November 2024: Rising East: The APAC Advantage in a Shifting Global Market

Authored by Nick Pollard, Managing Director, CAIA APAC, and Joey Chan, CFA, FCCA, CPA, Director, External Relations, CAIA APAC

“Of all the wonderful places in the world, one continent holds more riches than any other.” 

– Sir David Attenborough

Sir David Attenborough, in his new series “Asia”, may have been referring to the wildlife and natural wonders of the world’s largest continent, but his words hold true for so many aspects of life in this part of the world. We are often asked, “How are things in Asia?”—and the answer isn’t so simple. There are more than 50 countries in APAC; more than 2,300 languages; countless religions; and a plethora of unique cultures, climates, geographies, economies, political systems, cuisines, flora and fauna – which Asia do you mean?

With more than half the world’s population living in this diverse region, set to contribute 60% of global economic growth this year, it’s perfectly natural for the rest of the world to look East—but where do you start?

The Rising Pulse of APAC

Hundreds of years ago Marco Polo went North to China, James Cook went South to Australasia, and Vasco de Garma took the middle route to India. But even today, the West is still waking up to the enormous potential and challenges within this abundant region. 

Over the last six months alone, CAIA has participated in a packed lineup of events across Asia-Pacific (APAC). These gatherings aren’t just meetings—they’re markers of the transformation of the global investment community across APAC. And the recent three-week regional tour by CAIA’s President and incoming CEO, John L. Bowman, and the appointment of Nick Pollard as Managing Director for APAC, signal that APAC is no longer simply “on the radar”—but is actively shaping the future of global investments. 

While we’re all used to hearing the numbers, the growth rates, and the GDP figures, there’s a story here that is anything but typical.

The APAC region is less like the stock market report you’re reading right now and more like a bustling, unpredictable market bazaar—a place where cultures, technologies, and futures collide in ways that shock, surprise, and sometimes overwhelm. It’s a place where the desire for growth is palpable and investment opportunities are layered into the very fabric of its cities, its workforce, and even its policies.

Let’s explore the APAC region’s booming potential and why it’s capturing the imagination of some of the world’s most curious and bold investors:

The Allure of APAC: Booming Investments and Finance Powerhouses 

APAC’s rise is undeniable. It is home to four of the world’s top ten financial centres, including Hong Kong (3), Singapore (4), Shanghai (8), and Shenzhen (9). These cities serve as financial powerhouses with resilient infrastructure and regulatory systems, attracting international investors and managing trillions in assets.

Hong Kong, ranked third globally among financial hubs, leads with $4.6 trillion in assets under management, a thriving bond market, and one of the world’s most active IPO markets—according to the Hong Kong Monetary Authority, market cap is US$5.4 trillion.

 With its robust infrastructure, favorable regulatory environment, and large pool of experience professionals, it’s a regional centre that attracts alts managers and investors.

And according to a March 2024 Deloitte report, more than 2,700 single family offices are thriving in Hong Kong today.  

Singapore, in an intense competition with Hong Kong, has created a rival hub with a reputation for stability and precision. Known for its long-term strategy for urban planning, Singapore has been as strategic with finance as it has been with its city design. And the results? An impressive $4 trillion in assets under management and a foothold in everything from private equity to real estate investment trusts.

Note: Graph is in Singapore Dollar: S$5.4 trillion ~ US$ 4 trillion 

Singapore is the third largest foreign exchange (FX) centre globally, after London and New York. Nearly 1 trillion US dollars of FX is traded in Singapore each day. This substantial trading volume and liquidity support the growing trading and hedging needs in the region, reinforcing Singapore’s position as a major trading and corporate treasury hub in Asia.

Also, through the Institute of Banking and Finance (IBF) under the Monetary Authority, Singapore prioritizes training and re-skilling its financial workforce, keeping talent competitive in a fast-evolving industry. This focus on development has produced globally influential leaders—like Binance’s CEO, originally from Singapore, who rose from roles at the Singapore Stock Exchange to a regulatory position in Abu Dhabi, exemplifying Singapore’s impact on global finance.

Here’s a look at some key data points shaping Singapore’s rise according to Chia Der Jiun, Managing Director of MAS: 

• Singapore had a 10% growth in assets under management (AUM) to S$5.41 trillion as of Dec 31, 2023. 
• Private markets grew significantly over the years. Singapore’s private equity and venture capital AUM grew at a CAGR of 24.6% to more than S$650 billion from 2018 to 2023.
• Over half of these assets were directed towards supporting the growth of businesses in the APAC region.

Institutional Influx: APAC's Rise in State-Owned Investors and Alternative Investments

Sovereign wealth funds and public pension funds worldwide have increased their exposure in APAC, a testament to the region's growing influence. Nine of the world’s top ten sovereign wealth and public pension funds now are either originally from Asia or maintain offices here, with notable allocations to alternative investments. Six of these ten funds allocate more than 20% of their assets to alternatives, with the highest allocations seen in the Public Investment Fund (PIF) of Saudi Arabia at 37%, the Government of Singapore Investment Corporation (GIC) at 33%, and Abu Dhabi Investment Authority (ADIA) at 32%. This trend indicates a strategic shift towards diversifying portfolios and seeking higher returns through alternative assets.

The table below, sourced and created with Global SWF, respective firm websites, and data compiled by CAIA APAC, underscores the the region’s global importance for institutional investors: 

Importance of APAC to the “Maple 8” 

The “Maple 8” refers to Canada’s eight largest public pension funds, which collectively manage nearly $2 trillion in assets. These funds are known for adoption of “Maple Model” which delivers consistent strong performance and robust governance. Most of the Maple 8 have office(s) in the Asia-Pacific region with a substantial majority (6 out of the 8) allocating approximately 40% or more of their assets to alternative investments.

Sources: Global SWF, respective firm websites; data compiled by CAIA APAC.

As further proof of APAC’s growing influence on the global stage, the region now leads in global banking with 43 of the world’s top 100 banks by market capitalization calling APAC home.

Many of these major players are based in China, Australia, India, and Japan, underscoring the region’s financial strength. In fact, ask someone in Asia where HSBC is based, and you’re more likely to hear “Hong Kong” than “the UK”—a telling sign of how deeply rooted APAC’s banking powerhouses have become in both the region and the world.

What is behind this “rise of Asia” and what issues should investors be considering when they follow the sunrise?

Technology and Innovation at the Forefront

Technological advancements are reshaping economies across APAC, with countries like China, Japan, South Korea, and India leading in digital payments, artificial intelligence, robotics, and 5G deployment. China’s Alipay and WeChat Pay, and India’s Unified Payments Interface (UPI) are setting new standards in digital transactions, while Chinese, Japanese, and South Korean firms continue to lead in industrial robotics.

Private markets play a crucial role in advancing these technologies. APAC’s venture capital activity ranks second globally, trailing only the U.S., and fosters innovation across sectors like AI and robotics. Asia and Australia have led the world in annual installations of industrial robots since the 2010s and are forecasted to maintain this lead, with a higher growth rate than both the Americas and Europe.

Private equity and venture capital have also accelerated infrastructure development in 5G, supporting the digital backbone necessary for growth in e-commerce, fintech, and smart cities. The significance of venture capital in APAC is underscored by the fact that it ranks second only to the USA and surpasses that of Europe. This is unusual among other alternative asset classes, where innovations and scale are usually trickled down from US and Europe to the APAC region. 

Source: Preqin - Future of Alternatives 2028

Youthful Growth Meets Aging Economies

While Japan, South Korea, and China face aging demographics, many APAC nations such as India, Pakistan, and the Philippines are powered by youthful populations. India alone, with nearly half of its population under 25, represents a dynamic consumer market fueling rapid urbanization and middle-class expansion. 

But the large and relatively young population in many APAC countries provides a substantial labour force and a growing consumer market given rise to the demand for everything from new infrastructure to consumer goods, creating unique investment opportunities across real estate, healthcare, and education.

The rise of the middle class and urban migration in APAC countries also demands sustainable solutions. Investors are increasingly channelling funds into green infrastructure, renewable energy, and urban development to meet both economic and environmental needs. The energy transition in APAC isn’t just about meeting rising demand but also about balancing growth with sustainability, a priority in a region highly susceptible to climate impacts.

Is APAC an easy place to invest? Challenges and Complexities.

While APAC’s investment allure is strong, the region is not without challenges. Market volatility, regulatory diversity, and information gaps present potential hurdles. Countries like China, where regulatory shifts can rapidly impact sectors, or emerging markets where transparency varies, require investors to be diligent and adaptable.

Additionally, geopolitical dynamics and trade tensions can affect investment sentiment. For instance, changes in U.S.-China trade policies create ripple effects across APAC markets. However, these challenges also encourage investors to diversify and seek growth in less volatile areas like private credit, which has gained traction in APAC. Private credit, growing at 24% per year over the last five years, offers attractive returns and an alternative to traditional lending in a higher-interest-rate environment.

As APAC continues to grow economically and technologically, the region offers numerous opportunities for investors. From the tech-driven economies of East Asia to the youthful markets in South Asia, the region offers a dynamic blend of opportunities across sectors. Investors must, however, approach APAC with a long-term view, patience, and a readiness to navigate regulatory landscapes. For investors, APAC is not merely a part of the world map—it’s a vast, evolving region of growth and opportunity.

So, will you venture East? As Vasco da Gama put it, with an appropriate risk disclaimer, “Success is not guaranteed, but is always worth pursuing.”