GIC banks on Asian growth, with 30% of portfolio in region

There is a good chance that Asia will take up a greater percentage of GIC's investments, said chief executive Lim Chow Kiat.
There is a good chance that Asia will take up a greater percentage of GIC's investments, said chief executive Lim Chow Kiat.PHOTO: GIC

GIC chief sees good chance of Asia taking up more if strong growth continues

Sovereign wealth fund GIC has increasingly been making direct investments in Asia, and already has about 30 per cent of its portfolio in the region - more than most global institutional investors.

There is a good chance that Asia will take up a greater percentage of its investments as well, if it continues its strong trajectory of growth, GIC chief executive Lim Chow Kiat said at a news conference yesterday.

Banking on Asia's continued rise, which it believes will outpace that of developed and emerging economies outside the region in aggregate, GIC said in its latest report that it is a long-term value investor looking to buy the "growth story" before this is fully priced into valuations.

Although GIC started investing in Asia in the 1980s, first in Japan and later expanding to emerging Asia, it used to gain exposure indirectly through multinationals.

"In the earlier years, these were good vehicles to use because of their better governance and liquidity," GIC said in its report.

"(But) with the rising number of strong, unique businesses established by domestic Asian firms, increasingly, we have felt the need to gain direct exposures."

The geographical distribution of its assets has shifted in recent years as well, with Asia excluding Japan making up 20 per cent of its portfolio as at March 31 this year, up from 17 per cent as at end-March 2014.

Its share of assets in the United States, while remaining the largest, has decreased from 34 per cent to 32 per cent in this period.

Its recent investments in the region include acquiring a 2.55 per cent stake in Vietcombank, Vietnam's largest bank by market capitalisation, and a US$177 million (S$240 million) investment with Frasers Property and JustCo to develop a co-working space platform across Asia.

GIC group chief investment officer Jeffrey Jaensubhakij said that while it is still too early to tell how much Asia will benefit from supply-chain shifts due to the trade war, GIC is monitoring where marginal shifts are occurring and looking into invest-ment opportunities.

Excluding Japan, the region's share of global gross domestic product has risen from around 10 per cent in 1980 to 36 per cent today.

 

But GIC said in a feature article, released with its report on the management of the Singapore Government's portfolio, that Asia has challenges to overcome to deliver its full potential.

For example, it must see a further liberalisation to trade and market access and overcome constraints involving labour and natural resources.

It is also vulnerable to geo-political tensions, like those leading to growing trade and business restrictions between the US and China.

"Many countries will be significantly worse off, losing the benefits from globalised markets and supply chains," said GIC.

There are bright spots, however, with the region seeing more credible monetary and fiscal policies as well as improved financial sector regulation since the Asian financial crisis of the late 1990s.

"Institutions have been strengthening in Asia in the last few years, and we expect them to continue to strengthen," said Dr Jaensubhakij.

A version of this article appeared in the print edition of The Straits Times on July 03, 2019, with the headline 'GIC banks on Asian growth, with 30% of portfolio in region'. Print Edition | Subscribe