Key areas to invest in Asia for 2018
Dr. Johnny Hon, Founder and Chairman of The Global Group, discusses the key areas of growth in Asia this year and advises Business Chief readers what to look out for in 2018.
My venture capital, angel investment and strategic consultancy company, the Global Group, revolves around the motto ‘Bridging the New Frontiers’. To me, there’s no greater opportunity for any investor or venture capitalist than the Asian market, which, depending on one’s definition, may be said to span from Siberia or Turkey right through to New Zealand. However, there is a prevailing, incorrect perception that Asia is an easy market to enter, for example due to its vast consumer base. But despite its huge potential, investors should not be sanguine with regard to Asian opportunities if they are to make the most of this complex and fascinating business landscape.
Asia’s expansive geography, which includes more than half of the world’s population, means there is no one-size-fits-all approach for investors. China alone has such a dynamic and variegated economy that a business strategy fit for its financial capital, Shanghai, will most likely not apply to much of the rest of the country.
Asia’s diverse economies mean that investors targeting the continent will encounter countries at vastly different stages in their development. Japan and South Korea are leaders in consumer technology and Singapore has also reached the level of a first world economy. India is a leader in software development but will require massive investment in infrastructure for decades to come. And then there are economies such as Indonesia and Pakistan, which also offer huge potential for entrepreneurs. Surrounded by such giants as China and India, respectively the first and second most populous countries on earth, it is all too easy to forget that Indonesia and Pakistan are in turn the world’s fourth and fifth most populous nations. It is therefore very important that each Asian country is considered individually, rather than just all being lumped together.
With that in mind, there are distinct areas of development that offer significant opportunities for investment in Asian markets. There is a clear uplift in the market for luxury goods and high-end retail, a trend associated with the rising popularity of foreign brands and a steadily growing middle class. This is particularly noticeable in China, where heritage brands and luxury products, such as the classic Hermes scarf or tie, for example, are in high demand, but this trend is discernible throughout the region. The increasing appetite for foreign imports is not limited to goods: leisure activities and services are also increasingly sought after, be they overseas travel or theme parks, including the June 2016 opening of Disneyland in Shanghai. Although Chinese consumers may have a growing appetite for foreign goods and services, there’s certainly no guarantee that any old import will be an overnight success. Consumers are becoming savvier all the time. Some will even plan their foreign travel taking currency fluctuations into account so as to find the best bargains.
Technology is another sector that is experiencing rapid growth throughout Asia. Despite some controversies, the global influence and standing of brands such as Huawei, the telecoms giant, continue to grow, starting to give Silicon Valley a run for its money, and China is steadily building its reputation as a leader in mobile payments and e-commerce. As well as development and excellence in traditional and commercial technology, areas such as agricultural technology are also developing as businesses become more engaged with impact investment. With the world’s population expected to increase by more than two billion by 2050, sectors addressing environmental issues are gaining widespread interest from investors, and this is a huge opportunity for any angel investor with a global conscience.
In sum, there is great potential for investment across a range of sectors but identifying the right opportunity is not always straightforward. Investors are strongly advised to do their research and, as a general rule, find a partner to help them assimilate into the business culture of the country.
Investors in China, for example, should not only do their general due diligence but also learn about cultural and business etiquette if they wish to be successful. The importance of this cannot be overstated. To take just one example here, family-orientated small talk as well as a polite and calm manner in meetings are all highly valued traits when conducting business.
Business partners are vital for any investor - to identify and invest in the key areas of growth, you need to have a partner that knows the market like the back of their hand. I have always been hugely passionate about the opportunities that exist between East and West and I always encourage my clients, partners and friends to think on a global scale when they consider where to invest their time and money. Businesses that are keen to look East for potential investment opportunities in Asia should approach the continent both as a whole, but equally as a sum of its parts, given its myriad fascinating niches and sectors to explore. Asia is a vast and complex market but can be incredibly rewarding for any investor who is prepared for long-term commitment and takes the time to carefully research their options.