3 Reasons Investing In Asian Markets Is A Wise Choice
Even with volatility in Asian markets, Asia has proven to be a wise investment if investors adopt a long-term, fundamentals-based approach to investing.
With the continent’s role in driving world-wide economic growth, investing in Asian markets is commonly viewed as a wise investment. With that being said, market liquidity and volatility seem to plague Asian markets, causing some investors to question whether or not Asia is a worthwhile addition to their investment portfolio.
Even with likely volatility in the markets for the foreseeable future, we can still see a diligent, fundamentals-based approach to investing in Asia, that is led by a long-term mindset that will outperform other investments globally. This can be attributed to four contributing factors.
1. Aggregate market capitalisation in Asia now rivals that of United States and Europe.
Asian capital markets have been growing so much in depth and size that Asia’s aggregate market capitalization now rivals even the United States and Europe. From these numbers, a very positive picture can be drawn.
The Asian Development Bank has forecast that by 2050, Asia will account for half of worldwide Gross Domestic Product (GDP). Supporting this outlook, a study conducted by DBS projected that by 2020, the region’s GDP will be $22.4 trillion. This is more than $11 trillion larger than it was in 2015.
Early investors in Asian markets have already made significant returns from the region’s exponential growth.
2. Asia is not a single homogenous market.
Instead of a single market, run by a single nation, the Asian marketplace is comprised of a diverse set of markets, ranging from developed countries like Australia, Korea and Japan, to those that are just now beginning to emerge; such as China and India. Each bound to one another by intricate trade links, treaties and other inter-dependencies.
Understanding the differences among this market and analyzing the trends presented by historical data, can provide a truly unique insight and set the record straight about investments that are available in prospering Asian markets.
3. Eroding global boundaries for industry and trade.
The boundaries for businesses around the world are eroding and global trade is offering attractive opportunities for investors and international companies.
Over the last decade, many western companies have capitalized on under-serviced niches in Asian markets. Two examples are:
Mead Johnson underwent massive growth thanks largely to increasing demand from China for high-quality infant nutritional products.
Richemont (who owns Cartier) has also had success capitalizing on the growth of the middle and upper class in Asian markets.
All in all, Asian markets will continue to be volatile. Investors should expect that here will be periods of panic, and there will be times of euphoria. This is undeniable, and certainly not cause for concern.
The best and safest approach to the Asian market is to consider a multi-year view. Try not to think of your long-term investment strategy as a series of short-term investments. Instead, think of it as a series of expansions and contractions that with ultimately encourage long-term growth and profitability within your investment portfolio. Following that mindset is where really good opportunities for investment can be found in the Asian markets.