Broker's take: South-east Asia a growth market for China education sector

THE private education sector in South-east Asia has increasing growth potential for global buyers - particularly for Chinese investors amid tightening policies in China, DBS Group Research has said.

In a report on Wednesday, the research team said it expects the majority of overseas investments in the region's private education sector to be in Singapore, Malaysia, Thailand and Vietnam.

Regulation for private education is generally friendly in South-east Asia for international schools or private universities, compared to China, where policies on private education for those from kindergarten through to the 12th grade (or K-12 education) have been tightened.

Noting that foreign direct investments in international schools and private universities are encouraged in most markets in South-east Asia, DBS said China K-12 education providers may turn to this growth opportunity when domestic growth is restricted.

Most countries in the region also have shrinking household sizes that can make higher-quality education more affordable, since a family could have more resources on each child with a fewer children.

They are also emerging countries with robust economic-growth prospects, DBS said; it expects the international education markets in the region will post a compound annual growth rate of between 5 and 18 per cent in the next five years assuming the pandemic normalises by 2022.

The research team noted that Singapore has a lower growth potential as it is considered a mature market, compared to the others in the region, but added that it would harbours lower risks.

Additionally, the private sector has stepped in to meet the growing demand for quality education in the region, where the public-education systems in some countries are overburdened. There is also a "booming demand" for international schools, with high interest in overseas study in western countries such as the US and UK.

Furthermore, DBS noted that there are more synergies between South-east Asian and Chinese education operators, as the management radius is smaller, and time zone differences are smaller. The higher ratio of the Chinese ethnic population in the region also raises chances for students with Chinese background being accepted into private schools.

Besides schools, tutoring and education technology are also booming segments in the region, with similar market drivers to the schools, DBS added.

The South-east Asia market may also attract past potential buyers who were interested in the robust growth in China education before the policy controls were imposed.