The Dutch pension asset manager's Asia Pacific head of real estate says his team has just had one of its busiest years ever and that 2021 is looking similarly promising.
What are the multi-year themes that are shaping your portfolios?
Chiang: We have identified 10. Number one is Greater China economic growth. Number two is the burgeoning middle class. Number three is demographics. The rest include outsourcing, the squeeze on energy, supply inelasticity for commodities, information revolution, the global supply chain, the Japanese renaissance, and water shortage and climate change.
What are the key themes?
Greater China economic growth. This is slightly different from the way other people categorise China per se. We are talking about Greater China, which includes the bigger Chinese diaspora that extends to Taiwan. We are also talking about the economic synergies in the Greater China play.
The burgeoning global middle class. One of the points that we have been putting across is these themes should not be looked at on their own; a lot of these themes tend to overlap with one another. Economic growth has led to growth of the middle classes, and this had led to a lot of investment opportunities.
Demographics. Demographics have changed significantly over the last 50 years. What we allude to is life expectancy and fertility. If the economy develops, you will be at the level of economic subsistence that allows you to have a larger family. Once you reach the middle class, you earn a little bit more, you want a little bit more, and you want your kids to have a better life. This has led to what we call the short march, you donÆt want to live in the city in crammed living conditions even if you work there, you want to take your family to outside the city to live. This is what we are seeing in China.
And so you see, understanding the dynamics of these multi-year themes and how they overlap is very important.
What are some examples of stocks that benefit from the search for a better quality of life?
In China, everybody wants to work in Shanghai, but because of the development around Shanghai, many are choosing to live elsewhere such as in Suzhou. You can to go Suzhou from Shanghai in 45 minutes by train. The growth trajectory is expanding very rapidly. Infrastructure, transport, and consumer stocks would benefit.
Our approach is not esoteric. It is meant to guide you and to help you focus.
We may not end up with an Asian company. Globalisation makes it such that there is no more demarcation between companies. Geography is less important today. You can have a company that is headquartered outside Asia but benefiting from Asian economic growth. All our 10 themes point to Asia as the source of demand and supply.
When you look at these themes, do you see that there is overcrowding in terms of investment opportunities available to you?
In the case of the themes relating to water and the environment, there are not enough stocks. There are actually many schools of thought with regard to climate change. In the case of climate change, six degrees difference is all that matters. There are many other new ways of implementing strategies. We see things like carbon credits coming into the market place faster than you think. We need to be smart about how we approach these themes. In other themes, there are ample opportunities.
How do you benchmark?
You canÆt. The best measure of the global opportunity in the world is to benchmark against something that covers the whole opportunity in the world. Some people may look at MSCI Far East ex-Japan as an indicator for Asia, but Asia is in the world and when looking at the global opportunity the benchmark should be MSCI World.
What are examples of stocks that fit your themes?
We have always liked China Insurance International. ItÆs a beneficiary of the Greater China story. ItÆs an example of a company that has benefited from growing income and emerging middle class and the changing demographics.
Another one we continue to like is Apple. We donÆt look at the personal computer as just a technology tool. We look at it as a printing press, a broadcast station, a community tools, an auction tool, and all these have been made possible because of the enabling technology of the internet. Apple has also benefited from the changing demographics and growing income. Apple has been savaged by the markets in the past months, but we are looking at this long-term.
In its second annual sustainable investment report, the sovereign wealth fund says it invested $1.79bn in ESG bonds. Experts say asset owners next need to consolidate their standards.
Senior executives at the Taiwan financial group and Canadian pension fund believe that companies have to make an ESG transition, and may not have a choice in a few years.
Record low borrowing costs in Australia are feeding demand for the country's real estate, with domestic and global investors raising their allocations into the sector.
Experts have a diversified view on the appeal of private assets across the region, but one thing's for certain - inflows are rising, particularly into China and the US.