We are pleased to have Lion Global Investors to share their investing thought process and outlook on Emerging Asia.
1. What are the factors driving growth in Emerging Asia?
Asian stocks have surged in 2024, with many delivering
double-digit returns year-to-date[1]. With Asia being so large and diverse, it is worth
narrowing down to a specific group: the Asian Tigers.
The ‘original’ Asian Tigers (Hong Kong SAR[2], Singapore, South Korea, and Taiwan) were models of
rapid economic development, known for their strong export-led growth,
technological advancements, and integration into the global economy. They
quickly transformed from low-income to higher-income economies. These nations
have prospered, so it is now an opportune time to discover the next generation
of Asian Tigers, which includes India, Malaysia, Indonesia, and Thailand (IMIT).
Among the world’s top 40 economies by 2023 Gross
Domestic Product (GDP), 16 economies[3] are from Asia, with India, Malaysia, Indonesia and
Thailand among these economies. As companies diversify their production bases
and embark on the global trend of trade diversification, this will create
opportunities for more Asian economies.
With this backdrop, Goldman Sachs Research[4] expects emerging markets
(EM) share of global market capitalization to rise from 27% (2022) to 35%
(2030), 47% (2050), and to 55% (2075). In 2050, Goldman Sachs Research[5] also believes India and
Indonesia to be among the world’s 5 largest economies.
Projected market
capitalization [6] (trillion real USD 2021)
Note: DM and EM refer to developed markets and emerging markets respectively.
Asian Tigers 2.0 (India, Malaysia, Indonesia, and Thailand) are thus well positioned to drive Asia’s new phase of growth.
2. What do you believe are the gems of Emerging Asia?
Anchored by favourable labor costs and business-friendly environments, we believe India, Malaysia, Indonesia, Thailand (IMIT) are favourably positioned to produce competitive exports and attract huge foreign direct investments. We believe IMIT are the next Asian Tigers that will renew Asia’s economic landscape.
Being Emerging Markets, these IMIT countries are naturally expected to achieve higher growth levels than developed markets like the US. Demographically, the IMIT countries are young, and they hence do not face the ageing population issues that impact the developed countries.
India
India has the world’s largest working-age population, with its demographics favourably positioned for growth, similar to China in its booming era at the early 2000s.
Source: Population Pyramid as of 31 October 2024.
In 2021-2023, India’s average Gross Domestic Product (GDP[7]) growth rate reached 8.1%
per annum (pa), overtaking China’s 5.6% pa. In the same period, India’s average
GDP per capita growth rate reached 7.3% pa, also overtaking China’s 5.6% pa.
Anchored by the world’s largest population and a
rising economy amidst the global trend of trade diversification, India is
expected to attract huge foreign direct investments (FDIs) into its
manufacturing sector. These were the same drivers that grew China’s economy in
its past decades.
Source: World Data as of 28 June 2024.
Goldman Sachs Research[8] expects China’s relative EM share of global market capitalization to decline from 40% in 2022 to 30% in 2050. On the flipside, India’s share is expected to rise from 12% (2022) to 17% (2050), driven by a younger working-age population and faster GDP per capita growth.
India’s economic growth is also reflected in the stock market. Based on Bloomberg data between March 2018 and October 2024, India cumulatively outperformed Singapore, Korea and Hong Kong SAR.
Source: Bloomberg as of 31 October 2024.
Past performance and the predictions, projections or forecasts on the economy, securities markets, bond markets or the economic trends of the markets are not necessarily indicative of the future or likely performance of the ETF.
Indonesia
Indonesia is ASEAN’s[9] largest economy and population, contributing 40% of ASEAN’s GDP and population[10].
Being the world’s largest producer of nickel, it is also one of the few countries in the world to enjoy a trade surplus[11] with China, which reached USD 9 billion in 2023 even at weak commodity prices.
Source: Verdhana Research as of January 2024.
Back to the topic of growth, some analysts[12] expect Indonesia’s GDP to potentially double from 2022 to 2032.
Indonesia GDP per capita (US$)
Source: Verdhana Research as of January 2023.
In nickel production, Indonesian producers have benefited from lower operating costs (such as cheaper labour and energy), and lower costs for capital from Chinese financers. In 2023, Indonesia produced 40.2% of the world’s nickel[13]. This share is expected to grow to 43.9% of the world's nickel by 2027.
Indonesia’s annual primary nickel production
Source: S&P Global Market Intelligence as of 30 January 2024.
In the past decade (2014-2023), Indonesia’s 10-year average Gross Domestic Product (GDP[14]) growth rate reached 4.2% per annum (pa), overtaking Singapore, South Korea and Hong Kong SAR. In the same period, Indonesia’s 10-year average GDP per capita growth rate reached 3.3% pa, also overtaking Singapore, South Korea and Hong Kong SAR.
Anchored by Southeast Asia’s largest population and growing exports (such as nickel and steel), Indonesia is expected to double its GDP between 2022-2032.
Source: World Data as of 28 June 2024.
Malaysia
In recent years, Malaysia has shown greater stability and signs of growth. Malaysia’s 5.9% Q2 2024 GDP growth[15] surpassed market expectations, igniting the possibility of Malaysia’s full-year GDP exceeding 5% in 2024.
Source: Bank Negara Malaysia Quarterly Bulletin as of
19 July 2024.
Malaysia has been attracting investments[16] from US and Chinese tech
giants in areas such as data centers, cloud and artificial intelligence (AI).
- Nvidia (USD 4.3 billion AI development project with
YTL Power)
- Microsoft (USD 2.2 billion cloud and AI
infrastructure; its largest investment in Malaysia)
- ByteDance (USD 2.1 billion AI hub)
- Google (USD 2 billion data center and Google Cloud)
These tailwinds are reflected in Malaysia’s stock
market. Based on Bloomberg data between 1 Jan 2024 to 31 Oct 2024, the FTSE
Bursa Malaysia 100 Index gained 22.1% within 10 months in USD terms,
outperforming the MSCI Emerging Markets Index and MSCI Emerging Markets Asia
Index.
|
As of October 2024 (USD,
Total Return)
|
% cumulative return between 1 Jan 2024 to 31 Oct 2024
|
% cumulative return between 1 Jan 2019 to 31 Dec
2023
|
|
FTSE
Bursa Malaysia 100 Index
|
22.1%
|
-0.3%
|
|
MSCI
Emerging Markets Index
|
12.2%
|
22.1%
|
|
MSCI
Emerging Markets Asia Index
|
16.5%
|
25.7%
|
Source: Bloomberg as of 31 October 2024.
Past performance and the predictions, projections or forecasts on the economy, securities markets, bond markets or the economic trends of the markets are not necessarily indicative of the future or likely performance of the ETF
Thailand
Thailand is Southeast Asia’s second largest economy with tourism as a core driver of its economy. After Covid-19, Thailand is seeing a long-awaited rebound in tourist arrivals[17], with 35-37 million arrivals expected in 2024, nearing its peak of 40 million arrivals in 2019.
Source: Bank of Thailand as of 30 September 2024.
The government has been implementing measures[18] (effective 15 July 2024) to increase tourism by:
- Allowing visa-free entry from 93 countries and territories with stay up to 60 days.
- Introducing a new "Destination Thailand Visa" for digital nomads and freelancers, with 5-year validity and allowing stay up to 180 days.
- Extending the stay for international students to 1 year after graduation.
All these drive tourist consumption and economic growth, which increases tax revenue for redistribution.
Thailand is also redistributing tax revenue gains to ignite domestic consumption. On 23 April 2024, Thailand announced the Digital Wallet Policy[19], which will give THB 10,000 each to 45 million Thais. This flagship THB 500 million handout scheme is expected to end by September 2026. Phase 1 started in September 2024, aiming to distribute THB 10,000 cash to 14.5 million welfare card holders and disabled citizens. Eligible population include (a) Thai citizens aged 16 and above, and (b) annual income of <THB 840,000 or savings of <THB 500,000. The combined pro-tourist and domestic stimulus measures are expected to revise SET-listed companies’ earnings in the next 12 months.
On the longer term, Thailand is looking to pass a draft casino bill by 2025. Once passed, Thailand’s first legal casino aims to open by 2029 and leapfrog Japan’s 2030 opening of MGM Osaka. Harnessing Thailand’s leading position in Asia tourism, the casino complexes are expected to attract over USD 10 billion in foreign investments[20]. As such, Thailand is doubling down on its tourist advantage to drive long-term consumption and growth.
Through the Lion-China Merchants Emerging Asia Select Index ETF, investors gain a 4-in-1 opportunity to access Emerging Asia’s gems.
3. Could you share about the Lion-China Merchants Emerging Asia Select Index ETF, with regards to its index methodology? (e.g. how geographical allocations are determined and companies are selected)
A collaboration between Lion Global Investors and China Merchants Fund Management, the Lion-China Merchants Emerging Asia Select Index ETF is the world’s first Emerging Asia ETF traded in SGD. This ETF gives investors exposure to India, Malaysia, Indonesia and Thailand (collectively known as IMIT).
The ETF tracks the iEdge Emerging Asia Select 50 Index, which contains the 50 largest and most tradable companies by Foreign-Ownership-Adjusted Free-Float Market Capitalisation domiciled in IMIT and listed on the relevant IMIT stock exchanges or the US Exchanges. The index is rebalanced semi-annually in March and September. Below are details about the index methodology.
*Accessed via the Bombay Stock Exchange.
^Non-Voting Depositary Receipts (NVDRs) only.
The iEdge Emerging Asia Select 50 Index has outperformed both the MSCI Emerging Markets and MSCI Emerging Markets Asia indices in 2024 year-to-date since its launch date on 19 July 2024.
|
As of
October 2024 (USD, Total Return)
|
2024 YTD return since index launch (19 Jul
2024)
|
|
iEdge
Emerging Asia Select 50 Index*
|
5.48%
|
|
MSCI Emerging Markets Index
|
3.38%
|
|
MSCI Emerging Markets Asia Index
|
4.55%
|
Source: SGX Index Edge as of 31 October 2024.
*The iEdge Emerging Asia Select 50 Index was launched on 19 July 2024.
Past performance is not necessarily indicative of future performance.
4. What are some key features of the Lion-China Merchants Emerging Asia Select Index ETF?
Many emerging market ETFs are heavily weighted toward China, Taiwan, and South Korea, making them less ideal for investors looking for specific exposure to IMIT. The Lion-China Merchants Emerging Asia Select Index ETF offers targeted exposure to IMIT with 3 key features summarized as Grow and Diversify your Portfolio (GDP).
- Grow: The ETF focuses on helping investors ride on the growth of IMIT.
- Diversify: The ETF offers natural diversification across stocks, sectors and countries[21] through the index’s weightage caps of 7%, 40% and 50% respectively.
- Portfolio: The ETF helps investors access a portfolio of the 50 largest and most tradable companies in IMIT.
^Refers to Countries of Domicile. (i.e. India, Malaysia, Indonesia and Thailand)
5. Could you shed some light on the ETF’s geographical breakdown and a few of its top holdings?
As of 31 October 2024, India accounts for the largest weight in the index at 33.5%, followed by Indonesia at 21.8%, Thailand at 16.2%, and Malaysia at 13.9%, reflecting the relative size of their economies. Finance is the largest sector, making up 39.5% of the portfolio, with Technology and Energy rounding out the top three sectors. The index is well-diversified across 11 sectors.
Source: SGX Index Edge as of 31 October 2024.
*Note: The United States constituents include companies domiciled in India, Malaysia, Indonesia, and Thailand, but chose to list in the United States.
Below is a table showcasing the index’s top 20 constituents, including the household names in each IMIT country such as Bank Central Asia, HDFC Bank, Delta Electronics, Maybank, and Bharti Airtel. Investors can gain exposure to all of these through the Lion-China Merchants Emerging Asia Select Index ETF.
Source: SGX Index Edge as of 31 October 2024.
Securities referenced are not intended as recommendations to buy or sell.
Through the Lion-China Merchants Emerging Asia Select Index ETF, investors gain a building block to conveniently access the growth of IMIT, while diversifying across stocks, sectors and countries.
6. Any closing comments?
The Lion-China Merchants Emerging Asia Select Index ETF is the world’s first Emerging Asia ETF traded in SGD. This ETF is an Excluded Investment Product (EIP), so it is accessible to all investors. The ETF is open for subscription on the FSM platform at USD 1.00 per unit from 25 November to 6 December 2024 and can be traded on the SGX from 11 December 2024 onwards. The SGD ticker is EAA.
With USD 1.00, Emerging AsiA is within your reach. Access IMIT and make the right move in Emerging AsiA.
^ Up to a maximum of 0.99% per annum of the Net Asset Value of the Fund
*Application Unit size is at the discretion of the Manager. Application Unit size may be less than 200,000 and in multiples of 1 Unit during the Initial Offer Period.
Footnotes:
[1] Source: Lion Global Investors as of 31 October 2024
[2] Note: SAR refers to Special Administrative Region of the People's Republic of China
[3] Source: World Data as of 28 June 2024.
[4] Source: Goldman Sachs Research Projections as of 22 June 2023.
[5] Source: Goldman Sachs Research Projections as of 22 June 2023.
[6] Source: Goldman Sachs Research Projections as of 22 June 2023.
[7] Source: World Data as of 28 June 2024.
[8] Source: Goldman Sachs Research Projections as of 22 June 2023.
[9] Note: ASEAN refers to the Association of Southeast Asian Nations
[10] Source: Verdhana Research as of January 2024.
[11] Source: Verdhana Research as of January 2024.
[12] Source: Verdhana Research as of January 2023.
[13] Source: S&P Global Market Intelligence as of 6 February 2024.
[14] Source: World Data as of 28 June 2024.
[15] Source: Bank Negara Malaysia Quarterly Bulletin as of 19 July 2024.
[16] Source: Vulcan Post as of 20 June 2024.
[17] Source: Bank of Thailand as of 31 August 2024.
[18] Source: Straits Times as of 13 July 2024.
[19] Source: Thailand Government Public Relations Department as of 23 April 2024.
[20] Source: Channel News Asia as of 10 July 2024.
[21] Refers to Countries of Domicile
Disclaimer – Lion Global Investors Limited
This advertisement or publication has not been reviewed by the Monetary Authority of Singapore. It is for information only, and is not a recommendation, offer or solicitation for the purchase or sale of any capital markets products or investments and does not have regard to your specific investment objectives, financial situation, tax position or needs. You should read the prospectus and Product Highlights Sheet of the Lion-China Merchants Emerging Asia Select Index ETF (“ETF”), which is available and may be obtained from Lion Global Investors Limited (“LGI”) or any of the its distributors and appointed Participating Dealers (“PDs”), for further details including the risk factors and consider if the ETF is suitable for you and seek such advice from a financial adviser if necessary, before deciding whether to purchase units in the ETF.
Investments in the ETF are not obligations of, deposits in, guaranteed or insured by LGI or any of its affiliates and are subject to investment risks including the possible loss of the principal amount invested. The performance of the ETF is not guaranteed and, the value of its units and the income accruing to the units, if any, may rise or fall. Past performance, payout yields and payments, as well as, any prediction, projection, or forecast are not necessarily indicative of the future or likely performance, payout yields and payments of the ETF. Any extraordinary performance may be due to exceptional circumstances which may not be sustainable. Dividend distributions, which may be either out of income and/or capital, are not guaranteed and subject to LGI’s discretion. Any such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value of the ETF. Any references to specific securities are for illustration purposes and are not to be considered as recommendations to buy or sell the securities. It should not be assumed that investment in such specific securities will be profitable. There can be no assurance that any of the allocations or holdings presented will remain in the ETF at the time this information is presented. Any information (which includes opinions, estimates, graphs, charts, formulae or devices) is subject to change or correction at any time without notice and is not to be relied on as advice. You are advised to conduct your own independent assessment and investigation of the relevance, accuracy, adequacy and reliability of any information or contained herein and seek professional advice on them. No warranty is given and no liability is accepted for any loss arising directly or indirectly as a result of you acting on such information. The ETF may, where permitted by the prospectus, invest in financial derivative instruments for hedging purposes or for efficient portfolio management. The ETF’s net asset value may have higher volatility as a result of its narrower investment focus on Emerging Asia countries, when compared to funds investing in developed markets. LGI, its related companies, their directors and/or employees may hold units of the ETF and be engaged in purchasing or selling units of the ETF for themselves or their clients.
The units of the ETF are listed and traded on the Singapore Exchange Securities Trading Limited (“SGX-ST”), and may be traded at prices different from its net asset value, suspended from trading, or delisted. Such listing does not guarantee a liquid market for the units. You cannot purchase or redeem units in the ETF directly with the manager of the ETF, but you may, subject to specific conditions, do so on the SGX-ST or through the PDs.
© Lion Global Investors Limited (UEN/ Registration No. 198601745D). All rights reserved. LGI is a Singapore incorporated company and is not related to any corporation or trading entity that is domiciled in Europe or the United States (other than entities owned by its holding companies).
Disclaimer – Singapore Exchange Limited for iEdge Emerging Asia Select 50 Index
The units of the Lion-China Merchants Emerging Asia Select Index ETF are not in any way sponsored, endorsed, sold or promoted by the Singapore Exchange Limited (“SGX”) and/or its affiliates and SGX and/or its affiliates make no warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the iEdge Emerging Asia Select 50 Index and/or the figure at which the iEdge Emerging Asia Select 50 Index stands at any particular time on any particular day or otherwise. The iEdge Emerging Asia Select 50 Index is administrated, calculated and published by SGX. SGX shall not be liable (whether in negligence or otherwise) to any person for any error in the Lion-China Merchants Emerging Asia Select Index ETF and the iEdge Emerging Asia Select 50 Index and shall not be under any obligation to advise any person of any error therein.
Intellectual property rights in the iEdge Emerging Asia Select 50 Index vest in SGX. The iEdge Emerging Asia Select 50 Index is used by Lion Global Investors Limited under licence.
Disclaimer – China Merchants Fund Management Company Limited
The references to the company name and logo of China Merchants Fund Management Company Limited in this material do not constitute a guarantee by China Merchants Fund Management Company Limited of the authenticity, accuracy and completeness of the relevant content, nor do they constitute a judgment or guarantee by China Merchants Fund Management Company Limited of the investment value and performance of the Lion-China Merchants Emerging Asia Select Index ETF. China Merchants Fund Management Company Limited assumes no liability for this material or the investors’ investment in the Lion-China Merchants Emerging Asia Select Index ETF.
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