01.09.2016

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. Among the important things investors should know about the region are the following:

  • The ASEAN region is Asia’s 3rd largest economy and complements China and India in Asia’s long term growth story.
  • South-East Asia is the third most populous area globally, being home to 620 million people and with more than 50% of the population under the age of 30 (compared to 34% of Europe’s population). This demographic is expected to drive the region’s economies as many other parts of the world, including established economic superpowers, have ageing populations and shrinking labour forces.
  • ASEAN GDP doubled between 2007 and 2015, rising from USD 1.3 trillion to USD 2.7 trillion. Over the same period its GDP per capita rose 76%.
  • Growth is also being supported by vast capital inflows, especially into infrastructure. This includes, prominently, investment from the China-led Asian Infrastructure Investment Bank, which has USD100 billion in capital.
  • Wealth is being created quickly – it is thought that as of 2015, the region was home to more than 450,000 high net worth individuals with a combined wealth of USD2.2 trillion.
  • Compared to some more prosperous emerging markets, many of those in South-East Asia are still developing. This offers a more expansive investment environment. At the same time, the market is increasingly liquid and the combined market capitalization of the five South East Asian markets – Singapore, Malaysia, Thailand, Indonesia and Philippines - is now USD2.1 trillion.

 

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.”

 

REFORMS AND SUPPORT

A number of other fundamental developments are also strengthening the region’s economic health and, subsequently, investment opportunities. ASEAN governments 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. Budget deficits are coming down and consumer spending is picking up. The recent election of Rodrigo Duterte as Philippine president has drawn foreign investors to local equities with economists praising his pledges to increase infrastructure spending, cut red tape and invest more in agriculture. In Indonesia, the government has impressed investors with its commitment to boosting growth, including infrastructure spending. Presidential calls for lower interest rates have been heeded by the central bank with a series of cuts while the country’s financial services authorities have capped bank deposit rates, forcing their lending rates down and pushing cheap credit into the economy. Meanwhile, Thailand’s stock markets have become more attractive with rates low and USD 18 billion of economic stimulus having been announced in the last year alone.

More and more foreign businesses are looking to the opportunities offered by ASEAN countries as they turn to the region in greater numbers as China becomes less attractive. Japanese investment, to give just one example, in Southeast Asia continues to grow because of the region’s potential, drawn by, among other things, low labour costs. According to the Japan External Trade Organization, in 2015, FDI from Japan to ASEAN nations was higher than its FDI to China and Hong Kong – the third consecutive year it has been bigger. Meanwhile, figures from the Bank of Japan shows that as of the end of last year the outstanding amount of Japanese investment to ASEAN nations had almost tripled since 2010 to JPY20.1trn.

 

ONE REGION, ONE ECONOMIC COMMUNITY

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. At the end of last year, regional countries established the long-awaited ASEAN Economic Community (AEC), founded on ASEAN having the following four key economic characteristics: being a single market and production base; being a highly competitive economic region; being a region of equitable economic development, and being a region fully integrated into the global economy. In working towards the formal foundation of the organization, local economies and business conditions have been transformed in recent years. The major improvements that have been made include the creation of a more liberalized market with the elimination of most intra-ASEAN tariffs, reduced trade costs, improved investment regimes for both international and domestic investors, cross-border movement of skilled people and professionals has been facilitated and a number of free trade economic partnership treaties have been agreed. There have also been tangible improvements in transport and other infrastructure networks, helping firms by bringing down costs. And member states are continuing their commitment to deepen the region’s economic integration even further with their adoption of an agenda for further measures over the next ten years to create a stronger AEC.

 

 

OUTPERFORMANCE

The Fund has taken advantage of the opportunities in this dynamic and growing region, delivering long-term outperformance and strong returns. During the last five years it has repeatedly outperformed its comparative index, delivering an absolute return which was almost 20% higher (Class A USD as of 30.6.2016) than the comparative index over the same five year period.

 

 

OUTLOOK

In the medium to long-term, the region remains a very promising area to invest in with local economies expanding healthily and middle class populations growing quickly. In the short-term the region’s economic outlook is positive with growth forecasts for this year and 2017 well above those for many developed markets. ASEAN remains attractive for foreign investors and local multinationals are continuing to grow strongly. The recent launch of the ASEAN Economic Community will help these firms to expand their operations overseas. Following the UK’s Brexit vote at the end of June, some concerns have risen over global growth and the subsequent effect on regional economies. However, the IMF has not downgraded its growth forecasts for the ASEAN region in the wake of the UK’s vote and Brexit is not expected to have a major negative effect on China – ASEAN’s largest trading partner. In individual states in the region, the new administration in the Philippines has set out its economic agenda and the key issue going forward is the new government’s ability to implement structural reforms for continued market performance and sustained economic growth. Meanwhile, markets in Indonesia and Thailand will benefit from fiscal policies that will support growth mainly focused on infrastructure spending.

 

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.