Feb 25, 2013

ASEAN - Asean markets offer strong investment opportunities, says Barings

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The Asean region's continued economic growth and compelling domestic dynamics support a strong investment case for the region, according to Baring Asset Management.

It favours markets such as Thailand, Indonesia, and the Philippines, which the firm believes are home to a number of companies with attractive growth opportunities at a reasonable prices.

SooHai Lim, investment manager, comments, "The infrastructure story has important for Asean economies in recent years, though the region remains in the shadows of bigger spenders like India and China.  In this regard, we believe the opportunities this presents are not fully appreciated by investors and has significant potential to stimulate growth not just in more obvious markets like Indonesia and the Philippines, but also Malaysia and Thailand.

"In the case of Thailand, for example, there has been around US$85 billion 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.

Lim continues, "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. Propertyis 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.

"Agriculture also continues to impress, especially given Asean's strong share of soft commodity exports like rice, palm oil and rubber.  Growing 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.

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