Turning to Asia in the drive for equity income potential
Asia is more than a growth story. Find out why Asian dividends are back in the spotlight.
#ASEAN #ASEANopportunities #GrowthInvesting
With its proximity to China, ASEAN straddles between the familiar and alien for most investors. ASEAN is gaining momentum as the regional grouping comprises the world’s third largest population after China and India; is the sixth largest economy and the fourth biggest trading group, as illustrated below2.
ASEAN is big … and only getting bigger2
We share our perspectives on how the ASEAN market could drive equity growth with its mix of old and new economies, and where we see medium- and long-term opportunities.
As illustrated below, the ASEAN market is relatively less volatile than the investors generally believe, even though emerging-market stocks and bonds are generally considered risk assets because of historical political instabilities.
ASEAN equity index is less volatile than Asia and Europe over the past decade3
But ASEAN has undergone a healthy reset over the past 10 years with deleveraging and continuing infrastructure investment. Additionally, the region has presented equity opportunities1 with its expansion into new industries and acceleration of e-commerce, alongside a revival of traditional industries such as commodities, tourism and manufacturing.
We believe accelerating vaccinations could bode well for the ASEAN market in 2022 compared with 2021.
Vaccines continue to be available in Singapore and Malaysia. As of January 2022, 87% of the total population in Singapore4 and 78.6% in Malaysia5, respectively, have received at least two doses of vaccines. Thailand, the Phillipines and Vietnam are also lifting vaccination rates to help accelerate economic recovery and drive domestic consumption growth.
Tourism is a major contributor to Southeast Asia’s economy. For example, Thailand’s tourism revenue accounted for 18.21%6 of its total economy in 2019. With the onset of the public health crisis, mobility restrictions have hindered economic recovery as inbound tourist numbers dropped to historic lows. Lately, vaccination progress in Southeast Asia has enabled the region to reopen borders and restart tourism, and to gradually resume economic activities.
Even before the onset of the public health crisis, some businesses have relocated their factories from other parts of Asia to ASEAN to diversify their manufacturing base as well to mitigate rising labour costs. Businesses will likely continue to diversify, driven by rising inflation and transportation costs as well as pressure on profit margins.
A digital-led healthy reset
|Digitalisation in the spotlight|
ASEAN economies are straddling between the old and the new. Supported by the old economy, we see strong and sustainable growth in Southeast Asian equites in the next decade as the region’s quality corporates harness new technologies and undergo digital transformation.
A bottom-up approach and top-down considerations are crucial when investing in emerging markets. Harnessing a dedicated team of five ASEAN investment professionals with an average of 16 years of industry experience10, J.P. Morgan Asset Management seeks optimal growth opportunities on ASEAN’s road to recovery.
1. For illustrative purposes only based on current market conditions, subject to change from time to time. Not all investments are suitable for all investors. Exact allocation of portfolio depends on each individual’s circumstance and market conditions.