How to participate in the Asian growth story

January 9, 2013

The long-term economic growth story in Asia is strong, supported by urbanisation, industrialisation and demographics. This is understood by the investment community - but what is not always understood is how best to participate in this trend.
-King Fuei Lee, Head of Asia Equities, Singapore

Even as the US struggles with its debt burdens and Europe battles its sovereign debt crisis, the structural Asian economic growth story plays out unabated – buoyed by the long-term trends of urbanisation, industrialisation and positive demographics. 

Asia is now moving into an era of unprecedented urbanisation. The Asian Development Bank is forecasting more than 55% of the population to be urban by 2030. Asian cities will be expecting an influx of another 1.1 billion people over the next 20 years, creating increased prosperity for the region. 

Meanwhile, with generally well-structured societies and more stable governments in place, the industrial revolution that started decades ago in Asia should continue to unfold at a pace that far exceeds developed countries. Positive demographics are giving impetus to these economic trends.

However, while the long-term economic themes in Asia are well recognised and understood by the investment community, the ways for investors to participate in this structural growth story remain shrouded in mystery and misconceptions. 

Traditionally, investors hoping to participate in a country’s economic growth try to do so by investing in the country’s stockmarket, often through index funds and actively managed relative return funds. After all, conventional wisdom is that the faster an economy grows, the more corporate profits in the country will grow, and hence the higher the stockmarket returns the investors will achieve. This could not be further away from the truth.

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