ASEAN: Where Positive Demographics Meet Supportive Secular Trends
While ASEAN has not been immune to the widespread volatility triggered by the COVID-19 pandemic and geopolitical tensions, we believe the region remains resilient and is well-positioned for medium and longer-term growth given the supportive secular trends that have emerged over the last decade. Chief among them, many large multinational corporations have looked to diversify their manufacturing supply chains beyond China in recent years. The trade discussions between the U.S. and China have accelerated these efforts—with ASEAN’s large and competitive labor force and potentially strong consumer base looking increasingly attractive.
To seize a share of this manufacturing renaissance, many ASEAN countries—particularly the so-called tiger cub economies like Indonesia—have been enacting structural reforms, such as corporate tax cuts and labor law reforms, to enhance economic competitiveness.
Infrastructure investment has also increased across the region, which is supportive of GDP growth and encouraging of foreign direct investment. These factors, in turn, could pave the way for additional growth drivers to flourish—such as tourism, particularly once travel patterns return to normal.
Given the region’s favorable long-term growth outlook, equity markets in ASEAN have expanded notably over the last decade. Participation has increased, not only from international institutional investors, but also from a developing domestic investor base with rising wealth and growing institutional pools of capital. And while these markets—like many others—may very well face challenges in the coming months, we believe the compelling combination of supportive demographics and favorable secular trends creates a strong case for investing in the region’s equity markets over the medium to long term.
