3 top themes in Asian markets

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<p><strong>Glenn Freeman</strong>: Eng-Teck Tan from Nikko Asset Management is discussing what he sees as the three top investment themes within Asia, ranging from financial services through to renewable energy.</p> <p><strong>Eng-Teck Tan</strong>: The first one that we really is really insurance sectors across the region and especially in China. So, unlike a lot of overseas &ndash; in the western world a lot of people do buy insurance but not to the extent of Asians primarily because the social welfare system is probably not as developed as the Western world. So, a lot of people in Asia actually buy much more insurance than a lot of countries. For example, in Taiwan, insurance penetration is like almost 15% of GDP. A lot of us not only use insurance as a social welfare system, healthcare providers, but they use insurance kind of as a savings and a wealth protection kind of means. So, this provides a lot of opportunities. Penetration in China is almost like only 1.2%. So, there is actually a lot of room to move. The government is very, very supportive of that. A lot of corporate pension plans are actually tied up with a lot of insurance companies. And on top of that they are encouraging people to go into healthcare plans as well. So, we see a lot of potential in that.</p> <p>The second part which I mentioned before is all about advanced manufacturing in China. So, in China, a lot of manufacturing is probably not as advanced as the western world, especially if you take Japan and Taiwan as comparison. We think China has a very, very good chance of moving towards that. And that's premise on the people itself. As you know, demographics is actually aging in China. So, there is a lot of huge move into automation. Historically, the Chinese didn't really bother to do a lot of automation because they can get a lot of cheap labour. Now, they are actually moving towards that direction. Also, a lot of engineers are actually returning to China. I'm sure you heard a term haigui, basically, returning turtles. These are Chinese that historically didn't want to work in China, because if you moved back to 20, 30 years ago, the only jobs available in China were actually to be factory workers most of the time and most of them didn't want to do that. When they get their PhD and Master overseas, they tend to stay in those countries because they get better jobs. But today, if you go to any of the internet companies or more of the advanced manufacturing companies, auto companies in China, you realize that a lot of these are actually returning engineers. So, that gives China a chance in R&amp;Ds and to move on.</p> <p>Lastly, I think, renewable energy is really a big theme for us as well. China has a history of mismatching these renewable energies as in a lot of subsidies are given and then there is a lot of overinvestment. I think China has reached a stage where they finally know how to manage this renewable energy better and also, it's very important for the environment in China. The Chinese about three to four years ago in a lot of surveys done by the Chinese government the Chinese have said that they would prefer a slower economic growth but a better quality of life and most of the time when they said that they actually meant the air that they are breathing because that is quite serious. And we have seen pilot programs being implemented in a few major cities with good success. So, we think that is a huge theme.</p> <p>Now, selecting stocks is a big problem within China because a lot of companies can have corporate governance issues or maybe the execution isn't as good. So, that is another issue. But we think these three themes are actually where the future of China is, and we actually invest quite a lot in those stocks.</p>

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