Dynamic Asia has much to look forward to on the investment front, according to Taimur Baig, managing director and chief economist, group research, DBS Bank speaking on Monday at the first ever IHIF Asia in Hong Kong.
Tackling everything from renewable energy to China’s property bubble, Baig said that the region’s strength lay in its diversity – and said that a mix of “healthy competition and collaboration” would stand it in good stead.
Baig started by assessing the region’s overall travel and tourism revenue, reporting that 2024 would mark a turning point – the first year that Asia’s hospitality revenues would finish, in real terms, above 2019 volumes. Meanwhile, “in 2025, we are projected to see a real increase on a five-year basis compared to pre-pandemic times,” he added. “It’s been a long, tough road but the trend is very clear – we are heading in the right direction towards more upsides than downsides.”
China vs India
The keynote appraised aspects of innovation in China, starting with Baig’s recent visit to the country when he noted “clear skies and clean air”, due to high electric vehicle (EV) take-up. While recognising that the country “has many headwinds to deal with”, Baig said that he saw signs of improvement in terms of the economic outlook.
Tacking China’s complicated relationship with India, which tends to stand “on the side of the group of democracies pushing back against China”, he said that while in the past Chinese professionals had been denied Indian visas, that was now changing. “Even a country which has traditionally been antagonistic towards China is seeing the benefits of pragmatism,” he added, noting that similar changes were happening in Africa and parts of Southeast Asia. “There’s a subtle pivot towards more constructive, level playing fields,” he said. Meanwhile, China’s “tech war” with the West had forced China “to build a costly but self-sufficient tech ecosystem”.
Turning to the country’s property market, he said there could be “no sugar coating” and that China had a tough road ahead. “We saw this in Europe in 2008, and in Japan in the 90s and 2000s, that once you have a big debt-fuelled property bubble, it is very panful when it bursts.” However, he noted that the real estate outlook in China was “not a static picture” and that the “big mountain of debt and unsold properties” were being addressed, meaning that the country was also “moving in the right direction” on this issue. He hoped that dynamism in the country’s equity market might also drive recovery.
Southeast Asian dynamism
Baig said that perhaps the most exciting area of Asia was Southeast Asia, which he described as “the narrative of the next decade”. While remaining “bullish on India and on China’s manufacturing role”, he noted that protectionist tactics like “friendshoring and tech restrictions” were likely to substantially benefit the Southeastern states.
Singapore, where Baig lives, many be “a tiny island” but was displaying huge ambitions, he said. Despite land restrictions, he said that the country had found a way to attract more and more investment from semi-conductor manufacturers. It was doing that by creating “free trade regions just when the rest of the world is turning inwards” he said. “Southeast Asia is a beacon of hope, of free trade, free movement of goods, services and capital.” Baig explained that this was not just a theory, citing a recent agreement signed by Singapore and Malaysia to develop a special economic zone in the southern Malaysian state of Johor, with the aim of attracting investment and increasing the movement of goods and people across their shared border. Baig said that this kind of economic vitality echoed China’s success in creating regions that fiercely competed between each other for manufacturing opportunities, such as EV battery production. Now, he said, pockets of technology supply were emerging in Southeast Asia that might not replace China but offered a vital alternative to the likes of Taiwan and Korea as “investment dollars spread across the region”.
Baig said that green energy production was also on the horizon, with investors exploring “wind potential in Vietnam and solar potential in Malaysia”. These plans “would draw further FDI for technology into this area”, Baig concluded.
Baig, PhD, heads global economics as well as macro strategy for interest rate, credit, and currency at DBS Group Research. He also advises the bank on risk management and investment strategy.