Asia tech firms a must in portfolios

Asian tech is getting more exciting because more names are getting listed, creating more dynamic opportunities


ASIA Pacific has become a technological force to be reckoned with and now might be the time to invest in its technology.

JP Morgan Asset Management South-East Asia funds head Supreet Bhan said Asia-Pacific technology can be complementary to global technology exposure within portfolios as it provides a diverse range of high-growth opportunities.

“To us, it also provides a multiyear opportunity which seems to have a similar trajectory to the US several years ago,” he said in a webinar organised by RHB Asset Management Sdn Bhd titled “Rise of Asia Pacific Technology” yesterday.

He said there are unique growth opportunities in the region, driven by the global middle-class and younger generations.

According to a research by McKinsey Global Institute in 2020, over the last decade, the region has accounted for 52% of global growth in tech companies’ revenues, 43% of start-up funding, 51% of spending on research and development, and 87% of patents filed.

“In this decade of 2020-2030, the world is expected to add 1.7 billion people into the global middle-class. What’s interesting is out of that 1.7 billion, 1.5 billion are going to be from Asia.

“This is important because ultimately, the consumers of the future are millennials and Generation Z (Gen Z),” he said.

Supreet pointed out that with information available online, the new generation of consumers care more about quality and driving innovation in various sectors.

He said Asian tech stock valuations are still reasonable compared to the US with equally strong growth ahead.

“Asian technology stocks are still trading at a significant discount even after the strong year-to-date rally and yet, growth outlook is still comparable and even better versus the US.

“Additionally, stock markets in Asia have been becoming a fertile ground for innovative companies,” he said.

In the decade of 2010, it was the advent of cloud computing or mobile computing, and the only Asian company listed on the top 10 companies by market capitalisation in the tech space was South Korea’s Samsung Electronics Co Ltd.

“Dialed forward 10 years, now we are getting into the age of Artificial Intelligence, Internet of Things and big data. We noticed that out of the top 10, four are Asian companies,” he said.

These companies are Tencent Holdings Ltd, Alibaba Group Holding Ltd, Taiwan Semiconductor Manufacturing Co Ltd (TSMC) and Samsung.

Supreet said Asian tech companies’ IPO pipeline has been robust and the next wave of IPOs likely to be listed in the US are companies from diverse countries such as Tokopedia and Gojek from Indonesia, and Flipkart and Zomato from India.

South Korean companies like Kakao Games Corp, Krafton Inc and LG Green are also in the IPO pipeline, he added.

“In addition to strong growth characteristics, Asian tech is getting more exciting because more names are getting listed, creating more dynamic opportunities,” he explained.

When asked about US-China tensions on impact on Asian tech, Supreet said JP Morgan’s focus is on domestic winners and not companies that are dependent on exports for their revenues.

“With the exception of TSMC, in this portfolio, almost 95% of the revenues are generated domestically from Asia and sometimes from their own countries.

“Irrespective of what goes on in trade wars, the fundamentals of a company tell us what’s important is not exports but domestic demand, and to that extent, we are focused on domestic winners and not necessarily on companies who depend on demand from the West,” he added.