In this video, CIO of Manulife Asset Management Ronald CC Chan, presents an analysis of how Asia’s investment markets are being influenced by Brexit.
Andhra Pradesh in India will be receiving US$3bil (RM12.1bil) worth of investment from a slew of Malaysian companies. The sectors Malaysia is investing in include: beverages, biodiesel, metallurgy, retail, vector control and will result in the establishment of around 8,000 jobs. The bureaucratic part of this has already been completed with the signing by the Andhra Pradesh Economic Development Board and the Malaysian companies of seven memoranda of understanding.
According to Datuk Ramesh Kodammal, Asean-India Business Council co-chairman:
“The value of the MoUs signed today is just a fraction of the business potential between ASEAN and India. With a combined population of 1.8 billion people and existence of bilateral trade agreements such as the Asean-India Free Trade Agreement (Afta) and Trans-Pacific Partnership (TPP), opportunities in Asean and India abound for our business entities.”
Meanwhile, the Indian government will be creating a committee (led by the NITI Aayog CEO) to investigate a variety of issues, most notably FDI norms connected to the country’s e-commerce industry that is continuing on a growth spurt. Contributions to the committee will also be made by officials from commerce and industry ministry members as well as those from the department of electronics and IT. It will try to find additional ways the industry can grow as well.
It should also be noted that 100% of FDI has been allowed through the ecommerce retailing marketplace format via the Department of Industrial Policy and Promotion (DIPP) since March.
The Way Ahead Transport report assembled by Norton Rose Fulbright is showing how worldwide, the Asia Pacific region is going to be taking a key role in transport development with its anticipated infrastructure consolidation. Global head of transport at the firm, Harry Theochari said: “The transport sector is continuing to look to Asia Pacific for investment opportunities, encouraged by rising demand and China’s ambitious Belt and Road Initiative.” The study was conducted using over 200 industry players.
Thankfully, the region is making infrastructure a top priority. Indeed, after mergers & acquisitions, experts in the field are pushing infrastructure as this “offers the best investment opportunity in the sector today.” Indeed, with inadequate infrastructure for aviation, rail and road sectors, the challenges to their operational efficiency are highest.
Talking of transportation in Asia, Singapore is implementing a car-lite strategy. Through this, the region’s government is attempting the double the rail network by the year 2030, thus making public transport more reliable and attractive. In addition, it is hoped that by this time, every town will have its own dedicated cycling network, with laws in place regarding the use of bikes. Of course the issue of infrastructure is an important one here too, with advances being made in this sector in an attempt to facilitate commuters’ travel from homes to train station/bus stop.
There was a 32 percent increase in investment in the Belt and Road project in Beijing from Chinese firms, in the first four months of 2016. According to Xinhua a staggering $4.9 billion was invested during this time period. The goal of this project is the establishment of an “economic corridor,” linking China and Central Asia with Europe in a “21st century reprise of the ancient caravan routes.” Furthermore, the Ministry of Commerce reported that between January and April 2016, there was an escalation of 71.8 percent in ODI, reaching 391.5 billion yuan (about 60.1 billion US dollars). Likewise in the service sector there was an increase of 73.2% to $43.8billion.
China has been intensifying its presence in the worldwide economy in recent years. When analyzing this trend, it is paramount to look at the country’ ODI since that can be what is needed to bolster growth. To date it has comprised investment in M&As and start-ups and growth is anticipated from around $744 billion to around $2 trillion by 2020 (currently the leader in ODI in the world is America with $4.92 trillion). Due to European economic devastation, this ODI was met with an incredible reception throughout Europe, most notably UK, France and Germany which has reaped the most benefits from Chinese funding in the last few years.
It should be noted though that FDI has also played a significant role in China’s success, turning the region into “one of the world’s biggest cross-border investors.” According to figures from the Commerce Industry, there was an increase of 4.8 percent in the first quarter from 2015 year-on-year to 286.78 billion yuan ($45.3 billion).
So together with its FDI, China is fast becoming a leader in the global economy. As Bill Gates said recently in an interview with Xinhua “China is going to be contributing more and more to the world’s innovation.”
Which regions are helpful to Asia’s economy and which are burdensome? China, Indonesia, India and Malaysia definitely seem to be doing good things for Asia, economically. So let’s take a look at some of these, both from a positive and not-so positive standpoint.
China: its economic “re-balancing act” might lead to additional positiveness in the medium term. Looking at Beijing as an example, its attempts at economic retooling away from investment- and export-led growth toward an economy led by consumer demand to make for greater efficiency. That’s the theory. In practice however, GDP in China slowed to 6.7 percent in the 2016 first quarter. According to Ravi Menon, Managing Director of Singapore’s Monetary Authority,
“Demand for final consumption goods will increase as China’s middle-class grows, stimulating imports of consumption goods even as trade in intermediate goods slows. Indeed, at a rate of nearly 10 per cent per annum, China’s import of consumption goods has grown by more than twice that of intermediate goods over the past ten years.”
Indonesia had experienced an almost stagnant beginning in its first quarter this year (down from the same time period in 2015). Since then, however, Indonesia has encountered a profit growth from 0.5 percent to 12.4 percent. This weakening was understood as being caused by a governmental slowdown of spending and investment alongside a decrease in exports.
And India is faring well, boosting Asia’s economy. According to head of Asian equities at Invesco Perpetual, Stuart Parks, “India’s structural advantages such as strong demographics, low commodity prices and higher spending on infrastructure make Indian equities our top pick in Asian markets.”
Vis-à-vis Malaysia, the country’s Prime Minister, Datuk Seri Najib Tun Razak really believes its economy to be “sustainable at the core,” given that it has a place on the list of top 10 FDI hotspots in Asia Pacific. This was backed by IHS Inc. (an international information company) whose Chief Economist Rajiv Biswas said that “the Asia Pacific region will grow at an average annual rate of 4.5% per year, boosted by rapid growth in consumer spending in China, India and South-East Asia.”
Ultimately it seems that the Asia region is faring well and enjoying a lot of economic growth and stability via its various countries.
South East Asia has lately been the recipient of some quite attractive investments. For example, according to stats from Tech in Asia, startups in the region – in the first quarter of 2016 – received $478.4 million, 100% more than for the same frame, year-on-year.
These figures are interesting and inspirational given that since 2013, economic prosperity around the world has not even managed to completely negate its way past the 2008 fiscal crisis. Yes it’s true the fiscal situation in China has been encountering a stagnation with markets there enduring increased volatility. But still, compared with the monetary situation around the rest of the world, investors are choosing Southeast Asia due to its solid fundamentals such as a 600million plus population and a $2.3 trillion GDP – the seventh largest in the world with a projected growth spurt of rising to number four.
Google wants to be in Asia too, as part of its wider vision of renewable energy. But the multi-million dollar corporation is having a hard time as purchasing energy there is fraught with difficulties. Ascertaining the right credentials is next to impossible. Trouble is, it’s hard to buy green energy there. The system for getting proper credentials for renewable energy sources is virtually nonexistent on the continent.
In addition, vis-à-vis emerging market funds, Asia is not looking so great right now. Substantial amounts have been pulled from these funds, and most of them, from the Asia region. Indeed, according to a recent article by Teresa Rivas in Barrons, based on findings from analyst Markus Rosgen, “Most of the outflow from EM funds came from Asia, which saw investors withdraw $970 million.”
So there are different ways to look at what is going on in Asia. It’s definitely not a black and white situation. The hope is though that the good will outweigh the bad.
China’s economy is in trouble. According to a recent article by Kristie Lu Stout, “On China,” host on CNN International, “Factories are losing steam, exports are declining and companies have taken on worryingly high levels of debt…..[and that] By 2020, it’s estimated that more than 200 million Chinese will go overseas, double the amount that did in 2013.”
Further, even though the US economy is gaining tenacity, according to the latest Marketplace Edison-Research Poll, this has not positively impacted the consumers’ buying power. “The Marketplace Economic Anxiety Index — a trackable number derived from some of the poll’s questions — held steady at a score of 31 on a scale from zero to 100. The higher the number, the more stress someone is feeling.” Dave Shaw in this article felt that the number did not plunge at all because “Americans continue to feel anxious about their economic situation and feel worried about meeting monthly expenses.”
So one might have expected the 2016 Asia Week New York event of March 10-19, to have been somewhat lower-key. But, what actually happened was quite the opposite. With the participation of 45 galleries from around the globe, the ten day event garnered a total of $130 million in sales. Ultimately, as Chair of the event Lark Mason explained:
“For connoisseurs and collectors who want to immerse themselves fully in the wonders of the Far East, they know there is a once-a-year celebration that they must attend. And it’s no wonder. Asia Week combines top-flight galleries and world-renowned Asian art specialists for over a week of outstanding events and exhibitions—all sprinkled around the world’s most exhilarating city, New York!”
Ali Aboutaam, co-owner of Phoenix Ancient Art, was one of the participants in the extravaganza. Displaying pieces from their American and Swiss galleries, Phoenix Ancient Art was able to show visitors the museum’s Chinese Bronze Buckle with Monkeys, Chinese Terracotta Figure of a Kneeling Court Lady and Chinese Wooden Figure of a Court Lady. And as Phoenix Ancient Art’s Alexander Gheradi said, it was great for the gallery since it was able to access an Asian art crowd it has “never interacted with before.” As he continued, they were pleased to be the recipient of “very complimentary responses which was quite validating for us since Chinese art isn’t our main area of expertise as our focus is on Western Mediterranean and Egyptian antiquities.”
Another satisfied participant was James Lally of J.J. Lally & Co., who reported to have been “delighted [at the] high attendance [received] at [their] exhibition.” Indeed, 80 percent of his exhibition was sold before the end of Asia Week. He added: “The subject of our exhibition this year was very esoteric—ancient Chinese jade—but the response was very strong and we had many serious inquiries from American collectors and museums and we received many U.S. collectors and curators, as well as visitors from Asia and around the world.”
While there are struggles within both the Chinese and the US economy, Asia Week New York 2016 still enjoyed a great showing.
It might just be a good time right now to make an investment in the solar industry throughout Asia. This is because of the increase in populace in the area as well as the dearth of conventional energy sources. As a result, Asia is doing a fine job of promoting its alternative sources of energy.
Solar seems to be the one that is really gaining momentum in Asia. You just need to take a look at India and see how important solar is there; the government has stated that it intends to increase its solar capacity 30 fold in the next four years. At the end of 2015, ASEAN member states discussed the possibility of using renewable energy to solve the problems with limited electricity that the entire region encounter.
And then when you look at China, the revenue for solar power generation there increased at a yearly rate of 145.3 percent from 2010 to 2015, bringing in a grand total of $2.6(US) billion. So that’s real money and a real reason to get on the investment bandwagon for FDIs. Another advantage of solar investments is the increasingly popular promise of environmental consciousness and solving pollution issues.
And then there’s Indonesia. That region’s development as a solar market is likely to get quite substantial, given the Bali Clean Energy Forum’s announcement of a 5 GW goal. Especially given what Sudirman Said, Minister of Energy and Mineral Resources for Indonesia said on the launch of his Center of Excellence for Clean Energy that will expedite the expansion of renewable energy, up to 23 percent of the national energy mix by 2025. This center is set to “support the development of the 35 MW electrification programs [sic], of which 25% or about 8.8 GW will come from renewable energy.”
Ultimately, using renewable energy is a feasible method to generate energy in Asia. In terms of solar power, the South Asian region is privy to pretty much the perfect combination of high solar insulation and a large quantity of potential customers.
Various initiatives have been taken recently in an effort to boost Malaysia’s economy. One of them is the EPF (Employees Provident Fund) that is set to “continue investing internally” in 2016, with, according to Datuk Shahril Ridza Ridzuan, EPF CEO, an analysis on “the right assets.” Shahril said that one way of doing this is to encourage foreigners to invest in Malaysia. Indeed, Malaysia’s partners around the world have been “encouraged by the EPF to “invest jointly in Malaysia.” Vis-à-vis anticipated domestic investment allocation, this is hard to predict, as Shahril explained that “it depends on the availability of the right asset.”
Investment from local companies is crucial to spur the domestic economy given the weakened global economic condition. But local experts are optimistic. Indeed, Datuk Seri Ahmad Zahid Hamidi, Deputy Prime Minister of Malaysia, said that he was anticipating a “boost” in the economy in 2016 and that there will likely be a continued extension of governmental support from the Chinese community.
However, on the flip side, it was indicated by Datuk Wee Ka Siong, a minister in the government, that 2016 will encounter “economic challenges.” He explained that given the reality of “the global oil price slump, we will see a more challenging year ahead … we are however, hoping to achieve an increase in economic growth from 4 to 5%.” However, in this statement there was no addition of methods being used to put this in practice. Further, the sentiment was reinforced by Datuk Seri Michael Chong, of the Malaysian Chinese Association Public Services and Complaints Department, who said that there were many fiscal and social welfare issues the party needed to address.
On a related subject matter, with the recent signing of the 12-nation Trans-Pacific Partnership agreement, Malaysian companies will be eligible for the same treatment as American businesses when competing for American agency contracts. VP for Policy at the US-ASEAN Business Council, Marc Mealy explained that: “for global American companies with operations in Malaysia and Vietnam, the benefit would be that they could have the additional flexibility of supplying a US government contract from those locations.”
In addition, America will benefit from the TPP, with improved access to government contracts in those three regions. General Electric, Motorola Solutions, Microsoft, Hewlett-Packard and Cisco Systems are some of the major companies that are likely to benefit from this.
So all in all, a lot is going on with regards to Malaysian economy boosting. 2016 is set to be a year of substantial potential for the region.
In 2015, the Central Asian region received a “record amount” of investment from the EBRD (the European Bank for Reconstruction and Development). This was an increase of a staggering 75 percent from €803 million to €1,402.3 million. In total, Central Asia has thus received just over €10 billion from the ERBD. According to Natalia Khanjenkova, EBRD Managing Director for Central Asia and Turkey:
“The EBRD is ever more dedicated to the market transition of the economies of Central Asia, and last year’s record investment is only one of the areas where the Bank has boosted activity. We are also actively engaged in supporting policy reform on green energy, diversification, the investment climate and the role of the private sector. An upcoming EBRD-FT Central Asia Investment Forum on 18 February in Istanbul will discuss ways of boosting investment in the region even further.”
So what’s the story with 2016? Some experts are predicting that this trend of large investments will continue this year. The ANREV (Association for Investors in Non-listed Real Estate Vehicles) found that for those investing in the Asia Pacific, Sydney and Melbourne will still be most popular. Indeed, over half of those surveyed by the ANREV actually said they would “increase their investments in property in the next two years and are looking at investing in Europe first, then in the US followed by Asia Pacific.” Tokyo has also become a popular destination.
So in terms of investments and FDI’s, look no further than Asia.