Growth in ASEAN economies continues to run at just under 5%, which is only slightly slower than the average since the start of the century, the bank said.
“Such solid growth is impressive because the global environment has been challenging for ASEAN in recent years,” the bank said.
The Chinese economy has slowed significantly, having seen double-digit GDP growth as recently as 2010, but is now running below 7%. The country’s industrial production was growing at 14% pre-Lehman crisis and over the past twelve months the growth rate is 6%.
“Despite the persistent fears of what happens to Asia when Chinese growth slows, the fact is that growth has already slowed significantly without any particularly dramatic effect on the region. It is unlikely that China’s slowdown over the next five years will be as significant as that in the previous five,” it said.
The bank said some of the resilience of ASEAN growth is due to the boost to competitiveness from exchange rate depreciation, particularly in Malaysia and Indonesia. “Both [the Malaysian ringgit] and [the Indonesian rupiah] are down about 25% against the US dollar since the mid-2013 taper tantrum, which will have stimulated exports and import-competing sectors.”
The region has also been supported by the diversion of foreign direct investment flows away from China and towards ASEAN, it said.
“As recently as 2008, there was twice as much FDI into China. Now FDI into the ASEAN region is larger.”
ASEAN equities
Regarding investments in the region, ASEAN equities offer opportunities to access quality companies at attractive valuation, according to Soohai Lim, Baring Asset Management’s director of Asian equities.
“Many investors appear overly pessimistic in regards to emerging and frontier markets. As bottom-up investors, we do not let short-term macroeconomic factors, such as China’s economic slowdown or the fall in global commodity prices, sway our investment decisions,” Lim said in a recent research note.
Lim said he believes these macro trends are secondary, and that ASEAN companies can offer valuable long-term opportunities for investors.
“The companies we invest in exploit long-term structural growth opportunities. One area where we have found such opportunities has been among those beneficiaries of the region’s rising consumption story,” he said.
He cited a private hospital group in Thailand as an example.
“The company responses to the demand for quality healthcare, the shortcomings of public healthcare and the increasing ability, and willingness, of the middle classes to pay. They have also capitalised on Thailand’s fast-growing medical tourism and are investing in modern technology and new hospitals to meet this demand.”
