Asia: Foreign Investor\'s Perspective

Economic, Political, And Social Changes Impact on Growth

Region of the world: Asia

The region of Asia contains some of the world's most rapidly-growing economies. China's middle class is now securely established; India offers one of the most desirable arenas for outsourcing, given its low labor costs, English-speaking population, and technologically-literate workforce. More and more retail companies are targeting Asia due to the fact that many Asian nations boast expanding populations of young people and the sheer size of China and India's untapped markets. "If current trends continue, Asia's economy will surpass those of the United States and Europe combined in less than two decades -- a prospect that has prompted some to dub the 21st century the Asian century" (Asia faces five challenges to its economic future, 2014, IMF).

Asia's economy as a whole has been relatively durable when compared with its Western competitors: "while the financial environment for emerging markets has been challenging, financial conditions across Asia have remained broadly conducive. Domestic credit growth and corporate bond issuance have been strong" (Chapter 1, 2014, IMF: 2). The market for exports, particularly in China and Korea, remains robust and product as diverse as SUVs and Starbucks are being devoured in particular by Chinese consumers, newly flush with the ability to engage in conspicuous consumption. "With its combined population of more than 600 million people, strong economic growth and a growing middle class, Southeast Asia offers superb business opportunities for corporations" (Southeast Asia, 2014, J.P. Morgan).

From an investor's perspective, however, the Asian region does pose some concerns due its fluidity. "Set prices in Asia have…experienced large swings, in many instances coinciding with episodes of capital flow surges and reversals and underscoring the potential vulnerability to global bouts of volatility" (Chapter 1, 2014, IMF: 8). India and Indonesia in particular have shown themselves vulnerable to external economic influences (Chapter 1, 2014, IMF: 9). Still, within most nations "asset prices do not appear greatly out of line with fundamentals" (Chapter 1, 2014, IMF: 10-11). Despite concerns about the housing market bubble bursting in Hong Kong SAR, and high credit growth in Malaysia and Singapore, Asian governments have shown themselves to be relatively responsive to the need to enact reforms in an aggressive fashion to deal with structural vulnerabilities. "Actions taken have included policy rate hikes, increases in fuel prices, and other supply-side measures in India and Indonesia as well as a significant fiscal adjustment in Malaysia (encompassing tax increases, spending cuts, and fuel price adjustments). These efforts have started to pay dividends in Indonesia and India, as inflation is on a downward trend and the current account deficits in both countries are on a declining path" (Chapter 1, 2014: 17).