HSBC

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.”

All Eyes on China’s Economic Expansions

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While much of the world is still feeling the economic downturn, China stands strong with its confidence in its economic future. Last week, Chinese Premier Wen Jiabao said that he is confident in China’s economy.  He has openly welcomed foreign companies like ARC Investment Partners to share in the country’s growth.

As Wen said during his keynote speech at the opening of the World Economic Forum’s annual meeting in the northeastern city of Dalian, “We sincerely welcome foreign companies to actively involve themselves in China’s reform and opening up process and share the opportunities and benefits of China’s prosperity and progress.”

China is becoming more desirable for outside investors of all sorts. Recently, HSBC Holdings Plc. found that wealthy people in China are the youngest in Asia, outside of Japan.  In a recent HSBC report that covered Australia, China, India, Indonesia, Hong Kong, Malaysia, Singapore and Taiwan, they found that the average age of people in China who have liquid assets of at least 500,000 yuan was 36. This was in comparison to 48 in Hong Kong and 38 in Indonesia.

According to the report, more than 25% of wealthy Asians will be investing in greater China and Southeast Asian funds and equities in the next six months. Certainly, fund companies outside of China similarly have their eyes set on this region, and on the ever-increasing economic expansions happening in China.

The expansion into the Asian market is being seen in many sectors.  In the technology sector, companies are trying to get into the market and to target products to this new rising wealthy class.  Investment managers like Adam Roseman of ARC Investment Partners have also made China their main focus on interest.  Global banks like HSBC, Citigroup Inc. and Standard Chartered Plc are expanding into this area as well.