Investing in Emerging Markets

February 21st, 2018 by admin No comments »

Watch this guide with manager of Hermes Global Emerging Markets, Gary Greenberg on why investors have selected emerging markets in Asia and why that is changing now. It seems like they peaked in 2015 and now people are concerned. Greenberg – an expertise in emerging markets for the last three decades – believes that “a strong opportunity remains for the long-term and where investors need to look for the best returns – or the least risk.”

Investing in Asia? Check out Malaysia

January 21st, 2018 by admin No comments »

Malaysia is an oft-overlooked nation for those looking to invest in Asia.  Right now, it’s a particularly good time for those looking for investment opportunities since the strong currency (the ringgit) is indicative of investors already having positive feelings toward the economy.  As they should given that the region’s economy is looking good.

Indeed, according to recent stats put out by the Prime Minister, Datuk Seri Najib Tun Razak, vis-à-vis the dollar, the ringgit is really impressive with its 2017 appreciation of 10.4% against the US currency.  Plus, earlier this month, the ringgit “broke the four dollar psychological barrier.” And this is not a new phenomenon either since the country has been undergoing many years of

“strong growth with figures that most developed economies could only dream of – even during times of global economic turmoil and uncertainty.  In fact, last year Malaysia exceeded all expectations, with the World Bank having to revise its estimate for our growth upwards not once, not twice, but three times – to 5.8%. Our capital market, a key facilitator for financing business growth, has continued to grow from strength to strength. In 2017, foreign net fund inflow recorded a positive RM10.8bil, the highest since 2012.”

The even better news is that this growth and stability is likely to continue, particularly in the next few months.  according to the DoS (Department of Statistics), this comes from the improvement at the end of last year with the Landing Index (growth of 121.3 points in November and a jump of 4.5 percent in January) and Coincident Index (increase of 0.5 percent in November).

Furthermore, it looks like the country is now “poised to take on the world in the gold industry.” This is because, as the PM explained: “Previously, gold had to be melted, refined and manufactured overseas before being imported into the country. Now, with the development of our first commercial gold refinery, we have the ability to process gold – from the smelting phase through to refinement – within Malaysia.”

So investors into Asia…check out Malaysia!

Google International In India

December 21st, 2017 by admin No comments »

Google has been making some serious waves in India as of late and the plan is, to continue the trend.  Two examples of this that will be briefly reviewed here are Dunzo and Alphabet Inc.

The first direct investment in an Indian startup that Google has made is Dunzo.  In this unprecedented move, the multi-billion corporation has been at the head of an investment valued at $12 million as part of its push for ‘Next Billion Users,’ while it establishes an ecosystem in the country throughout high-frequency hyper-local transactions.  This will also substantially impact – positively – India’s education, financial and healthcare sectors.

Earlier this year, Google International put Rs 1,204 crore into google India which was the largest and only investment it has made since 2008 in the unit.

Moving on to Alphabet Inc., Google just launched a (smaller) version of its Android software in India in an effort to attract huge support from the country’s pool of basic phone users in the fast-growing wireless services market.  The Android Oreo Go operating system can work on entry-level smartphones with memory of as low as 512 megabytes.  Given that only around one third of India’s mobile phone subscribers are with smartphones, there is a huge market for these cheaper handsets.  And, alongside this trend, Google announced a Google Assistant version for its low-cost 4G-enabled device, JioPhone.

Asia and the Garment Industry

November 21st, 2017 by admin No comments »

Post-Rana Plaza (manufacturing building) collapse in Bangladesh, industry businesses and individuals became concerned about their next step.  Having heavily relied on this one address for their garments, the realization of the impact of Environmental, Social and Governmental (ESG) practices were highlighted. Once it became known how abusive working conditions there were, investors pulled out.

In recent years, it is not just business that counts; to get investments portfolios have to reflect a strong value system and the Rana Plaza just wouldn’t have cut it. One recent example of this was discussed in a Bloomberg article entitled The Cost of an Investment Conscience by Mark Gilbert of DBS Group Holdings with the promise of Scandinavian institutional investors of divesting from banks (in Asia, North America and Europe) which support destructive palm oil ventures in South Asia.

In other words investment dollars are influencing investee action as ESG factors become more prominent.  Gilbert quotes AQR Capital Management co-founder Cliff Asness who explained:

If the virtuous decide they won’t own something, the sinners then have to, and they have to be induced to through getting a higher expected return than otherwise. This in turn is achieved through a lower than otherwise price. If the discount rate used by sinful companies isn’t higher as a result of constraints on holding sinful stocks then there was no impact. And, if the discount rate on sin is now higher, the sinful investors make more going forward than otherwise. If the virtuous are not raising the cost of capital to sinful projects, what are they doing? How are they actually affecting the world as they wish to?

Given the fact that Norway’s Rainforest Foundation has quadrupled in growth since 2009, it has become a world equity market major investor, imbuing it with a substantial influence over the companies in which it invests.

 

If Asia wants to retain its status as a global leader in the garment industry it looks like ethical awareness and preservation have to be at the top of its priority list.

China’s Emerging Markets

October 21st, 2017 by admin No comments »

Emerging market economies – most notably China and India – are expanding faster than those in developed nations.  With this growth, emerging market companies are able to offer potentially attractive returns to long-term stock investors, while bond investors can reap the benefits of generally higher interest rates than in developed markets.

According Tao Zhang, IMF Deputy Managing Director it is crucial for emerging markets at this point to remain “vigilant” to potential risks.  China’s economy is currently encountering substantial changes during its transition to a consumption-led economy which moves away from dependence on cheap good exports. As such, it is vital leaders are aware of the “rapid credit expansion.”

Still, at the latest World Economic Outlook, the forecast for China’s economic growth (this and next year) was increased to 6.8 percent (2017) and 6.5 percent (2018); a 0.1 percentage higher than July forecasts.  The region’s economic growth is mainly due to progress within economic reforms, in particular, supply-side structural measures along with the capacity of the government to maintain a stable macroeconomic policy.

It should also be noted that there is a targeted urban area population increase in 2020 of 60%, translating into a move of 41 million individuals from rural areas to urban centers in China.  What this means is that there will likely be significant investment opportunities given that urban residents have different consumption patterns and higher wages.

Infrastructure Investment in Asia

September 21st, 2017 by admin No comments »

In this video, CGTN Africa’s reporter Sumitra Nydoo discusses how the region has been opened up for infrastructure investment. However, for the next two decades, the continent needs $93 billion per year to address its developmental needs – most of which is slated to come from FDIs.

Is India Surpassing China as Fastest Growing Economy?

August 21st, 2017 by admin No comments »

Evidence is pointing to India becoming the newest fastest growing economy in the world, taking over China’s Number 1 position, according to Harvard University’s Center for International Development (CID) growth projections.  Further, it is expected that the region will maintain this leading position, encountering an average 7.7 percent growth until 2025.

One reason for this, it is thought, is that, geographically it has the potential to expand into new markets, including automobiles, chemicals and (some types of) electronics. This is in direct contrast to those regions that rely solely on oil.

Other regions in the east expected to follow suit include Bulgaria, Indonesia, Turkey and Uganda, similarly because they have broader geographical and institutional dimensions.   As the report stated:
“What they share is a focus on expanding the capabilities of their workforce that leaves them well positioned to diversify into new products and products of increasingly greater complexity.”

Growth projections are measured by each country’s economic complexity, looking at the productive capabilities found in exports and how hard/easy it is to further diversify.

Amazon’s Asia Investments

July 21st, 2017 by admin No comments »

Amazon just received approval from the government of India to sell food products via actual stores in the region.  For the next five years, Amazon will spend $15 million on this venture.

This could just be the start of grocery store investment and expansion in India.  Big Basket and Grofers (online grocery stores in India) are looking for similar approval to set up food outlets.

In June of 2016, 100% of FDI was allowed in India in multi-brand food retail. With this, however, all food products must have some connection to the country: manufactured, processed or produced in India.  But with Amazon, this is the first FDI case to have received an “in-principle clearance” after the closure of the Foreign Investment Promotion Board.

What is also good for India investments is the interest in this industry being shown by brands throughout the world.  To date, more than 40 major brands have come into India since 2015.

Why Invest in Asia NOW?

June 21st, 2017 by admin No comments »

When we talk about investing in Asia, we are not just referring to the more-commonly discussed FDI-attractive regions like East and Southeast Asia; we’re suggesting investors broaden their horizons and look at investment possibilities spanning as integral as India and as far-removed as the Former Union Republics of the Soviet Union. It is staggering when one looks a little beyond the surface and finds these regions so naively overlooked.

So what does Asia have to offer for investors? First thought: its size. With a world population of less than 8 billion, Asia comprises over half of that with a 4.4 billion headcount. Making an investment in that region is in effect investing in humanity. In addition, the scope of a place makes it a more attractive location for global firms to set up shop there when they expand as they realize that the market there is way bigger for their product/service. This results in higher growth and the stats show that Asia’s FDI has bolstered the region’s larger economies.

Another reason to look to the region for investment purposes – especially NOW – is because the scope of industries is so large that something is bound to appeal. You’d be hard-pressed to find that kind of diversity anywhere else. In other regions it’s very much limited to a type of market; not so with Asia.

And then there is the infrastructure. Replete with private placements, mutual funds, multi-asset funds etc., this makes for a very attractive environment for investors from anywhere around the world.

So these are just some of the reasons why it makes so much sense to invest in Asia right now.

Asian Economies: The Good, The Bad and the Ugly

May 21st, 2017 by admin No comments »

Asian economies contribute substantially to the global outline of fiscal opportunity.  As such, once in a while it is potentially helpful to look at what they are – and are not offering.  In a nutshell, here are some oversights of current status of economies in the region and how they impact investment opportunities.

The Good

Anticipated growth for economies in the region throughout this year, is 5.5% which is a little higher than the number for 2016.  In addition, according to data released through the “2017 Regional Economic Outlook for Asia and Pacific: Preparing for Choppy Seas,” policy stimulus is maintain a healthy domestic demand in both China and Japan in the short term.  This is positive for all of Asia’s economies.

The Bad

With the growth in economies, there are two potential problems (one shorter term and one longer):

  1. Making worldwide fiscal conditions more stringent.
  2. With the aging populations, there is the emergence of limited productivity union.

There are possible solutions to this such as an influx of women and migrant individuals joining the work force; more secure pension systems; supplementary trade and FDIs, etc.

The Ugly

While there is predicted additional growth for 2017 in the region, when looking at 2018, this seems to be reversed, most notably with Japan which has a predicted 0.6% growth rate.  This has been explained as being due to the consolidation of fiscal policy and the proposed increase to consumption tax.

Ultimately, there is much to watch in the short and long-term with Asia’s economies.