23 Jan 3 Great Reasons Why You Should Include Asia in Your Portfolio
There’s been a lot of talk on growth investing over the past year.
Although the pandemic is still raging around the world, investors have been rushing towards big names that have performed well despite the downturn.
The large technology stocks such as Alphabet (NASDAQ: GOOGL), Facebook (NASDAQ: FB), Apple (NASDAQ: AAPL) and Amazon (NASDAQ: AMZN) have thrived amid the crisis.
The acceleration in businesses and individuals going online and resultant explosion in data usage have led to outperformance in the growth cohort.
The shift has been noticeably centred around the US, where huge liquidity exists and where many investors converge for a myriad of opportunities.
But they are all missing the elephant in the room.
I’m talking about Asia and its vast potential.
From our vantage point, the Asian region offers many enticing opportunities for investors to enjoy sustainable, long-term growth over years, if not decades.
Here are three great reasons why Asia should deserve a place within your investment portfolio.
Asia has already recorded a few notable successes that have even made the West sit up and take notice.
Sea Limited (NYSE: SE), a gaming and online payments company, was founded by Forrest Li and raised US$1.2 billion in an IPO in October 2017.
The company was valued at around US$4 billion upon its listing but has now grown into a US$120 billion behemoth in just three short years.
Sea’s clout was on display when it was awarded a digital full bank licence by the Monetary Authority of Singapore last December.
Meanwhile, gaming hardware and software company Razer Inc (SEHK: 1337) also went public in late 2017, raising US$528 million in an IPO in Hong Kong.
The company was backed by Intel (NASDAQ: INTC) and also Hong Kong’s well-known billionaire Li Ka Shing.
And let’s not forget the technology titans of the East: Tencent Holdings (SEHK: 0700) and Alibaba Group (SEHK: 9988), founded by entrepreneurs Pony Ma and Jack Ma.
Tencent’s share price has soared five-fold over the last five years.
The rapid ascension of these Asian companies is a reminder that growth is very much alive here in the East as well.
Asia becomes the centre of gravity
Asia is on track to form the bulk of the world’s gross domestic product.
More and more companies around the world have singled out the Asian region as a growth destination.
For instance, Starbucks (NASDAQ: SBUX), the ubiquitous coffee giant, has set its sights on growing in China and plans to open a new store every 15 hours for the next five years.
Overall, the company plans to almost double its current store count in China from 3,300 to 6,000 across 230 cities by 2022, an ambitious target to say the least.
Closer to home, both DBS Group Holdings Ltd (SGX: D05) and OCBC Ltd (SGX: O39) also have significant exposure to Asia.
DBS derived around 34% of its revenue from Asian countries outside of Singapore for the first half of 2020.
For OCBC, around 43% of its loan book in its latest half-year result came from Asian countries excluding Singapore.
And many more companies are setting their sights on Asia as a place to plant the seeds of their future prosperity.
With a burgeoning middle class and a new breed of entrepreneurs to address the increasing needs of the population, the new demand creates opportunities for investors.
For income-seeking investors, Asia offers its fair share of dividends.
Singapore is well-known for its reputation as a REITs hub since the maiden listing of a REIT, CapitaLand Mall Trust, back in July 2002.
By now, investors are aware that REITs offer steady, consistent dividends.
That said, investors need to look for the right REITs to invest in over the long-term.
The ones that have strong sponsors, attractive assets with high demand, and the ability to grow their asset bases through acquisitions are those that you can consider.
Many of these REITs offer exposure to real estate in Singapore and parts of Asia.
For instance, Parkway Life REIT (SGX: C2PU) owns hospitals and nursing homes in Singapore and Japan and has remained resilient throughout the pandemic.
Its distribution per unit has even risen year on year in the last quarter despite the crisis.
Elsewhere, many consumer stocks listed in Hong Kong also pay more than a decent dividend yield.
These companies tap into the burgeoning demand by the Chinese for essential and discretionary goods.
Hengan International (SEHK: 1044), a manufacturer of sanitary napkins and baby diapers in China, offers up a 4.9% dividend yield.
Goodbaby International (SEHK: 1086), a company that sells a comprehensive range of baby products, provides a near 5% yield.
And there are many more such examples if the astute investor cares to look more closely.
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Disclaimer: Royston Yang owns shares in Alphabet, Facebook, Starbucks, DBS Group and Apple.