Asia, holding over half the world’s population, is back on investors’ radars. After witnessing a lot of tangible, structural change in recent years, an acceptance of capitalism and capitalistic development and a yearning to align itself with the growth and expansion that China has enjoyed, is authorising the continent to take a more central role this year. Still comparatively cheap, investors are buying into markets like Taiwan and South Korea because they consider them global growth trades. Initially Donald Trump’s victory threatened to mar the case for emerging-market stocks, as America’s new president vowed to defend his country from trade-inflicted ‘carnage’.
The primary response of Asian stock investors was obvious - sell, fearing his protectionist trade style would harm the region's export economies, and rising rates and the strengthening dollar that followed Trump’s victory risked pushing capital out of the developing world. Where the US dollar tends to move; historically capital flows to the region are inclined to do the opposite. However, billions of dollars have been pumped into Asia and, in particular, its emerging markets over the last year.
Emerging markets are enticing fresh funds emphasising a tendency among investors to look further afield for returns as weekly inflows into emerging-market stocks came to $2.1 billion, marking a fourth straight week of gains. Economic data in Asia has steadied and waning concerns over potential US trade policy has helped lift equities, while the markets benefited from local currency strength. Foreign money is expected to increase and according to new research released by ANZ, capital inflows to the region rose to $US15.3 billion in March, and the United Overseas Bank foresees FDI inflows into ASEAN to surpass China for the first time this year. The existing absence of infrastructure investment, alongside the opening up of frontier ASEAN economies such as Myanmar offer huge possibilities for investors.