Weekly Market Outlook
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Convincing long-term growth potential
Nowadays one hears quite frequently about the rise of Asia, especially China and India, and more and more commentators are forecasting an “Asian 21st century”. What most people probably don’t realise is that Asia was by far the most dominant economic area on the planet about 200 years ago. Thus, it seems that Asia is poised to regain the importance it had quite recently by historical standards. Along with China and India, South-East Asia is also increasing dynamic.
The greatest competitive advantage for the countries in South-East Asia is their rich reserves of raw materials, combined with their favourable geographic location in the immediate vicinity of the growth markets of China and India. The South-East Asian markets produce many key commodities for food production and energy generation. There are already almost three billion people in China, India and South-East Asia (over 40% of the world’s population) to feed and supply with energy, and the trend is increasing. Indonesia and Malaysia in particular are leading exporters of palm oil. Indonesia also delivers large amounts of thermal coal, which will remain the central commodity for power generation in China and India for decades to come. Thailand, on the other hand, is one of the world’s most important rice exporters.
Nevertheless, the boom in South-East Asia is not due to the global upswing in commodities alone. It is also borne by increasingly robust domestic consumption and growing trade ties within the region itself. Along with the massive Chinese economic stimulus programme, these factors are among the main reasons that the economies of South-East Asia have fared quite well in the global economic downturn so far.
Another important aspect is that political stability has improved significantly in recent years. One fine example of this is certainly Indonesia which – despite all of the difficulties and problems after decades of dictatorship – has embarked on a very promising democratic development.
Despite the global financial and economic crises, the long-term growth prospects for South-East Asia have seldom looked better than now.