer have a cap on foreign share ownership, including special and new energy vehicles manufacturing, ship design, general aircraft maintenance as well as setting up foreign investment banks and securities companies.”

The government will also reward foreign investors who choose to do business in Guangdong.

Liu Xiongwei, director of the Trade and Industry Development Division at Guangdong Provincial Finance Bureau, explained that the new policies will work to attract Top 500 global companies, as well as “new high technology sectors and major manufacturing programs.”

Global Financial Firms Expand in China

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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 Thrilled with Previous Asian Investment

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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.”

Hotel Investments Peak in Asia in 2013

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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.”

Japan, Hong Kong See Gains as U.S. Indexes Hit Record Finishes

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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.

 

West Asia Region Projected to Collect $90 Billion by 2020

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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.”

Asia Leads Investments in Watershed Projects

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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.

Businesses See Potential in Chinese Markets

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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.