31.07.2015

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.” This potential is underlined by the forecasts for its economic future - a report by the ANZ banking group has suggested that the ASEAN region could replace China as the world's leading manufacturing centre in the next decade and that it is on track to be the fifth-largest economic entity in the world by 2020.

 

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.

 

ASEAN economies are also pursuing more active reforms as they look to attract more investment. In Malaysia, for instance, the government recently unveiled plans to accelerate regulatory reforms as it looks to raise productivity. In Indonesia, investor-friendly reforms are being prepared, including easier licensing procedures, quicker public tenders and simplified land acquisition procedures for industrial developments. Access to previously restricted sectors such as healthcare, energy and telecoms, has become easier. Meanwhile, in Philippines, parliament earlier this year approved a number of key economic bills, including legislation on fair competition policy to curb monopolies and unfair business practices.

 

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, while bilateral trade between China and the ASEAN region stood at USD350.5bn in 2013, accounting for 14% of total ASEAN trade. 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 in 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)

 

2014

2015

2016

2017

 

Singapore

3.9

2.9

3.3

2.9

Indonesia

5.1

5.2

5.5

5.5

Malaysia

5.7

4.7

5.1

5.2

Philippines

6

6.5

6.5

6.3

Thailand

0.5

3.5

4

4.5

US

2.4

3.2

3

2.4

Eurozone

0.8

1.1

1.6

1.6

Source: World Bank, Focus Economics, Economywatch

 

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, recent GDP data suggests economic activity may be on the slower side in the near future. The weak IDR is an ongoing challenge for investors and businesses in Indonesia. Any backtracking on reform or ad-hoc policy moves will be a potential risk. Evidence of improved implementation on infrastructure projects in 2H2015 will be important. In Thailand, increases in public sector spending are helping to support the economy and there is also potential for higher public sector investment in the months ahead. Singapore will be supported by loose monetary policy in major economies, stabilizing earnings and low valuations.

 

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.