For any individual or corporate investors, Emerging Asia remains as one of the most exciting region to invest in. Today, I am going to offer you 3 reasons on why this is so, and 3 potential issues that investors should look out for.
1. Sustainable growth
The growth rates of the Emerging Asian economies remain strong by global standards. This is in spite of the significant slow-down over the past few years. China should continue to grow at least 6%, a number to die for if you ask any mature economies. The question is will it continue? Likely yes, once you look across at the fundamental drivers of the growth: young population, rapid urbanization, formation of middle income families and so on.
2. Sector opportunities
Many Asian economies are undergoing a process of diversification. China is moving towards service-based economies. India is industrializing and investing in infrastructure. Indonesia is trying to diversify its resource-based economy. This creates plenty of sector opportunities - industries that grow at even faster rates than the broader economies.
3. Political changes
For many Asian countries, things are finally changing for the better. The democratic election of Aung San Syu Kyi's government in Myanmar promises to bring a new life for the country. India and Indonesia finally elected competent leaders as their government. Of course, there are always exceptions, for example the Philippines and Malaysia.
Moving to issues that an investor might look out for:
1. Corporate governance
Many companies in Asia are not run in the best interest of minority shareholders. Government-linked companies often invest according to national interests. Many family-owned companies have underutilized balance sheets. Shareholder activism is virtually non-existent. The key to investing? Avoid the bad apples.
Avoid companies with too much debt. In an emerging market, anything can happen anytime, in a big way, so investors need to be prepared.
Do not underestimate the prevalence of technology in Emerging Asia. Go to China, you will see how well people are integrated with technologies such as mobile payment and ride hailing apps. The bottom-line is, disruption do happen to business at a fast pace in these countries.