Asian stocks have surged in 2024, with many delivering double-digit returns year-to-date. Beyond our Singapore shores and the much-discussed China, Hong Kong, and Japan equities, we’re also seeing winners in India, Malaysia, Indonesia, and Thailand. Here are some examples:
Bharti Airtel, in which Singtel holds nearly a 30% stake (Singtel annual report 2023), is not only a major telecom operator in India but also the second-largest mobile operator in Africa and among the top three globally, according to GSMA intelligence data. Its stock is currently the best-performing in India’s SENSEX index, boasting a remarkable 64% gain year-to-date (TradingView, 24 Oct 2024).
Maybank, Malaysia’s largest bank, is also well-known in Singapore due to its presence here and in other countries like Indonesia. Its stock has gained 19% year-to-date, while another Indonesian bank, Bank Central Asia, has delivered a 15% return (TradingView, 24 Oct 2024).
These are just a few examples of leading Asian companies, each dominating its respective country and delivering impressive returns this year. It’s time for Asian stocks to shine, given the immense potential of the region’s economies. And with Asia being so large and diverse, it’s worth narrowing down to a specific group: the Asian Tigers 2.0.
Note: All securities referenced above are not intended as recommendations to buy or sell securities.
The Rise of Asian Tigers 2.0
The ‘original’ Asian Tigers—Hong Kong, Singapore, South Korea, and Taiwan—were models of rapid economic development, known for their strong export-led growth, technological advancements, and integration into the global economy. They quickly transformed from low-income to high-income economies. Today, however, these nations are developed, and their economies are not growing as fast as they once were. There is now a need for the next generation of Asian Tigers, which includes India, Malaysia, Indonesia, and Thailand (IMIT).
According to Goldman Sachs Research, by 2050, the world’s five largest economies will include China, the U.S., India, Indonesia, and Germany. By 2075, India is expected to surpass the U.S. and become the world’s second-largest economy.
India is following a trajectory similar to China’s from decades ago, with a large, young, and productive population. In 2023, India overtook China to become the most populous country in the world. While China’s population is aging, India’s remains predominantly young, forming a vast workforce.
Foreign companies have already established production sites in India, and foreign direct investments are fueling the country’s industrialization, much like China’s earlier rise. Unsurprisingly, India’s GDP growth is now outpacing China’s—between 2021 and 2023, India’s average GDP growth was 8.1% per annum, compared to China’s 5.6%.
Indian stocks provide a strong proxy for participating in the country’s economic growth, which has been reflected in stock performance. Over the past six years, India’s Nifty 50 Index has outperformed Asian peers, including Singapore, South Korea, and Hong Kong.
Note: Past performance and the predictions, projections or forecasts on the economy, securities markets, bond markets or the economic trends of the markets are not necessarily indicative of the future or likely performance of the ETF.
Similarly, Indonesia is projected to be one of the world’s five largest economies by 2050, according to Goldman Sachs Research Projections as of 22 June 2023.Even today, Indonesia is the largest economy and most populous nation in Southeast Asia, contributing around 35% of the region’s total economy (International Monetary Fund 2024 data). Like India, Indonesia boasts a young population, and its GDP has grown at over 5% per year post-COVID. While Indonesia benefits from its rich natural resources, it has also developed a strong digital economy, home to many successful tech companies (Tech In Asia 12 Oct 2024).
After Indonesia, Thailand is Southeast Asia’s second-largest economy, and Malaysia has the third-highest GDP per capita in the region. Thailand, while renowned for tourism, has expanded into automotive manufacturing and is well-positioned to benefit from the transition to electric vehicles (EVs). Malaysia, meanwhile, has moved up the value chain from commodities to electronics and semiconductor manufacturing, making it an important exporter in the global supply chain. The country has recently achieved political stability and implemented policies to attract foreign direct investment, further strengthening its economy.
Together, these four countries are becoming more significant players on the world stage and stand to benefit from China+1 policies, as companies seek to diversify their production capacities beyond China.
How to invest in Asian Tigers 2.0
The most direct way to invest in these economies is by buying stocks in IMIT countries, but most investors may not have the time or confidence to select individual stocks in less familiar markets. In some cases, like India, there are restrictions—foreign individual investors cannot directly invest in Indian stocks.
A more convenient option is to invest in ETFs, but most emerging market ETFs are heavily weighted toward China, Taiwan, and South Korea, making them less ideal for investors looking for specific exposure to IMIT countries. This is where the Lion-China Merchants Emerging Asia Select Index ETF comes in, offering targeted exposure to IMIT.
The ETF tracks the iEdge Emerging Asia Select 50 Index, which was created by SGX Index Edge. The index selects 50 stocks domiciled in IMIT countries, listed either in their domestic markets or in the U.S. Filters ensure that selected stocks have sufficient liquidity, take into account foreign ownership restrictions, and apply caps to avoid overexposure to any single stock, sector, or country.
India accounts for the largest weight in the index at 33.5%, followed by Indonesia at 21.8%, Thailand at 16.2%, and Malaysia at 13.9%, reflecting the relative size of their economies. Finance is the largest sector, making up 39.5% of the portfolio, with Technology and Energy rounding out the top three sectors. The index is well-diversified across 11 sectors.
Below is a table showcasing the top 20 stocks in the index, including some of the top performers mentioned earlier—Bank Central Asia, HDFC Bank, Delta Electronics, Maybank, and Bharti Airtel. Investors can gain exposure to all of these through the Lion-China Merchants Emerging Asia Select Index ETF.
Investors will be pleased to know that the iEdge Emerging Asia Select 50 Index has outperformed both the MSCI Emerging Markets and MSCI Emerging Markets Asia indices since its launch date (19 July 2024).
The Lion-China Merchants Emerging Asia Select Index ETF is a collaboration between Lion Global Investors (an OCBC company) and China Merchants Fund Management (part of China Merchants Group). Lion Global Investors has launched several popular ETFs on the SGX, such as the Lion-Phillip S-REIT ETF and Lion-OCBC Securities Hang Seng TECH ETF. China Merchants Group, with a 151-year history, has evolved from a shipping company to a conglomerate with a comprehensive financial arm.
The SGX code for this ETF is EAA, and it will be traded in SGD, providing local investors with the convenience of investing in their home currency. The management fee is set at 0.8% per annum, though the total expense ratio will be confirmed once the ETF begins operation.
Investors can subscribe to the ETF during Initial Offer Period from 25 Nov 2024 to 6 Dec 2024 with a lot size of just 1 unit via participating dealers. The issue price is US$1.
Asia is on the rise, with the most significant growth coming from emerging markets. We’ve discussed the potential of the IMIT countries, and now, with the Lion-China Merchants Emerging Asia Select Index ETF, investors can conveniently access these markets and capture the rise of Asian Tigers 2.0.
How to buy?
The initial offer period is from 25 November to 6 December 2024.
During this time, you can subscribe for the ETF via OCBC ATMs, Mobile and Online Banking, or through any of the brokers below.
Promotions
For OCBC ATM, Mobile and Online Banking customers:
– S$2 application fee waived.
For POEMS customers:
– Get S$20 cash credits for every 10,000 units subscribed before 5 December 2024, 5pm. Limited to S$500 cash credits per customer. For the first 100 customers.
You can visit the Lion Global Investors’ website for more information about this ETF.
This article is sponsored by Lion Global Investors. All views expressed belong to the author.
Disclaimer – Lion Global Investors Limited
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Investments in the ETF are not obligations of, deposits in, guaranteed or insured by LGI or any of its affiliates and are subject to investment risks including the possible loss of the principal amount invested. The performance of the ETF is not guaranteed and, the value of its units and the income accruing to the units, if any, may rise or fall. Past performance, payout yields and payments, as well as, any prediction, projection, or forecast are not necessarily indicative of the future or likely performance, payout yields and payments of the ETF. Any extraordinary performance may be due to exceptional circumstances which may not be sustainable. Dividend distributions, which may be either out of income and/or capital, are not guaranteed and subject to LGI’s discretion. Any such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value of the ETF. Any references to specific securities are for illustration purposes and are not to be considered as recommendations to buy or sell the securities. It should not be assumed that investment in such specific securities will be profitable. There can be no assurance that any of the allocations or holdings presented will remain in the ETF at the time this information is presented. Any information (which includes opinions, estimates, graphs, charts, formulae or devices) is subject to change or correction at any time without notice and is not to be relied on as advice. You are advised to conduct your own independent assessment and investigation of the relevance, accuracy, adequacy and reliability of any information or contained herein and seek professional advice on them. No warranty is given and no liability is accepted for any loss arising directly or indirectly as a result of you acting on such information. The ETF may, where permitted by the prospectus, invest in financial derivative instruments for hedging purposes or for efficient portfolio management. The ETF’s net asset value may have higher volatility as a result of its narrower investment focus on Emerging Asia countries, when compared to funds investing in developed markets. LGI, its related companies, their directors and/or employees may hold units of the ETF and be engaged in purchasing or selling units of the ETF for themselves or their clients.
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The units of the Lion-China Merchants Emerging Asia Select Index ETF are not in any way sponsored, endorsed, sold or promoted by the Singapore Exchange Limited (“SGX”) and/or its affiliates and SGX and/or its affiliates make no warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the iEdge Emerging Asia Select 50 Index and/or the figure at which the iEdge Emerging Asia Select 50 Index stands at any particular time on any particular day or otherwise. The iEdge Emerging Asia Select 50 Index is administrated, calculated and published by SGX. SGX shall not be liable (whether in negligence or otherwise) to any person for any error in the Lion-China Merchants Emerging Asia Select Index ETF and the iEdge Emerging Asia Select 50 Index and shall not be under any obligation to advise any person of any error therein.
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