14.04.2015

Investing in equities and equity-related securities of companies located in the Association of Southeast Asian Nations (ASEAN), the WIOF South-East Asia Performance Fund offers investors the chance to take advantage of growing economies and markets in one of the world’s most economically-dynamic regions. The Fund’s portfolio is managed by award-winning asset management group and Asian investment specialists CIMB.

 

WHY SOUTH-EAST ASIA?

With a growing young workforce, a rapidly-expanding middle class driving rising domestic demand and outperforming regional markets, the South-East Asia region is one no investor can afford to overlook. The Fund’s focus investment markets are some of the most dynamic economies in the world, each offering attractive fundamentals, including:

 

  • An estimated combined regional population of 630 million and GDP of USD2.4 trillion.
  • A combined market capitalization of USD2.3 trillion.
  • Strong and growing domestic demand driven by an expanding young workforce and a growing and affluent middle class.
  • Strong regional GDP growth which is expected to outstrip that of major western economies in the coming years.

 

As Ken Goh, portfolio manager for the WIOF South-East Asia Performance Fund, says: “The underlying fundamentals of the ASEAN region hold tremendous potential and growth opportunities.”

 

PERFORMANCE (USD)

 


REFORMS AND SUPPORT

A number of other fundamental developments are also strengthening the region’s economic health and, subsequently, investment opportunities. Governments in the region are moving to support their economies with a range of fiscal and other policy measures including income tax cuts, hikes in minimum wages and spending on infrastructure and rebuilding, all of which are aimed at bolstering investment spending and domestic consumption. Meanwhile, they have also been proactive in encouraging foreign direct investment into their respective economies in recent years. Given the prospects of lacklustre global growth, ASEAN economies are expected to pursue more active reforms to continue attracting more investment. This is typified in Indonesia where reform expectations are high under the recently-elected president Joko Widodo. The steps his administration has taken have already boosted investors’ confidence after it moved to deregulate fuel prices and push the current proposed budget to increase infrastructure spending. His use of presidential authority to push ahead difficult economic reforms is fuelling positive investor sentiment.

 

The region’s collective potential is being seized upon by the individual countries within it as intra-ASEAN trade and economic integration continues to deepen.

 

  • Economic links between ASEAN members continue to expand quickly and in the last ten years intra-regional trade has grown faster than total ASEAN exports. Businesses now regularly expand their operations beyond their national borders to seek growth and diversification in the region.
  • ASEAN countries have all committed themselves to creating an ASEAN Free Trade Area, an ASEAN-wide manufacturing base, an ASEAN Investment area and the single integrated ASEAN Economic Community (AEC) is expected to allow for easier liberalisation and facilitation of investments into the region, making ASEAN countries more globally competitive.
  • Individual markets have benefitted from the increasing correlation between ASEAN markets as the region has increasingly come to be seen as a single investment destination, highlighting opportunities in some individual countries which investors otherwise may have overlooked.

 

 

THE CHINESE CONNECTION

The region is also benefitting from growth in the rest of Asia, specifically from increasing trade with China, which is set to become the world’s largest economy in the next 20 years and is the region’s most important trade partner. Trade links between ASEAN countries and China have raced ahead in the last ten years. As an illustration of this, 12% of the ASEAN region’s exports went to China in 2013, compared to 7% a decade ago. China is the region’s largest external trade partner. Exports to China, as a percentage of Gross Domestic Product (GDP), have grown for all major ASEAN countries in the same period and many companies in the ASEAN region have extended their exposure to China, including some on the financial sector which provide foreign currency loans to China. At the same time, China has been investing heavily in the region. China’s investment in Asia has grown at double digit rates in recent years and it finances numerous agriculture, hydropower, housing, railway and mining projects in the region. While this creates job opportunities and provides an investment boost to the local economy, it also introduces an element of potential competition for domestic companies.

 

GDP (% CHANGE)


2015

2016

2017

2018

2019


Indonesia

5.5

5.8

6.0

6.0

6.0

Malaysia

5.2

5.0

5.0

5.0

5.0

Philippines

6.3

6.0

6.0

6.0

6.0

Thailand

4.6

4.4

4.3

4.3

4.3

Singapore

3.0

3.0

3.0

3.1

3.1

USA

3.1

3.0

3.0

2.7

2.6

United Kingdom

2.7

2.4

2.4

2.4

2.4

Source: IMF

 

 

OUTLOOK

In the medium to long-term, the region remains a very promising area to invest in with both economies and middle classes in ASEAN countries growing quickly. In the shorter-term, most ASEAN economies should benefit from a drop in global oil prices, with the exception of Malaysia, which is an oil exporter. Cheaper oil is expected to lift growth, ease inflation pressures and improve fiscal and current account balances. The tailwinds from lower energy prices have yet to be factored in by the markets and this could present an upside surprise to earnings. Prospects in the Philippine economy remain positive, largely due to lower oil prices and its strong export performance. Indonesia and Thailand will experience headwinds from tighter fiscal policy (subsidies cuts) in the near term before planned infrastructure spending probably feeds into the economy in the second half of the year.

 

INVESTMENT ADVISER

The Fund’s investment adviser is the award-winning Asian investment specialist CIMB-Principal Asset Management, part of CIMB Group, South East Asia’s fourth largest banking group with total funds under management of almost 17 billion USD. It has an integrated team of more than 50 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 17 December 2010 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.