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.
He is courting hedge funds to invest in Taiwan and raise money from investors in that market. ThatÆs a bold move from a regulator, considering that many of his peers in other markets in Asia have not yet fully embraced hedge funds; some even still consider them the enemy. Hedge funds, after all, have been blamed û justifiably or not û at least in part for some of the difficult periods in AsiaÆs financial markets, most notably the regional financial crisis beginning in 1997.
ôThis is an excellent environment for hedge funds,ö Lee says.
Among the pluses of investing in Taiwan is its undervalued currency and stable foreign exchange regime, Lee says, that allows for relatively cheap access to local securities. He urges hedge funds to look more closely at opportunities in TaiwanÆs equities, fixed income, currencies, and interest rates markets.
Attracting hedge funds is in line with TaiwanÆs efforts to attract investors in general.
For those looking for more traditional investments, Taiwan equities are no longer as expensive as they used to be. Price-to-earnings ratios have fallen significantly and are now able to compete more with other Asian markets such as Korea, Hong Kong, and Singapore when it comes to attracting value investors. Ongoing legal reforms designed to make the use of international best practices more widespread in Taiwan is also expected to work in its favour, Lee says.
TaiwanÆs fixed-income industry û unloved by many international investors because of low yields and withholding tax that eats into returns û is set to undergo reforms in the areas of products and securitisation. Lee sees many opportunities for investors in this asset class.
The M&A environment is also favourable, Lee says, noting there are many acquisition opportunities in Taiwan because of low valuations, corporate liquidity, and the undervalued currency. The FSC, he says, is ready to be open-minded about potential investments to Taiwan.
Asset managers are also welcome to raise funds in Taiwan, Lee says. ôTaiwan is flooded with liquidity,ö he says. ôThere is a clear need for new assets to absorb these.
The potential to raise funds is certainly there. A total of $783.86 billion is currently parked in cash deposits in Taiwan, producing returns of 2% annually; the central bank has $270 billion in similar low-yielding deposits.
The FSC relaxed restriction on foreign investments in recent months. Insurers are allowed to allocate up to 45% of total assets to overseas, of which 10% exposure is allowed for foreign real estate.
The FSC is looking to relax more investment regulations, Lee says. He looks forward to an up-to-date and open regulatory environment in Taiwan that will be able to compete with other markets in the coming years.
Mega players Nippon Life and Dai-ichi Life are looking for opportunities in higher-yield single-A US corporate bonds, which offer more appealing yields than stagnant domestic offerings.
The “lower for longer” monetary policy and stimulus packages, coupled with the rolling out of vaccine programmes favorably support real estate investing in the region, with offices and data centres presenting forward-looking opportunities.
As US fixed income default rates rose and yields fell during the pandemic, are Asian bonds, which have had more stable yields through 2020, looking more attractive?
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Norway's Oil Fund welcome Chinese proposals improving transparency and shareholder protection; HK's MPF assets surge 35% year on year; Korea's NPS commits $100m to TPG consortium to invest in taxi-hailing app; Poba commits W270bn to European property; Malaysia's EPF sees investment income rise 59% year-on-year in first quarter, and more.