Investing in digital economies: How investors can diversify their portfolios and ride the tech wave in South-east Asia and India

Apple, which makes most of its products in China, is rapidly expanding production in India and Vietnam and it may soon add Thailand as a manufacturing base.

Samsung recently launched a US$220 million (S$294 million) research and development hub in Vietnam and the South Korean technology heavyweight is building a huge factory in Malaysia to produce batteries for electric vehicles (EVs).

Once peripheral players in high-tech industries such as electronics and EVs, India and South-east Asia, have become increasingly prominent as the world's largest technology companies step up efforts to diversify supply chains. The two regions - with their combined population of 2 billion - are also important consumer markets thanks to their urbanisation and rapid Internet adoption.

India and South-east Asia look set to enjoy many years of sustained expansion, following in the footsteps of China which has driven global economic growth in the last 30 years.

Burgeoning growth of tech giants and start-ups

The growing interest in India and South-east Asia can be attributed to many factors.

BT in your inbox

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign Up

Sign Up

Unlike many Western and North-east Asian countries, India and South-east Asia boast a growing workforce that is tech savvy and relatively cheap by global standards. India recently overtook China as the world's most populous nation and the International Monetary Fund expects India's economy to grow faster than China's in coming years.

The two regions have also become more welcoming to foreign investors. According to a recent report in The Business Times, foreign direct investments into South-east Asia doubled over the past decade to more than S$200 billion last year.

Just as importantly, both India and South-east Asia have become a lot more innovative, spawning home-grown tech giants such as Infosys and Wipro in India and Shopee and Grab in South-east Asia along with hundreds of promising tech start-ups.

In a study published late last year, Google, Singapore state investor Temasek and management consultancy Bain & Company said South-east Asia's digital economy is expected to grow twice as fast as gross domestic product and could reach up to US$1 trillion by 2030. The report defined the digital economy as ranging from e-commerce and financial technologies to ride hailing, food delivery and online entertainment.

Ding Chen, CEO of CSOP Asset Management, says: "South-east Asia and India are poised for exceptional growth in the upcoming decade, fuelled by the expanding middle class, favourable demographics, and significant investments from developed economies. Astute investors recognise the significance of embracing these dynamic markets, especially when adopting a long-term perspective."

An industry-first tech ETF that tracks India and SE Asia's top tech companies

Hong Kong-headquartered CSOP recently listed the CSOP iEdge Southeast Asia+ TECH Index ETF on the Singapore Exchange to tap the rapid growth of the tech industry across South-east Asia and India.

The new ETF, or exchange traded fund, tracks the iEdge Southeast Asia+ TECH Index, which comprises the 30 largest tech-focused companies based in India, Singapore, Indonesia, Thailand, Vietnam and Malaysia. The ETF is divided into Singapore dollar and US dollar tranches to cater to different investors.

Michael Syn, Senior Managing Director and Head of Equities, SGX Group, said, "Nowhere in the world is the pace of digital transformation faster than in South and Southeast Asia, and investors are taking note. This ETF provides investors exposure to some of the most innovative and fast-growing technology companies, enabling access to exciting growth opportunities in these markets and portfolio diversification benefits at the same time. This successful launch also demonstrates CSOP Asset Management's commitment to build a multi-asset product suite on SGX and we look forward to continuing our partnership with them to deliver more investment options for investors."

To ensure the index represents a good cross section of companies, no single company can have a weightage of more than 10 per cent while India's share is capped at 50 per cent. These weights are revised quarterly to reflect changes in market capitalisation, and there are fast entry rules to allow very large, newly listed companies to be added to the index on their first few days of listing.

"Navigating unfamiliar market landscapes can be intricate and time-consuming. However, through the power of ETFs, investors can find a simplified path. ETFs offer investors a diversified portfolio of companies, regularly adjusted to capture the growth potential of top performers," says CSOP's Ding.

ETFs are funds that closely track a benchmark and differ from actively managed mutual funds whose managers are free to vary their holdings.

The CSOP iEdge Southeast Asia+ TECH Index ETF will be CSOP's fifth listed Singapore ETF. The four earlier funds had around US$1.17 billion in assets under management, or 11 per cent of the Singapore ETF market as at March 31.

Looking ahead: Regions on the cusp of sustained expansion

The Asian miracle began with the emergence of Japan from the ashes of World War 2 and spread to the four tiger economies of South Korea, Taiwan, Hong Kong and Singapore. The baton then passed to China.

Today, that baton is being handed over again. South-east Asia and India are at the cusp of a multi-year expansion that will see them catch up with the region's more advanced economies.

Multinational companies have already pumped billions of dollars into the two regions, and long-term investors should follow suit by allocating some of their funds in these areas.

Visit this website for more information.

Disclaimer

The investment product(s), as mentioned in this document, is/are registered under section 286 of the Securities and Futures Act (Cap. 289) of Singapore (the "SFA"). This material and the information contained in this material shall not be regarded as an offer or solicitation of business in any jurisdiction to any person to whom it is unlawful to offer or solicit business in such jurisdictions.

CSOP Asset Management Pte. Ltd. ("CSOP") which prepared this document believes that information in this document is based upon sources that are believed to be accurate, complete, and reliable. However, CSOP does not warrant the accuracy and completeness of the information and shall not be liable to the recipient or controlling shareholders of the recipient resulting from its use. CSOP is under no obligation to keep the information up to date. The provision of this document shall not be deemed as constituting any offer, acceptance, or promise of any further contract or amendment to any contract. The information herein shall not be disclosed, used, or disseminated, in whole or part, and shall not be reproduced, copied, or made available to others without the written consent of CSOP.

Advice should be sought from a financial adviser regarding the suitability of the investment and/or investment product before making an investment. Investment involves risk. The value of investments, and the income from them, can go down as well as up and an investor may get back less than the amount invested. Past performance is not necessarily indicative of future performance. Investor should read the prospectus and product highlights sheet, which can be obtained on CSOP website or authorized participating dealers, before deciding whether to invest. This document has not been reviewed by the Monetary Authority of Singapore.

Index Provider Disclaimer

The CSOP iEdge Southeast Asia+ TECH Index ETF is not in any way sponsored, endorsed, sold, or promoted by Singapore Exchange Limited and/or its affiliates (collectively, "SGX") and SGX makes no warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the Index and/or the figure at which the Index stand at any particular time on any particular day or otherwise. The Index is administered, calculated, and published by SGX. SGX shall not be liable (whether in negligence or otherwise) to any person for any error in the CSOP iEdge Southeast Asia+ TECH Index ETF and the Index and shall not be under any obligation to advise any person of any error therein. "SGX" is a trademark of SGX and is used by the Manager under license. All intellectual property rights in the Index vest in SGX.