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Research Reports » Calastone Asia July 2020

Concluding thoughts

Calastone_Asia_2020This survey reveals that Asia-based investors will be seeking investment opportunities particularly within the Asia-Pacific region during the coming 12 months. China will be the most popular investment destination, with Hong Kong and Singapore also prominent.

In the face of uncertainties in the global economy, Asian investors will increase their exposure to emerging markets (ex Asia), but investment flows into the US and European markets are likely to be lower than during 2019.

In the longer term, China is expected to provide the strongest growth in cross-border fund distribution in Asia in the next five years, with respondents also optimistic about opportunities in a number of ASEAN markets, particularly Indonesia.

As an emerging fund centre, India continues to offer attractive opportunities for asset management companies to grow their business, with its expanding professional class expected to increase investment flows into collective investment funds and ETFs as tools to meet their wealth management goals. The choice of proprietary and third-party distribution platforms offering low-cost investment products has grown significantly over the past two years, but investor education will be important to extend the uptake of fund products beyond this professional class to a wider segment of the Indian population.

Respondents told us, as they did in the 2019 Asia survey, that distributed ledger technology will be the emergent technology that will have greatest impact on the development of Asia’s funds business. The launch of high-profile blockchain initiatives, such as the Blockchain Service Network in China, has continued to give visibility to DLT projects and has reinforced respondents’ confidence in DLT’s ability to deliver efficiency and risk management benefits to Asia’s funds industry. Beyond this, asset managers are exploring potential for ‘tokenised’ issuance of fund products on blockchain, particularly for private markets.

Current uncertainty around investment outcomes – as markets begin their recovery from Covid-19 and adjust to broader geopolitical tensions (US-China trade tensions, public demonstrations in Hong Kong) – provides a barrier to attracting new investors to Asia’s fund markets. However, the easing of regulatory obstacles to cross-border investment (in China, Thailand and India, for example) will have a positive effect in stimulating new investment flows. Steps to promote investor education and to provide affordable access to investment advice will also be key. 

For Asian investors which have deep experience of buying products and services through digital channels, robo-advisory is likely to play a key role in meeting investors’ requirement for investment advice, particularly in meeting the needs of millennials and younger-generation investors.

© 2020 funds global asia