Optimism for Asia Pacific Investments

Datastat - Modification from wikipedia
Datastat – Modification from Wikipedia

Optimism is rising for making investments into the Asia Pacific region. There is greater confidence among executives in the region, a large percentage of whom, according to a PwC report believe that in the next 12 months there will be substantial growth. Given that it has risen 10 points from 2012 and four from 2013, this is a good sign.

However, growth has not been encountered all that much in China. So will this impact the rest of the Asia Pacific region? According to the study, 67 percent of executives are anticipating that they will make large investments in the APEC region over the next year. And they will be doing this within each of the 21 member economies. As well, China is actually up there as one of the most popular places for such investments.

If that is the case, how do investors justify these plans if China’s economy is not encountering growth? A couple of weeks ago, Bob Davis at ‘The Wall Street Journal,’ wrote that “we are witnessing the end of the Chinese economic miracle.”

However, just recently China started admitting its issues – which is a huge deal vis-à-vis solving them.   It announced a drop in interest rates which will once again begin to make the region more attractive to outside investors.

Still, there is much more to be done. The facts are that the country’s manufacturing sector is facing challenging overcapacity, resulting in a drop in prices. As well, there was an increase of GDP in the third quarter by 7.3 percent. These issues have to be addressed as well as interest rates, if China is going to have a chance of getting back in the foreign investment game.

Is Asia on a Spending Binge?

Qatar-HoldingQatar recently acquired a small part of Lifestyle International Holdings in Hong Kong. This may be indicative of the start of an Asian spending binge. What this means for the near future is that Qatar may very soon be investing in other Asian regions including: China, Japan, Singapore and South Korea. The total amount spent could reach $15bn.

This is new for Qatar, which, via the Qatar Investment Authority (QIA) has primarily made investments in Europe, with businesses like Barclays, the Canary Wharf Group and Harrods. Now, with its move into Asia, Qatar is doing something new.

While in the past there have been some Qatarian investments into Asia (such as in 2010 the $2.8bn investment into the Agricultural Bank of China) until now there hasn’t been a steady flow. Now, putting £616m into Lifestyle International Holdings is according to QIA forming part of the region’s “strategy to diversify its portfolio.”

Another potential region for investments is Turkey. The Hassad Food Co. is planning on investing in Turkey’s country poultry, dairy and meat sectors. As it stands right now, 90 percent of Qatarian food products are imported. Hassad was launched to secure supplies. And then there is real estate investment, linked to the FIFA World Cup that is set to be in Qatar in 2022 and all the infrastructure preparations involved in that. Real estate prices are elevating due to increasing demand for infrastructure land.

East Online Investments: India and Singapore

At the beginning of last month, India’s internet retail industry encountered substantial profits. This put it in the top three web-using region, boasting 74 million users. This is an increase of 31 percent since 2012.

This has led to an increase in India of online shopping, escalating the country’s e-commerce market by 66 percent last year, with a value of $16bn. Not only is this figure huge, but compared to the rate of the rest of the world – which stood at 18.3 percent – it is even more impressive. As well, within the next decade, it is expected to be valued at a staggering $56bn.

In addition, according to Snapdeal (an Indian e-commerce site), is planning to sell properties online. The idea is to offer affordable housing, in conjunction with the Tataconglomerate. This is the first such endeavor that India has encountered. When the project starts, around a thousand units will be offered in cities including: Ahmedabad, Bangalore, Chennai, Mumbai and Pune.

Moving on to Singapore investments, a recent US-based report valued a gaming company at $1bn – higher than other US tech companies. This is indicative of Singapore’s local tech industry advancing with additional venture capitalist investments and acquisitions over the last few years. Singapore was ranked 27th on the list of the top Internet companies by market from the World Startup Report. Indeed, it appears that South East Asia is one of the “fastest growing regions in the world,” vis-à-vis tech market. As such, Singapore’s gaming industry has been hailed as a “milestone” for the country’s start-up ecosystem, by CEO of the National Research Foundation, Professor Low Teck Seng.

Singapore has what to learn from India in the fiscal realm. According to Prime Minister Lee, India has been proving how social media technology can be used to enhance the quality of government, in particular through the MyGov platform. For more information on this endeavor, click here.

East and West Investments: True 2-Way Street

hague-osborneHistorically, it was western countries exporting to and investing in eastern countries. That has not been the case though for some time now. In the UK’s Chancellor of the Exchequer George Osborne’s recent statement, it was announced that £120m in funding is being allocated to new investments into India from the UK.

These days the west actively looks for investments in the east. Thus Osborne went with British PM William Hague to Mumbai to seek out investments. Some examples of these include: Cipla – a Mumbai-based pharmaceutical firm – to invest £100m into the UK for drug-based research; Mahindra – automotive manufacturer – investing £20m into the UK for the development of its electric vehicle technology, with the hope of having a car on sale in the UK within the next 12 months. JCB – construction machinery manufacturer – is set to open a further two plans in India. In total during the trip, the deals amounted to approximately £370 million (around Rs.3,800 crore).

In the military field, India’s Defense Ministry signed a contract valued at £250m with MBDA, the UK’s missile maker for “the supply of advanced short range air-to-air missiles (ASRAAM) to the Indian Air Force’s fleet of Jaguar aircraft.”

Currently, India is Asia’s third largest economy and has just encountered a political change of a new government led by Narendra Modi. Of this appointment, Osborne said, “I believe a stronger relationship with Britain will help deliver the new economic policy of the Indian government. Prime Minister Modi is seeking more investment in India’s economy – and I want British companies to provide it, and the British government to support it. Good days are coming for the financial partnership we can forge to build, literally, the infrastructure of the future.”

Since 2010 there has been an escalation in UK exports to India by 50 percent as well as an increase in imports by a third.

China Pushes India Investments

China is currently focusing on making investments in India. This is quite timely, given that Xi Jinping, China’s President, is scheduled to make a visit to the country. The focus is transport. China is seeking to enhance railways in India while constructing expressways.

China-to-IndiaTo further improve relations and investment opportunities between the two countries, China’s Foreign Minister, Wang Yi committed to China continuing the trend of issuing visas to Arunachal Pradesh residents, one of India’s 29 states. It is hoped that this will be seen as a “goodwill gesture” to Indian citizens.

Wang has pointed out that these days there are “consultations and a positive attitude” between the two countries, which facilitates the process of issue resolution as it arises.

What all this shows also is that China is committed to supporting India with its economic progress. Of India Wang said that his country “stands by your side throughout your efforts of reform and development. No country can choose its neighbour, but friendship may be fostered.”

This sentiment was echoed by India’s Ministry of External Affairs spokesman, Syed Akbaruddin, who pointed out that, “both leaders felt that there was tremendous untapped potential for the growth of economic ties.” Still, before these efforts can move forward, there is some significant unfinished business.   The fact is, India runs a $40 billion trade deficit with China. There is a chance of China putting money into industrial parks in India. This might help rebalance trade.

In conclusion, there is work to be done but if the trend of positive attitudes and communication is maintained, a large space could be created for China India investments to move forward.

APR Investment Growth

Aleksey UlyukayevA plan has been put in place to boost investments in the Asia-Pacific Region (APR). The recent Asia-Pacific Economic Co-operation (APEC) conference encountered discussion on improving conditions in the region for potential investors. It is believed that there is plausible reason to anticipate a boom in trade.

APEC – launched at the end of 1989 – connects America, Australia, Canada, China, Japan, Malaysia, and other countries, totaling 21 members. Its most recent meeting was held a few days ago in Qingdao, China, with a goal of boosting partnership relations in the region.

Russian Minister of Economic Development Aleksey Ulyukayev expanded on the specifics of the goals. He said the aims were boosting activity on the Doha Round format, improving conditions in the Asia Pacific region, making a better case for Kazakhstan to join WTO.

Asian Real Estate Investors Take Interest in Overseas Markets

Asian real estate investors are venturing beyond regional markets to OECD countries and other areas in the West, according to a recent study by Colliers International.

Outbound real estate investment from Asia has climbed from $1 billion in the early 2000’s to more than $30 billion in 2013. This is a result of a surge in global liquidity, as well as several other “pull” and “push” factors, according to CEO, Asia at Colliers International Piers Brunner.

Pull factors include the higher yields available in foreign markets, as well as strong economic growth potential and first world country real estate environments. Meanwhile, governments in Mainland China, Hong Kong and Singapore are pushing investors in an effort to slow local real estate markets by loosening overseas investment restrictions.

According to John Marasco, Colliers International’s Managing Director of Capital Markets and Investment Services in Australia, the Chinese investors are contributing greatly to the Australian real estate market.

“Chinese buyers alone are currently spending around $5.9 billion a year on Australian property (both residential and commercial),” he said. “The strong performance of Australia’s property markets suggest this demand will continue to grow across a range of assets.”

Director of Capital Markets and Investment Services, Asia, Terence Tang added: “We believe the emerging trend will see more outbound investors taking on additional risks in non-traditional property sectors, such as hotels, and to commit to value-adding schemes, including conversion and development opportunities, in the secondary locations of gateway cities, where prices are more attractive than in traditional core locations.”

Indonesia’s Eastspring Investments Launches Business in Jakarta

Eastspring Investments, an asset management firm based in Indonesia, recently drew upon its Asia investment experience to launch its institutional business in Jakarta.

CEO Riki Frindos stated: “The launch of Eastspring Investments’ institutional business is in line with our commitment to make our deep investment knowledge available to institutions and retail customers alike in Indonesia.”

“Eastspring Investments Indonesia offers a wide variety of investment capabilities across a range of asset classes, with a primary focus on Indonesia’s equity and bond markets,” he added.

While launching its business, the Indonesian firm hosted a seminar entitled “Facing the Challenges of a Graying Asia,” with guest speakers including global strategist Robert Rountree and University of Indonesia Professor Suahasil Nazara.

During his presentation Rountree explained: “An aging population is a phenomenon not limited to developed nations. The challenge of preparing for an aging population in developing nations is increasing, while the birth rates in Asia have fallen well below birth rates in Europe and the U.S.”

He went on the explain that the region’s aging population will have an impact on the dependency ratio, government spending on health care and pension, taxes, work forces and investment capital for developing markets.

Abenomics Prove Effective for Boosting Japanese Growth

Japan has been instituting several new economic initiatives, known as Abenomics, to boost growth in the region. According to several investment trust managers, these efforts are proving effective.

Bailie Gifford Japan investment trust manager Sarah Whitley said:

“Abenomics is a wide-ranging programme to revitalise the Japanese economy and raise its growth rate in the long term, as well as provide short-term stimulus. During the past year the yen has weakened significantly, allowing Japanese manufacturing to be re-priced into world markets, company sentiment has improved tremendously and there are encouraging signs that growth is spreading into the broad domestic economy.”

Aberdeen Japan investment trust manager Kwok Chern-Yeh added that while some are concerned, Japan’s new sales tax may not have a negative impact on the situation.

“The consumption tax hike is a crucial step towards fiscal consolidation – raising the national sales tax from 5 to 8 per cent will help address the nation’s ballooning public debt,” he said. “One worry in the short term is that discretionary spending will fall after the tax has been implemented, although the government is hoping to cushion the short-term impact with a ¥5.5 trillion stimulus package. If Abenomics works and the economy grows then consumers will spend more as the economy rises anyway.”

 

Tokyo Climbs from #13 to #1 for Real Estate Investment in Asia-Pacific

This year’s top spot for real estate investment in Asia-Pacific was claimed by Tokyo following the Japanese government’s economic reforms. Followed by Shanghai and Jakarta, according to the Urban Land Institute and Price Waterhouse Cooper, Tokyo has been described as a “magnet” for investors. Last year, the city was listed as number 13 in the same report.

The economic turn appears to be a result of Prime Minster Shinzo Abe’s efforts to end a significant deflationary spiral. His reforms, or “Abenomics,” have already had a significant impact on the economy. According to the report, 2013 saw Tokyo amass significant transaction volume, and sales of office, warehouse and retail space have climbed 85% during the first half of the year.

The report quotes a source as stating: “We’re very bullish on Tokyo, particularly around refurbishing existing assets- focusing on energy and sustainability and repositioning from a B- to an A- grade.”