Emerging Asia has pulled out of the pandemic faster than many might have expected. Its outperformance relative to developed economies and emerging market peers is due to several factors. Its experience of dealing with past health crises – notably Sars – has allowed it to cope better with Covid-19.
What’s more, the bloc’s anti-crisis economic policies have been prudent and measured, in contrast to the West, where governments and central banks have been forced to take far more extreme measures.
Take China. Although it was at the epicentre of the pandemic, policymakers there have not had to resort to excessive fiscal or monetary largesse. The world’s second-largest economy has not experienced a build-up in borrowing on the scale of developed economies. For instance, it went into the crisis with public debt at less than 50% of GDP.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The picture is similar in the rest of emerging Asia, comparing favourably with G5-economies where the average debt-to-GDP ratio is expected to exceed 150% next year. Asia has managed to support growth without sowing the seeds of potential future financial shocks.
The economies of the regional heavyweights – China and India – are as diversified as the US, with a balanced mix of heavy industry and services sectors. Emerging Asia should be the fastest-growing region in the world this year, with GDP expanding by up to 8.6%. All of this throws up a number of attractive structural and cyclical investment opportunities.
One of these is Chailease International Finance Corp. (Taipei: 5871), a Taiwan-listed specialised-finance company that lends to consumers and small businesses. A market leader on its home turf, it is now successfully applying its expertise to the underpenetrated mainland Chinese market. Unlike some industries where economies of scale can make or break a company, this is an arena where being a smaller operator is a competitive advantage. This is because many of its customers are just too small for its larger peers to bother with, meaning it can pick a high-quality client base.
Another of our favourites is Ming Yang Smart Energy Group (Shanghai: 601615), a wind-turbine manufacturer. We believe the company will benefit from China’s 2060 carbon-neutral goal and the broader environmental aims set out in the country’s most recent five-year plan. This is a fragmented yet dynamic market that we believe should consolidate over time. It bodes well that Ming Yang is based in one of China’s richest provinces, which has both the intention and the capacity to spend money on more wind-turbine installations. While highly sought-after sectors such as renewables have frothy valuations, this is a well-priced company.
Finally, Wiwynn (Taipei: 6669) remains a core holding for us. It focuses on research and development as well as the distribution of servers for cloud services and hyperscale data centres. Demand for Wiwynn’s services is expected to grow as the world extends its move online and as the likes of Amazon and Facebook continue to build their servers and data centres. This stock has lagged its peers, but we remain impressed with the company’s structural growth potential as demand ramps up.
-
What do rising oil prices mean for you?As conflict in the Middle East sparks an increase in the price of oil, will you see petrol and energy bills go up?
-
Rachel Reeves's Spring Statement – live analysis and commentaryChancellor Rachel Reeves will deliver her Spring Statement on 3 March. What can we expect in the speech?
-
Three Indian stocks poised to profitIndian stocks are making waves. Here, professional investor Gaurav Narain of the India Capital Growth Fund highlights three of his favourites
-
UK small-cap stocks ‘are ready to run’Opinion UK small-cap stocks could be set for a multi-year bull market, with recent strong performance outstripping the large-cap indices
-
Hints of a private credit crisis rattle investorsThere are similarities to 2007 in private credit. Investors shouldn’t panic, but they should be alert to the possibility of a crash.
-
Investing in Taiwan: profit from the rise of Asia’s Silicon ValleyTaiwan has become a technology manufacturing powerhouse. Smart investors should buy in now, says Matthew Partridge
-
‘Why you should mix bitcoin and gold’Opinion Bitcoin and gold are both monetary assets and tend to move in opposite directions. Here's why you should hold both
-
Invest in the beauty industry as it takes on a new lookThe beauty industry is proving resilient in troubled times, helped by its ability to shape new trends, says Maryam Cockar
-
Should you invest in energy provider SSE?Energy provider SSE is going for growth and looks reasonably valued. Should you invest?
-
Has the market misjudged Relx?Relx shares fell on fears that AI was about to eat its lunch, but the firm remains well placed to thrive
