08.07.2011

Ken Goh

Portfolio Manager

CIMB Principal Asset Management Pte. Ltd. Singapore

 

Rich in natural resources, with a growing young workforce, strong economic growth and outperforming regional markets, the South-East Asia region is one no investor can afford to overlook. The WIOF South-East Asia Performance Fund offers investors the chance to take advantage of the growing economies and markets in one of the world’s most dynamic economic regions.

 

DEFINED BY GROWTH

The South-East Asia region is defined by its growth, both economically and physically. Domestic demand is expected to keep growing at the same time as the region’s young workforce and middle class expands, and FDI and infrastructure spending rises. GDP is also set to grow soundly. In 2011, all countries in the region have a projected stable outlook with GDP growth ranging between 4 to 6.4%. The region’s GDP growth in 2011 is expected to be driven by the roll-out of mega-projects within the region and, consequently, an influx of FDI to help stimulate economies. FDI flows to developing economies rose 10% in 2010 and ASEAN region states in particular benefited from FDI inflow growth.

FDI Inflows (as at January 2011)

Partner Country/Region

FDI Inflows (USD billion)

2009

2010

Growth rate

World

1,114.1

1,122.0

0.7%

European union

361.9

289.8

-19.9%

United States

129.3

186.1

43.9%

Japan

11.9

2.0

-83.2%

China

95.0

101

6.3%

India

34.6

23.7

-31.5%

Indonesia

4.9

12.8

161.2%

Malaysia

1.4

7.0

400%

Singapore

16.8

37.4

122.6%

Thailand

5.9

6.8

15.3%

Source: UNCTAD

Expanding cities and growing urban populations are also set to drive economic expansion as South-East Asia rapidly urbanizes. Every year 7.7 million people migrate to cities and it has been predicted that Jakarta could be the biggest city in the world by 2030.

 

RISING LIQUIDITY

Apart from this rapid economic and physical growth, the region also boasts an increasingly liquid market. The combined market capitalisation of the five Southeast Asian markets is now USD1.8tn with further growth expected throughout this year. And in line with rising FDI and exposure to foreign investors, liquidity has been improving across the region, which now sees an estimated daily trading volume of USD3.5bn. This is a far cry from the figure of just US500mn 10 years ago. Currently, ASEAN countries represent 11% of trading volume in the Asia ex-Japan region.

 

Average trading volume in ASEAN region

Source: FactSet, MSCI, Goldman Sachs Global ECS Research

 

The South-East Asia region also remains globally competitive in soft commodities. For example, ASEAN region countries, collectively, meet more than 70% of global demand for rubber. Thailand is the biggest contributor to the supply of natural rubber among its regional peers and is alone expected to expand at a 5.7% rate in 2011.

 

GROWING CO-OPERATION

The region’s potential is also being seized upon by the countries within it and the ASEAN Economic Community (AEC) has already pledged increased economic cooperation in the coming years.

Plans through to 2015 include:

  • Creation of an economic bloc that will encourage free trade and investments across the region.
  • Increased investments into tourism.
  • Manufacturing, healthcare and education projects.
  • Greater investment into the property sector.

 

OUTLOOK

After a lull in the first quarter, regional markets have begun gaining momentum. The sub-regional index is now up 4% YTD and is outpacing the broader MSCI Asia Pacific ex-Japan index commendably. Looking forward, the region will experience robust growth due to rapid urbanization and rising domestic demand. Additionally, 2011 will see an increased influx in FDI and infrastructure spending across the region. Investors did not return to developed countries in 2010, but instead FDI flows to developing economies rose last year. Specifically, countries such as Singapore, Indonesia and Malaysia were well-positioned for global recovery and benefited from a rise in FDI inflow to the region. We expect this trend to continue well into 2011. In terms of sectors, our approach remains the same: overweight on consumer discretionary, industrials, financial sectors that benefit from ongoing improvements in domestic demand and infrastructure spending within the region. We are also more positive on the energy sector and particularly companies related to the coal sector.

INVESTMENT MANAGER

The Fund is managed by award-winning Asian investment specialist CIMB-Principal Asset Management, part of CIMB Group, South East Asia’s fourth largest banking group. It has more than USD8bn of assets under management as of 2010 and an integrated team of 56 investment professionals across the region using their local knowledge and presence to ensure clients get the best possible service.

 

IMPORTANT NOTE:

This report has been prepared for information only, and it does not represent an offer to purchase or subscribe to shares. World Investment Opportunities Funds (“WIOF”) is registered on the official list of collective investment undertakings pursuant to part I of the Luxembourg law of 20th December 2002 on collective investment undertakings as an open-ended investment company. WIOF believes that the information is correct at the date of production while obtained from carefully selected sources considered to be reliable. No warranty or representation is given to this effect and no liability can be assumed for the correctness or accuracy of the given information which may be subject to change at any time, without notice. Past performance provides neither a guarantee, nor an indication of future performance. Value of the shares and return they generate can fall as well as rise. Currency fluctuations, either up or down, may also affect value of the investment. Due to continuing market volatility and exchange rate fluctuations, the performance may be subject to significant changes over a short-term period. Investors should be aware that shares in the financial instruments entail investment risks, including the possible loss of the invested capital. Performance is usually calculated on the basis of the relevant NAV unless stated otherwise. Performance shown does not take account of any fees and costs associated with subscribing or redeeming shares. It is assumed that all dividends were reinvested. WIOF prospectus is available and may be obtained through www.1cornhill.com. Before investing in any WIOF Sub-fund(s) investors should contact their financial adviser / legal adviser / tax adviser and refer to all relevant documents relating to the WIOF and its particular Sub-fund(s), such as the latest annual report and prospectus that specify the particular risks associated with the Sub-fund, together with any specific restrictions applying, and the basis of dealing. In the event investors choose not to seek advice from a financial adviser / legal adviser / tax adviser, they should consider whether the WIOF is a suitable investment for them.