Investors believe ASEAN markets offer strong investment opportunities

13- Feb-2013

The ASEAN region’s continued economic growth and compelling domestic dynamics support a strong investment case for the region, according to international investment firm Barings Asset Management. Markets such as Thailand, Indonesia and the Philippines are favoured by the firm and are believed to be home to a number of companies with attractive growth opportunities at a reasonable price.
The infrastructure story has become increasingly important for ASEAN economies in recent years. Although the region remains in the shadows of bigger spenders like India and China, SooHai Lim, investment manager for the Baring ASEAN Frontiers Fund believes the region offers opportunities which have yet to be fully appreciated by investors.

“The region has significant potential to stimulate growth not just in the more obvious markets like Indonesia and the Philippines, but also Malaysia and Thailand,” explains Lim. “In the case of Thailand, for example, there has been around US$85bn earmarked for infrastructure projects in the aftermath of 2011’s flood, including a series of new high-speed railways.”

An important investment theme for 2013 and beyond is the growth in the ASEAN middle class and, by extension, the rise of discretionary spending power.  With the number of affluent middle class individuals in the region expected to top 160 million by 2015 – over a quarter of the region’s population – Barings believes there are strong investment opportunities stemming from this positive demographic change.

“Healthcare, tourism, and retail are all sectors which, we believe, are in a prime position to benefit from enhanced spending from an expanding middle class with relatively little in the way of borrowings,” says Lim.  “Property is another strong theme we favour as we journey through the first few months of 2013, especially as we’re seeing rising home ownership because of falling interest rates across a number of markets. In this regard, we like real estate developers such as Jakarta-based Ciputra Development.

“Agriculture also continues to impress, especially given ASEAN’s strong share of soft commodity exports like rice, palm oil and rubber,” adds Lim. "Growing demand for these and more broadly an elevated price environment should benefit Thai, Malay and Indonesia producers over the medium to long-term.”
Though the ASEAN markets have performed strongly in the last five years, Barings still believes that there is room for further steady outperformance, reinforced by strong and large domestic demand which creates momentum and the potential for a greater resilience against external economic shocks.