Described as a preferential trade agreement between 12 Asia-Pacific countries, the TPP stretches from regulatory harmonisation into rules governing environmental, labour, government procurement and intellectual property policies.
The countries involved are: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.
Industry sources say that ASEAN will stand to gain the most of all the signatories to the agreement as their pre-existing trade barriers will be dissolved, ideally leading to growth in exports and improved productivity.
TPP’s potentially beneficial impact is especially important considering the negative investor sentiment toward many ASEAN countries.
Several industry sources agree ASEAN frontier markets such as Vietnam will benefit the most from the trade pact. Luke Ng, senior vice president of FE Advisory Asia, told Fund Selector Asia that nations with low labour costs such as Vietnam and exporting countries facing high tariffs such as Japan should reap significant rewards once the pact is implemented.
“Specific sectors include the textile and manufacturing industries in Vietnam and the Japanese automotive industry,” Ng said.
Alex Wolf, Standard Life Investment’s emerging markets economist and Nintin Dialdas, CIO of Mandarin Capital, share the same view.
“Among the emerging markets TPP countries, Vietnam will be the biggest beneficiary, followed by Malaysia. Vietnam stands to gain an estimated 10.5% GDP increase by 2025 on the back of an estimated 28% increase in exports,” Wolf said.
“Malaysia will gain from reduced trade barriers on its exports of electronics and chemicals. Malaysia does not currently have bilateral trade agreements with the US, Canada or Mexico, and would benefit from increased access to North American markets,” Wolf added.
Dialdas told Fund Selector Asia that “with the current reforms that have been happening in Vietnam, the TPP will be beneficial in helping develop the country’s domestic economy”.
“Funds in Vietnam, Peru and Malaysia would gain. The equity markets will initially be the biggest winners due to them being the most liquid point of entry,” Dialdas said.
Jalil Rasheed, Invesco’s investment director who manages the firm’s ASEAN equity fund, believes that the TPP will have a large impact on manufacturing industries and exporters.
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