London – Maybank Kim Eng, the investment banking arm of Maybank Group, said at its Invest Asia UK conference today that amidst the current economic uncertainties in Europe, Asia provides an oasis of opportunities to European investors.
Held at The May Fair London, the Invest Asia UK attracted more than 300 delegates from 23 countries. A total of 31 corporates from 12 countries in Asia including China, Korea, Taiwan, India, Malaysia, Thailand, Indonesia, the Philippines and Pakistan, covering North Asia and ASEAN with total market capitalization of about USD500bn and 120 funds across Europe totaling USD19 trillion in Assets Under Management participated in the conference.
The investment bank expects stronger growth for Asia this year, buoyed by a cyclical recovery in trade and commodity prices. The region has seen a robust recovery in exports and trade-related services since end-2016, benefiting many Asian economies, especially those which are trade dependent. The East Asian economies namely Taiwan, Korea, Singapore, and China are part of the global electronic supply chain and are gaining from the recovery in electronic exports. Many ASEAN countries are also benefiting from trade recovery and improved commodity prices. The Asian Development Bank (1) expects Asia to grow at 5.7% in 2017 and 2018, ahead of most developed economies.
Dato’ John Chong, Chief Executive Officer of Maybank Kim Eng, says that Asia has strong fundamentals and its long term structural growth is sustainable given its favorable demographics and growing infrastructure investments.
Asia’s 4.4 billion population with a median age of 30, makes up about 60% of the world population. ASEAN has the world’s 3rd largest labour force, with 60% still below the age of 35. Countries such as the Philippines, Vietnam, India and Indonesia are expected to grow strongly, leveraging on their demographic dividends, low balance sheet leverage and technological catch-up.
According to Asian Development Bank (2), the region needs an estimated USD22.6 trillion or USD1.5 trillion annually (equivalent to 5.1% of projected GDP) of infrastructure expenditure from 2016 to 2030 to maintain its growth momentum and eradicate poverty. Apart from increasing consumption, Asia’s infrastructure spending will sustain and fuel growth by improving efficiency, productivity, and connectivity in the region.
“Asia is also home to two of the world’s largest emerging economies, India and China, with impressive growth rates of 6-7%. This will have substantial spillover benefits to the surrounding economies. China’s outward direct investment has grown by 28% CAGR from 2010 to 2015 to USD1.1 trillion, and Asia accounts for about 70% of China’s outward investment,” Dato’ John added.
On the equity front, Asia ex-Japan continues to be a key investment destination for global investors, and made up about 15% of the global commission wallet in 2016, the second highest after North America. Since the beginning of the year, the Asian bourses have seen strong investment inflows, with the MSCI-Asia ex Japan rebounding strongly by about 19% year-on-year in April 2017.
Dato’ John Chong said, “Asia’s valuations remain more attractive compared to developed countries’. For 2017, we expect the S&P 500 to trade at 2.9x 2017 price-to-book (PB) while Asia x Japan at 1.5x 2017 PB.”
In 2016, Maybank Kim Eng ranked among the top investment banks in ASEAN. The investment bank was ranked no. 1 in ASEAN for Investment Banking &Advisory (3), Mergers & Acquisitions (4), and Equities, Equities linked & Rights (5), and No.2 for ASEAN Local Currency Bonds and Global Sukuk (6).
1 Asian Development Outlook Report, Asian Development Bank, 2017
2 Meeting Asia’s Infrastructure Needs Report, Asian Development Bank, 2017
3 Dealogic, 31 December 2016
4 Bloomberg, 31 December 2016
5 Bloomberg, 31 December 2016
6 Bloomberg, 31 December 2016