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Capital inflows into Asia

By David Swartzentruber
AseanAffairs   29 September 2010

Everyday reports flow into Asean Affairs, highlighting the amount of investment flowing into Asean countries.

The values of currencies continue to rise causing jitters who see their lower-valued exports become more expensive with concern that demand for the goods may decline in western countries, where the economies are doing less well than in Asia. A key factor that most of the Asian press reports is the monthly retail sales figures in the United States. The US is the key trading partner for many Asean countries.

The Asian Development Bank has issued its quarterly report and has raised the growth rates for practically every country in the region.

With these rising economic reports, perhaps it’s best to take a more measured look at the Asian and Asean economic front from within Asia itself.

The Government of Singapore Investment Corp. (GIC) is rated the world’s sixth largest investment company and manages more than US$100 billion in reserves.

In its annual report issued September 27, GIC said it will continue to raise investments in higher-growth emerging economies, especially in Asia, aiming to increase the proportion of investments in public equities and private assets in emerging markets from 12 percent to 13 percent by the end of the first quarter 2011.

The growth in Asia is outdistancing the rest of the world, forcing monetary authorities in Asian countries to raise interest rates before the western countries need to take such action.

However, GIC’s Chief Investment Officer Ng Kok Song, is looking at real estate and private equities as offering even more lucrative opportunities. He notes that private equities are not as liquid as public equities .

He also noted that GIC plans to continue holding its stakes in Citigroup Inc. and UBS AG, as both banks have recovered from the financial crisis and he expects them to do well. The holdings of developed market equities rose to 41 percent of its portfolio as of March 31 from 28 percent earlier. The firm repurchased shares in developed markets in early 2009 after selling them from July 2007 to September 2008.

Established in 1981, GIC said its annual returns in the past 20 years averaged 7.1 percent in U.S. dollar terms.