Asia-Pacific is seeing a new wave of liquidity, driven by institutional capital and sovereign wealth funds and augmented by cash from private sources, either domestic developers (particularly in China, South Korea and Japan) or corporate and high-net-worth players, according to latest data from Savills.
There is liquidity aggressively seeking to diversify not only across borders, but also across asset classes and risk spectrum.
The two-way flow of capital from east to west and west to east involves local investment opportunities and search for joint-venture partners. This requires high-quality intermediation at both ends.
Hong Kong, Singapore and China are the main investors within the region in the first to third quarter of 2016.
In 2017, they will continue to be active but we will see more Korean, Japanese and even Indian capital.
The promising socio-economic profiles of Southeast Asian countries is likely to attract a sizeable amount of foreign investment.
Respectable economic growth is expected for Malaysia, Indonesia and the Philippines over the next five years.
For the period 2017-2021, the average annual GDP growth is forecasted at 4.84 percent for Malaysia and 5.8 percent for Indonesia.
In Malaysia, GDP per capita is the highest among the developing ASEAN-5 economies.
For the next five years, the International Monetary Fund forecasts Malaysia’s GDP per capita to remain above that of China.
In short, Malaysia’s purchasing power is expected to remain strong.
However, the strong growth fundamentals have been overshadowed by controversies over 1MDB, Malaysia’s sovereign-wealth fund.
As a result, there has been low interest from foreign capital generally, but the astute investors recognize the fundamental strengths of this market.
We like Malaysia. There is just too much pessimism. Fundamentals are strong, currency is weak and foreign direct investments into Malaysia are strong.
Chinese investments represent 16 percent of Malaysia’s 2015 GDP. If spread over 20 years, it adds 0.7 percent per annum of growth to Malaysia’s GDP baseline in 2015.
We anticipate higher interest levels as well as investment activities in Malaysia over the next 12-18 months.
Indonesia is an economy with massive potential. The fundamentals are strong and inbound FDIs are strong. The astute investors’ focus will be on high-quality commercial opportunities in Kuala Lumpur.
Chinese investments represent 35 percent of Indonesia’s 2015 GDP. If spread over 20 years, it adds 1.8 percent pa of growth to Indonesia’s GDP baseline in 2015.
We anticipate higher interest levels as well as investment activities in Indonesia over the next 12-18 months.
More importantly, the country is beginning to see some semblance of a viable tax system with the successful implementation of its tax amnesty program.
In the first three months, the initiative already managed to capture 90 percent of its 4 quadrillion rupiah target.
For the first time in a long time, Jakarta appears unencumbered by roadblocks.
“In the year ahead, we anticipate an increase in investment activity, especially from sovereign wealth funds and large corporate groups,” said Benjamin Tan, regional director of regional investment advisory at Savills.
In Southeast Asia, the healthy pipeline of both greenfield and brownfield development opportunities, particularly in markets such as Indonesia, Malaysia, Vietnam, and Myanmar, will increasingly become beneficiaries of these institutional capital.”
Malaysia is a strong candidate, as the GDP per capita is the highest among the developing ASEAN-5 economies and purchasing power remains strong.
As for Indonesia, it has the latent potential to grow and, in light of recent pro-business policy changes, is closing the gap between its potential and actual output.
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