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Asia and the Garment Industry

November 21st, 2017

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.

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Amazon’s Asia Investments

July 21st, 2017

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.

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Why Invest in Asia NOW?

June 21st, 2017

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.

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Asian Economies: The Good, The Bad and the Ugly

May 21st, 2017

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.

 

 

 

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Asian Regions: World Bank Predictions for Growth

April 21st, 2017

According to a recent study undertaken by the World Bank, these are the regions to watch in Asia for investment and economic success. They are: Laos, The Philippines, Cambodia, Myanmar and China.

The Laos economy — that has historically been regarded as the poor relation of fiscal success — is set to surge by 7% this year due to investments in the power sector alongside a more solid amalgamation with the 10-member Association of Southeast Asian Nations.

The Philippines – will probably remain the fastest growing economy from the Association of Southeast Asian Nations 6 (ASEAN-6). This is due to increased domestic demand alongside an escalation in infrastructure expenditure, the growth in the middle class and the upsurge in the Business Process Outsource (BPO) industry.

Moving over to Cambodia, it seems that the microfinance industry is what is currently propelling growth. Over the last 20 years or so, thanks to this sector, the economy has encountered significant growth, simultaneously mitigating poverty in the region. These two factors – growth and poverty elimination – are two high priorities for the government.

Most notably, the private PRASAC Microfinance Institution has played a huge role in this. Over this same time frame of Cambodian growth, PRASAC has become the country’s “largest and most sustainable MFI in Cambodia in terms of business size, customer care, flexible and sound financial solutions, and a wide network of offices and ATMs [having] developed a modern, transparent and dynamic core banking system.” As such it has received various awards for its part in putting the country’s economy on the Asian investment map.
Myanmar’s new oil pipeline has had a huge impact on its economic attractiveness. When activated, this will measure around 770 kilometers from western port city Kyaukpyu to the Chinese border. It has been hailed as “the crown jewel of economic cooperation agreements,” that was signed in Beijing.

And then of course let’s not forget China, which has always been known as the hero of growth and investment. Most recent figures from March showed an increase in trade surplus and exports (16.4%) a reversal of the 1.3% decline from February. Further, predictions for Q1 of growth in the region from economists is 6.8% from last year so that’s indicative of strength in economy too.

So for companies and high net-worth individuals looking to Asian locations to invest, watch these regions.

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Asia and GCC

March 21st, 2017

The most dynamic economy today in the world, is Asia.  Comparative to North America and EU economies (encountering deceleration of optimistic economic activity), the markets throughout Asia are truly thriving.

Consequently, thriving countries in the Gulf Cooperation Council (GCC) region are becoming increasingly aware of the advantages of working with Asia, in particular they want places that are fiscally able to purchase their energy exports.

Looking at current relations between members of the GCC and Asia, we find that strong ones exist (and are growing in leaps and bounds) in particular with East and Southeast Asian regions.  Indeed, the economic bonds between these regions have shown particular burgeoning since 2007.  For five years from that time, exports from Saudi Arabia to China encountered a growth from around $17 billion to $55 billion.

Further, in 2014, GCC yields became more appealing for new issue investors with new issuers coming to the bond market with the capacity to diversify their investments more. it is likely that the trend of the GCC bringing in more foreign investors (most notably from Asia regions) will continue.  When investment links strengthen, this will further bolster the process.

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America’s Trading Support of Asia

November 21st, 2016

asiaAsia is encouraging Donald Trump to give his support to a Beijing free trade deal with the Asia Pacific. Given that during his campaign, Trump labeled the Trans-Pacific Partnership a “disaster,” now is the time for action and a move away from Obama’s framing of the TPP resulting in an effort to write Asia’s trade rules before Beijing had the opportunity.

China has expressed concerns that America could use the TPP to force it to open markets by signing up or face isolation from other regional economies. Beijing is just relieved that it is appearing increasingly less likely that the TPP will materialize. And China is in the process of engaging in initiatives toward the Free Trade Area of the Asia Pacific as well as the Regional Comprehensive Economic Partnership.

Meanwhile, Griffith University Business School’s research dean said that Trump’s TPP repudiation (which excludes China) as well as his “open disdain for asymmetrical alliance arrangements — in other words all US alliance ­arrangements,” can be cause for concern.

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Investing in Asia: After Brexit

September 19th, 2016

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.

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Asia Sun Investments

March 18th, 2016

solar-panelsIt 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.

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What Next for Business in Asia?

November 14th, 2015

mapHow optimistic are Asian businesspeople today about the future of economic conditions?

According to the Asia Business Council Survey, 59% expect conditions to remain at their current pace. In 2014 that figure was 35%, potentially indicating a less optimistic view now.

What they do believe is good for Asia is the region’s “solid economic fundamentals and pro-growth policies.” For example, India is seen as having an inviting economic environment.

But those who felt like nothing would change much (or would deteriorate) spoke of the potential of economic slowdown and uncertainties within China due to its seemingly open-ended reforms. As well, throughout Asia there seems to be a lot of infrastructure development which may not be a good enough environment to back up an escalated level of foreign investment growth.

This China issue can be seen perhaps with the most recent announcement from Australia’s IAG (Income Insurance Australia Group) that its Asia strategy is steering clear of China. However, in a more optimistic note, it added that that fact will not stop it from it expanding in India, Malaysia, Thailand, Indonesia and Vietnam.

Further, if Rohini Kappadath is to be believed, if Australia hides from making real investments in Asia, it is a mistake. He said: “More focus must be invested on the opportunity that is passing us by each day because of under investment in Asia by Australian businesses. There is more at stake by not considering the outsized returns we are foregoing by not taking some risk. This means taking an equity position by making a direct investment and working (as other Asian business leaders do each day) with balancing the risks and volatilities that are part of the terrain in any economic value capture opportunity.”

So yes, there are risks to making investments in Asia. But it is simultaneously the case that ultimately there may be more risks by not making such investments.

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