Future of Asia

Found this report referenced from an AFR article on Atlassian this morning

Some key/interesting points:

1. Asia was the destination for $1 of every $2 in new investment in the past decade; 43 percent of the world’s top 5,000 firms by revenue are headquartered in the region.
2. The capital influx has not resulted in higher economic profit; Asia accounts for half of the deterioration in global economic profits from $726 billion to an economic loss of $34 billionfrom 2005-07 to 2015-17.
3. Capital intensification of the world accounts for 90 percent of the global fall in return on capital that is driving down economic profit, particularly in Asia.
4. The decline in global economic profitability over the decade largely reflects the cyclical energy and materials sector, European finance, and Chinese capital allocation to valuedestroying sectors.
5. However, pockets of economic-profitgenerating excellence can be found in several sectors across Asia.
6. The opportunity: Asia could unlock $440 billion of incremental economic profit from two major levers: turning around troubled companies and capturing companies’ latent potential to create more profit champions.


The picture is by no means negative across the board. Behind the averages, some Asian companies and sectors are performing exceptionally well. Pockets of significant value creation can be found in major countries and in varied sectors (Exhibit 7). For example:
— Japan’s capital goods sector creates the most value in Asia with a performance comparable to its counterparts in North America and Europe.
— Financial services are highly profitable in China and in Australia.
— Technology-driven sectors, especially IT, create a great deal of value in China, Japan, and South Korea, and are improving as a source of value creation in India.
— Southeast Asia’s energy and materials sector generates substantial value despite the sector’s overall underperformance globally.

Countries have a competitive edge in different sectors. Japan and South Korea, for instance, lead in high-tech manufacturing, China has a host of dynamic new internet companies, and India gains most of its economic profit from its IT services firms. The breadth of the corporate ecosystem also varies. In Southeast Asia’s energy sector, for instance, economic profit is being generated by only a handful of vertically integrated companies.

However, we recognize that EP is not the sole determining factor of top performing firms. Each sector has different industry characteristics and specific metrics to assess performance. Structural factors including regulations and competitive dynamics in specific countries and sectors can also create favorable conditions for companies

 

I spend 30-40% of my time in China/Hk/Japan these days. Asia is definitely the future. Leagues ahead. If you held for long you’d definitely make 20% IRR doing nothing

 

I've had exceptional returns in mainland as well as Taiwan.

 

Ah yes Taiwan is nice - I was there in Nov and Dec mainly for going to AI. My feeling was Taipei is a more niche market and you have to know it very well, can’t just buy randomly if you’re doing real estate. Semi conductor stocks though are great.