The Asian Market Surges in the Wake of Brexit
“There are decades where nothing happens, and there are weeks where decades happen.”
Despite the turmoil within politics and the economy, there are a number of major trends that the financial media are completely ignoring.
Events in Europe during these past weeks, this year, and over the last decade for that matter, highlight that the European community – with its population of 510 million – is facing steep challenges. And the European Union may even be headed for oblivion.
Anemic economic growth, stubbornly high unemployment rates, sporadic acts of terrorism, big government, aging demographics, crushing debt, and a lack of will in foreign policy, are all part of the cocktail that shadow Europe’s future. Great Britain’s recent referendum to exit the European Community is just the tip of an iceberg, as Europe becomes less unified and less important to investors and American foreign policy, alike.
Meanwhile, way on the other side of the world, there are dynamically surging countries. With a combined population of 625 million and a GDP of 2.5 trillion – ten Southeast Asian nations recently launched an ambitious initiative to join their economies together in a common market.
The goal of the ASEAN Economic Community is to increase their common influence, form a counterweight to China, and boost growth and prosperity.
However, this diverse group of countries shares more than geography.
Malaysia, Indonesia, Malaysia, Thailand, and the Philippines have a young, tech savvy population with a rising middle class that is fueling booming consumer markets.
Indonesia, the fourth largest country in the world, boasts consumer spending that has more than doubled in the last decade as it approaches becoming a $1 trillion economy.
Singapore has become the most important financial and trading nexus in Asia, and is already the world’s richest nation on a per-capita basis.
Vietnam has the fastest-growing and the most-youthful economy in the world.
Myanmar, which is just beginning to open to the world marketplace, has plenty of room for catch-up growth.
International Up and Comers
These countries have, in spades, what Europe sorely lacks – strong economic and job growth, a young ambitious population, a rising middle class, optimism about the future, low debt, and an attractive destination for new capital and investment.
One fact is undeniable – over the past few years, Southeast Asia has attracted more foreign direct investment than China.
And now is the time for investors to capture some of this growth in their portfolios.
There are country-specific ETFs for almost all these countries but for one stop shopping, consider the Global X Southeast Asia ETF (ASEA).
The top pick in this region, right now, is Vietnam. This country is packed with talented, well-educated, ambitious people with great faith in their future, low real wages for a decisive competitive advantage, opportunities for market growth, low valuations, and robust foreign investment to drive its stock market forward.
To invest in Vietnam, seek out a fund manager that is plugged in to local markets.
The AFC Vietnam Fund would be an ideal recommendation. Managed by veteran stock pickers, it is up 14.8% so far in 2016 and has gained 62.9% over the past three years.
America’s Pacific Century
America and investors need to turn toward the Pacific region for higher growth and bigger profits.
This new and dynamic Asian economic community is not a threat to America’s future – it is an opportunity. If America renews, engages and deepens its leadership role, it can make this Pacific century another American century of peace and prosperity.
Much like Europe in the late 19th and early 20th centuries, the Asia-Pacific of the early 21st century is home to several rising, contending powers.
Instead of the American-shaped order that enabled China’s tremendous growth, new strategic balances are emerging, which are creating friction, tension, and disputes. And American diplomacy can play a critical role as leader, balancer, and mediator.
Two key components are required for America to play this role effectively – the right market reforms at home, and a persistent shift of attention and resources towards the Pacific region.
This spirit is captured in a quote from John Curtis Perry’s book, Facing West: Americans and the Opening of the Pacific, which describes how the US became a Pacific power through private initiative.
“American activity was largely private, not governmental; individual and not collective; sporadic, not systematic…and Americans were propelled by the lure of profitable commerce and a sense of destiny,” Perry wrote.
It is crucial to relentlessly highlight the importance of the Pacific region, when so many pressures and events are drawing America’s attention and resources elsewhere.
Investors need to keep the theme of Pacific America at the core of their portfolios. With so much potential on the horizon, it is a move that no one will regret.