Where in the world should you invest? This region represents 55% of globally listed companies

There are about 2,300 companies listed on the ASX and there are about 58,000 companies listed around the world.

The Australian market makes up about 2% of global share markets (in terms of market cap) and while 16% of Aussie investors are investing directly in international shares in 2023 (according to the ASX Australian Investor Study 2023), only 2% of median portfolio values were allocated in this way.

Sure, investors might be accessing international opportunities via ETFs and Managed Funds – something we will explore in this series – but the numbers still seem disproportionate.

As proud as I am of our great land, we have a market that is heavily skewed towards companies that dig stuff out of the ground and lend money to people. And whilst we do those things particularly well, they are not cutting-edge industries. 

Of course, there is the odd company (CSL, Cochlear, Wisetech, Aristocrat, Brambles) winning on a global scale, but ultimately there is a massive opportunity set beyond our shores.

So, what is holding us back? 

Could it be lack of knowledge? Could it be lack of access? Or is there more to the story?

In a multi-part series, I’ll be taking a deep dive into key investment regions around the world, with the help of fund managers who have expertise investing in the regions. The fundies will also be sharing their top stock pick for the region. 

Each fund manager will be asked the following 5 questions:

• What are the main characteristics of the investment region?

• Why do you like the region as an investment destination?

• What are the major risks to the region?

• What is the one thing that potential investors need to know before investing?

• What is one stock in your portfolio that best represents the region?

The aim is to educate investors about the regions, highlight the access points, and illuminate the risks and opportunities. So, strap in as we take a trip around the investing world.

Today we are exploring Asia with help from Cameron Robertson from Platinum Asset Management. 

Asia

Key stats and food for thought

• Asia is home to 60% of the world's population

• APAC is home to 55% of the 58,000 globally listed companies

• E-commerce revenues in Asia have surpassed other regions in the world and now account for nearly 60% of the world’s online retail sales (IMF, Accelerating Innovation and Digitalization in Asia to Boost Productivity, January 2023)

• The region’s robot density – an indicator of automation adoption – grew faster than other regions from 2016 to 2021. (International Federation of Robotics as of December 2022)

• In the last 20 years, technology innovation has accounted for nearly one-third of Asia’s per-capita growth (IMF Data, The Digital Revolution in Asia, April 2019)

Cameron Robertson, Platinum Asset Management

What are the main characteristics of the investment region?

Asia is a large, growing, and dynamic region with generally well-educated populations and countries in various stages of growth and development.

Why do you like the region as an investment destination?

There are huge opportunities for entrepreneurs in the region to build out infrastructure, goods, and services. 

Investing in the region gives you access to some fantastic businesses with world leaders in a range of areas, including electric vehicles and batteries, renewable energy infrastructure, semiconductors, and so on. 

Markets in this region also appear less efficient, with local norms and regulations being unfamiliar to many international investors. This creates opportunities for those who focus on this region to exploit misunderstandings and make money.

What are the major risks to the region?

Investors need to pay particular attention to corporate governance and geopolitics. 

It’s also important not to approach investment opportunities with preconceived notions of how things work based on experiences drawn from your home country, particularly with respect to government, legal systems, and consumer behaviour, as different countries and cultures all have their own nuances. 

On the positive side, the lessons of the late 1990s Asian Financial Crisis remain fresh in the minds of many countries’ officials and regulators, meaning the economic foundations of these economies are now relatively more resilient and robust.

What is the one thing that potential investors need to know before investing?

As always, it’s important to take a long-term perspective when investing in businesses across Asia. Whether you’re buying the shares of a domestic retailer or a world-leading semiconductor manufacturing company, their share prices can fluctuate a lot from day to day, but the underlying businesses and environments they operate in evolve over multi-year time horizons.

What is one stock in your portfolio that best represents the region?

There’s a broad range of interesting assets, however, Jardine Cycle & Carriage (SGX: C07) is a great example of one asset we like in the region. In our view, this is a well-run company with good corporate governance, solid economics and a dominant position in the still relatively nascent Indonesian car and motorbike market (among other assets they also hold across the region). As an investor, you can buy shares in this company for less than 10x earnings and get paid a little under 5% dividend yield while positioning yourself to capture the growth of Indonesia’s car market, with car penetration in the country at around one-tenth of what we see in Australia.

How to invest in Asia (some options)

• Platinum Asia Fund 

• BetaShares Asia Technology Tigers ETF

• abrdn Asian Income Fund 

• abrdn Sustainable Asian Opportunities Fund Active ETF (Managed Fund)

• Vanguard FTSE Asia ex Japan Shares Index ETF

• iShares ASIA 50 ETF

• Fidelity Asia Fund

This article was first published for Livewire Markets on Thursday, 6 June 2023.