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Asia – getting on the back of the Tiger

The rise of the Asian economic ‘tiger’ is well documented but it is often misunderstood on the Western side of the world. Many of the local economies lack transparency and prove difficult for non-local investors to extract value.

Often, perceived returns turn into zero returns. History says this is not uncommon in a developing region and it is therefore vital to have a strong thesis, a long-term vision and a core local presence.

Perhaps the most striking element of growth in the region is the demographic shift of large-scale migration towards cities in recent years. This is leading to large-scale infrastructure development as cities become larger in order to cope with increased population profile, job growth and ultimately, output.

As this process continues to evolve, the opportunities within education, technology, banking, healthcare and recruitment are enormous. Our focus has shifted from being ‘China centric’ to other parts of the region in order to explore unique opportunities where higher alpha can be extracted through intense research and analysis and where the masses are avoiding.

Banking the unbanked

The nature of banking in the region means that vast amounts of the population are under banked and even non-banked. This means that easy access to credit/finance is almost non-existent in certain areas outside of illegal moneylenders. Statistics show that loan growth in the region is growing at exponential rates in recent years but this is a cycle that is still in its infancy.

Economic growth is being driven by a number of factors that will endure volatile periods but continued credit expansion is both necessary and in order for the region to grow. Simple lifestyle changes are part of the urbanization process and banking is core to the story alongside investment in clever technology infrastructure.

Banking relationships can prove highly difficult in rural areas within emerging economies. It can be difficult to understand how someone can have no bank account or local branch but has access to a mobile phone with cheap internet access.

Asia is not on its own in this way of life. Large swathes of Africa are in a similar position but are different in that local banks have targeted the population through technology and mobile devices. This has led to mobile banking now being way of life across Africa in a mutually beneficial relationship between customers and banking institutions. This should also lead to positive social outcomes over time.

Hugely populated countries in Asia such as Indonesia are far behind in accessing a customer base that is under banked but financially feasible. With the number of internet users approaching 75 million, this will change quickly.

Our primary focus is to invest in such opportunities that will prove successful as the story plays out. This is why we are in places such as Singapore and Indonesia.