Asia Insights
Key Highlights:
- An analysis of Vietnam's transformation into a global manufacturing hub
- Insights into the technological advancements and regulatory reforms shaping Vietnam’s business environment
- Our outlook for equity and bond markets for the broader region
Vietnam, an emerging frontier
Vietnam has emerged as a key beneficiary of global supply chain diversification, driven by its advantageous geographic location and demographics, along with substantial infrastructure investments. The country has significantly expanded its trade relationships through policy initiatives and free trade agreements, with growth particularly accelerating since the 2010s. The country is increasingly embracing advanced industries, such as semiconductors, aligning with government initiatives to develop a skilled workforce. The challenge of low local value-add in manufacturing must be addressed to sustain the current growth trajectory. Proactive government strategies focused on education and vocational training can support this.
Vietnam’s impressive earnings growth, outpacing regional peers, reflects its economic success. While its frontier market classification currently limits institutional investment, ongoing regulatory reforms and a push for emerging market status could unlock increased foreign inflows in the coming years. In addition, Vietnam is working to enhance its financial market infrastructure.
The country is an example of the opportunity set within today’s frontier markets. With their varied individual drivers, frontier economies present the broader asset class as a useful diversifier amidst market volatility.
Asia equity: Diverse opportunity set
Asian equities delivered overall stability last year, with key markets exhibiting mixed performances due to unique economic conditions. Investor confidence in China has stabilised amidst a recovery initially driven by policy measures and boosted by technology developments, while India continues to show long-term promise despite recent volatility. The combination of proactive fiscal policies, structural reforms, and rising domestic consumption is expected to support long-term growth across the region.
Asia fixed income: Fundamentals and carry
Asia's fixed income market has demonstrated resilience, outperforming global bond markets in 2024. Despite ongoing geopolitical tensions and global economic uncertainties, Asia's credit market is insulated due to regional diversification and stable, domestically-driven economies. Projected bond issuance remains supportive, with issuers increasingly turning to domestic funding sources, supporting market stability amidst improving credit quality.