With 4.64 billion people calling Asia home in 2021, representing 60% of the global population and a burgeoning middle class, it should come as no surprise if 21st is the Asian century. Asian markets, notwithstanding some periods of short-term underperformance and volatility, have been outperforming others markets in the long run. What makes this time more especial to invest in Asia is that it is becoming a hub of innovation. And scores of developing countries have been reforming their economies and introducing frameworks to attract foreign investment. Here’s the list of 6 core reasons everyone is talking about Asia and why you should take it seriously.
A New Hub of Innovation:
The notion that innovation flows from the west to the east is no longer the case, as Asia has dominated the technology sector for the last two decades. Whether it is Shenzhen or Asia’s Silicon Valley or Bangalore – the Indian high-tech industry hub, Asia is second to none in innovation. The domination in tech can be discerned from the fact that 47% of startup funding took place in Asia in 2018, and the continent is also responsible for 71% of total VC funding. Though Asian countries did come out of the pandemic relatively unscathed, a permanent shift to WFH has taken roots in Asia. According to McKinsey, the virus has broken barriers that prevented work from home. The emergence of coworking space in Singapore and other important cities across Asia has further facilitated the phenomenon. Approximately 20-30% of jobs in Asia are anticipated to become permanently remote.
Uninterrupted Economic Growth:
The rapid growth in Asia is another reason why you should invest here. The continued growing faster than any other continent in the last three decades indicates its strong markets and efficiency. In the ten years till 2015, the MSCI Asia Index provided 40% higher returns than the MSCI World Index and 50% more than the UK’s FTSE index. In a recent report about the most profitable places to invest, 5 of the 10 places in the list belonged to Asia, and Forbes’ list of 10 Best-emerging markets-2020 included 4 Asian counties. With sustained population growth, Asia’s population growth derivers look bright in the long run, which will eventually drive global economic growth.
The Rising Middle Class:
Being a leader in electrical appliances, Japan has been the main driver of economic growth in Asia, with China as a manufacturing center. It now has changed, with Asia constitutes about 58% of the entire middle class in emerging markets worldwide. Several companies are now flocking to Asia to capture their share of the market. The area’s and the world’s vast quantities of commerce in products and services are projected to fuel future growth in the region and beyond. The world’s second-largest economy China is now gearing its economy towards domestic consumption. In contrast, India’s middle class now consumes $2.4 trillion worth of goods and services from 2018-19. The Asia-Pacific region is likely to contribute 59% of consumption, totaling more than $30 tr. – making Asia a hot place to invest at the moment.
A Business Friendly Environment:
The established infrastructure and enabling government policies provide a friendly environment for businesses in Asia. Hong Kong and Singapore offer excellent opportunities for new companies to grow, such as easing up new companies and low taxation for foreign investors. The Malaysian government is keen to grow and favors businesses like health services, biotechnology, and manufacturing through tax incentives and other perks for foreign investors. Then there’s UAE, which provides complete tax exemption on the incomes of various businesses operating, except in oil and Gas and foreign banks, and is a very progressive economy. And, of course, there’s China, where the government is changing its focus away from an export-led economy and toward serving the local market with a more sustainable development business model.
On the whole, Asian countries are very liberal when providing a business-friendly environment, with good infrastructure available to support them, and easier to acquire capital.
The Asian Tourism Industry is Booming:
The fact that the Asian tourism industry has tripled in the last 10 years and saw a 50% growth in air passengers says a lot about why investors must keep an eye on this sector. With the abundance of cultural and tourist attractions coupled with improving infrastructure, the tourism industry has already obtained the status of an industry in many Asian counties. It is on its way to reclaiming its true position.
Increasing Income Opportunities:
Though it has traditionally been the focus of income investors, Asia has some of the highest dividend-paying countries. With an annual dividend rate of 3.7%, Singapore is one place that is featured in high among places paying the highest returns. Similarly, companies in Taiwan and Thailand have yielded an average of 3.6% and 2.9%, respectively. That was also corroborated by a report from Legal and General (L&G), which stated that Asia has more stocks with a yield of above 4% than North America and Europe combined. One good way to access high yield stock in Asia is through Investment Trusts. They can maintain reserves of dividends to ride out volatile periods. From the Economic times to various other business magazines, all have suggested that investing in high-yielding stocks in Asia is the winning strategy.
Conclusion:
To sum it up, one can conclude safely conclude that the Asian century is here. With the booming middle class and technology eliminating barriers that prevented investments in Asia, first movers will have the advantage over latecomers. Some of the numerous reasons investing in Asia are the appropriate option include a growing population, continuous economic growth, and many investment possibilities for foreign investors. And an improved regulatory environment.
Veeramachineni Lalitha
I am Finance Content Writer. I write Personal Finance, banking, investment, and insurance related content for top clients including Kotak Mahindra Bank, Edelweiss, ICICI BANK and IDFC FIRST Bank. My experience details : Linkedin