Conventional wisdom now says there is a shift in economic power from West to East. But what are the facts? Fidelity International's Carlo Venes talks with AsianInvestor's Jame DiBiasio about a recent survey of global institutional investors to determine what, if any, changes in asset allocation are taking place.
China is expected to gain Asia's largest investment increase from institutional investors in 2010, closely followed by Korea and Taiwan as part of a fundamental shift in the flow of assets from West to East, according to Fidelity International.
In a survey conducted by the Economist Intelligence Unit and facilitated by Fidelity International, over 100 institutional investors in Europe and Asia confirmed that their investment allocations to Asia are set to increase significantly in 2010 with emerging markets – China and India – predicted to take the largest share of the increase.
"Asia as an investment market is clearly becoming much more attractive for institutional investors in many parts of the world, and China is by far the most popular investment destination in 2010 for our clients," says Carlo Venes, managing director and head of institutional business for Asia-Pacific at Fidelity International.
"An important shift is now gaining momentum, as institutional investors increasingly view Asia as an attractive investment destination and a strategic asset holding. Most of those institutions surveyed believe that returns are greater across all asset classes in Asia than the equivalent investments in Western markets; a fundamental change in thinking for major pension funds and institutions in both Europe and Asia.
"Institutional investors have traditionally been cautious about so-called riskier asset classes but this survey confirms that their risk appetite is returning and China will become a strategic hold over the longer term, despite any short term concerns about transparency and in some cases, a lack of expert knowledge about China in general."
Venes says almost an equal portion of the new funds flow to the Asian market is coming from investors within Asia and from European institutions.
"Almost the same percentage of investment professionals in Europe anticipate an increase in asset allocation to China as do professionals in Asia. China is anticipated to be the number one destination for new investments by institutions based in Europe (57%) as well as Asia (56%). With respect to South-East Asia, the proportion of investors from Europe likely to increase their allocation to this region is even higher than the proportion of investment professionals in Asia," he says.
Survey respondents considered South Korea and Taiwan as the most popular investment destinations among Asia's developed markets in 2010.
"Almost 30%f the respondents anticipate their institution to increase their asset allocation to South Korea over the next year and 23% anticipate an increase in Taiwan, which shows renewed confidence in both markets. As is the case with Asia, institutions believe these markets continue to show strong economic potential, can deliver solid stock picking opportunities and have a long-term growth story at a time when the West is struggling to recover from the financial crisis," says Venes.
For a copy of the report, click here.