Australians at risk of under investment in Asia
Australia’s economic involvement with Asia appears to be generally well-understood. But as investors, Australians are at risk of being underinvested in the region, which could affect the long-term strength of their portfolios.
The 21st century has already been described as the “Asian century” and it makes sense to have exposure to the region in order to benefit from its inevitable growth.
It seems that there are a number of reasons why investors feel they don’t need Asian investments. For instance, they think that if they are invested in Australian companies, or if they have an international component in their portfolio through US or European equities, then they have exposure to Asia, because these are major trading partners of the region.
However, acceptance of such myths betrays a lack of understanding that could prove costly.
For example, the US and UK - our traditional trading partners - account for 51 per cent of our investments1 but only 9.5 per cent of our exports. However our four biggest export markets - China, Japan, South Korea and India - when combined account for over 53 percent of our exports, yet only 8.5 percent of our total international investments go to the region2.
It makes sense for investors to recognise time has moved on and shift their focus towards Asia to take advantage of this changing relationship.
Another issue seems to be that investors don’t fully understand the investment realities of Asia.
Anecdotally, some investors seem to think that markets in Asia are less secure than in developed countries because of corruption and weak regulation.
In fact, while Asian governance varies enormously country by country, main investment centres such as Japan, Singapore, Hong Kong and Korea, are highly efficient and transparent.
This view also overlooks the scandals in Wall Street, London and other western financial and economic centres – including Australia.
Virtually all forecasts and predictions suggest Asia will continue to grow dramatically and, by the middle of this century, experts believe it will account for over half of all global trade.
This evidence means that it simply doesn’t make sense for Australians not to be investing in a region with such strong attributes and outlook.
If you need further information on how this may affect you please call us.
