Jim Rogers: The New Safe Haven For Equity Investors

Posted by Tom Stevenson via The Telegraph.co.UK

Share on Facebook

Tweet on Twitter


So I wasn’t unduly surprised to read recently that he believes Burma to be “the best investment opportunity in the world, with North Korea not far behind”.

He exaggerates to make a point, but his comments gave me pause for thought because I am as guilty as anyone of lazily describing the investment world as a three-legged stool, as if the US, Europe and China were the only markets that mattered. In particular, his interest in Burma and North Korea is a reminder that there is a lot more to Asia than the Middle Kingdom.

Some of the countries that make up the ASEAN region have been among the best places to ride out the financial crisis. Stock markets in Indonesia and Thailand, in particular, trade at a healthy premium to their pre-crisis levels, while the world average remains deeply in negative territory compared with five years ago.

South-east Asia as a safe haven is a novel concept for anyone who remembers the region’s own devastating financial crisis in the late 1990s. I have a cartoon on my wall from a newsletter I published at the time showing a row of sick-looking tigers in hospital beds with thermometers in their mouths. The region has never really shaken off its image as the riskiest of emerging market bets.

But confidence is growing in a region of 600m people, with a fast-expanding middle class driving consumption and economic growth. The International Monetary Fund recently downgraded growth for the ASEAN region, showing it cannot completely buck a slowing global recovery. But it has still pencilled in 6.1pc growth next year, compared with 0.7pc for the euro area and 2.3pc for the US.

The ASEAN should not be underestimated. With a combined stock market capitalisation of more than $2 trillion and trade with China expected to top $500bn by 2015, the region is grabbing the attention of increasing numbers of investors. In the first half of this year, almost as much money flowed into ASEAN funds as flowed out of China. Having been the first investments to be liquidated in an emergency, they are taking on the characteristics of a port in the storm.

Many of the region’s attractions are familiar to China bulls. Rapid urbanisation and infrastructure build tell a similar story, for example, as do the robust government finances that make a high level of public investment possible. But there are differences, too. China’s one-child policy is leading to a rapid ageing of its population, but in South-east Asia more than 40pc of the population is under 25, putting the region in a demographic sweet spot. The ASEAN region is extremely diverse, however, so it is not possible to generalise beyond the obvious themes of higher consumption and investment. Vietnam and Singapore share membership of the economic organisation, but little else. Some of the region’s countries are rich in natural resources that others lack. Inflation is a problem in some places and not in others. Local knowledge is key.

One of the most interesting markets in the region is Thailand, and not just because it might be the best way to tap into the opening up of Burma. Thailand’s stock market has risen by 16pc so far this year, beating all the other main indices in Asia.

In part that reflects a quicker than expected recovery from last year’s floods. But it is also a consequence of a raft of pro-stimulus policies from the country’s populist government, including a 40pc rise in the minimum wage and a sharp reduction in corporation tax from 30pc to 23pc, with 20pc in the pipeline for next year.

Foreign investment is pouring into Thailand, with Japanese car makers seeing the country as a safe destination for companies seeking to escape the high yen and energy shortages following the Tohoku earthquake.

The government is playing its part, too, spending heavily on dams and flood defences as well as rail and road projects to help promote the country as a distribution hub for the region, linking China with frontier markets such as Cambodia.

Thailand might seem a bit mainstream for someone weighing up an investment in North Korea, but less adventurous investors than Jim Rogers probably won’t mind that.

Tom Stevenson is an investment director at Fidelity Worldwide Investment. The views expressed are his own. He tweets at @tomstevenson63