Our strategists Daniel Blake and Tim Chan discuss how Asia is
adapting to multipolar world dynamics, tech innovation and
longevity trends to create new opportunities for global
investors.
Read more insights from Morgan Stanley.
----- Transcript -----
Daniel Blake: Welcome to Thoughts on the
Market. I'm Daniel Blake, Morgan Stanley's Asia Equity and
Thematic Strategist.
Tim Chan: And I'm Tim Chan, Morgan Stanley
Head of Asia Sustainability Research and Thematic
Strategist
Daniel Blake: Today, how Asia is reshaping
its development strategy, corporate governance, and capital
markets to lead globally.
It's Monday, October 6th at 8am in Singapore.
Tim Chan: And it's also 8am in Hong
Kong.
Daniel Blake: Asia is experiencing a number
of dramatic changes that are reshaping industries, even entire
economies. Deglobalization, supply chain shifts, frenetic
investment in AI and looming disruption from the adoption of the
technology, rapid energy transformation, and the transition to
super aged populations as longevity drives investment in
innovative healthcare and better nutrition are just some of the
overarching themes. Asia's transformation is a story every global
investor needs to follow and look for opportunities in.
Tim Chan: So, what are the overarching
themes, when you look at Asia Pacific? For example, what are the
key themes that you're seeing in terms of driving the equity
return and the market trend that you're seeing?
Daniel Blake: We're approaching the Asia
thematic opportunity from the framework of a competitive
reinvention. It's competitive because this is deeply rooted in
the cultural and business norms across much of the region, which
has had an export focus through the modernization process in
Japan, and more broadly with the emergence of the Asia
Tigers.
But we're seeing this competition really stepping up another
notch. As countries look at how they can take market share in
emerging technologies, and also this overarching competition
between the U.S. and China, which sits at the heart of the
multipolar world theme we've been laying out in recent
years.
We're also seeing a reinvention of development strategies of
corporate governance frameworks and of capital markets to try to
better improve the financial supply chain, to see the capital
raising the capital allocation process improved and ultimately
drive better returns for an aging population.
So, Tim, you've been very focused on the corporate governance
improvements that were seen in much of the region. Take us
through what you think is most compelling and most important for
investors to note.
Tim Chan: I think governance reforms is a
really key thing for Asia Pacific. Take an example in Japan, in
the past we have done some correlation analysis between the major
governance factors and what are driving the return. What we have
found is that, first of all, there is a significant alpha
potential from online companies with leading governance metrics
and also companies that may improve their governance metrics over
time.
So, if we look at the independence of board of directors as an
example. There is a positive correlation between the total return
and also the independence in Japan market. And overall, we are
seeing a major government improvement. As Daniel you have
mentioned, China, Korea, India, and Singapore, and Japan as well
– all these markets together account for over 70 percent of the
market cap in MS Asia Pacific in index. So that's why, we think
the governance reform is really driving the return of Asia
Pacific as a whole.
Daniel, after talking about the governance reform and capital
market reform, I know multipolar level is also a key theme for
Asia Pacific. So, what you are seeing in terms of multipolar
level in Asia Pacific?
Daniel Blake: So, the multipolar world
theme has come back to the foreground in 2025 as trade tensions
have risen, as deal making has been struck or attempted. And
we've seen the concept of weaponized interdependence really being
proven out in the second quarter of 2025, as China has been in
recent years, implementing frameworks for export controls and
leverage these quite effectively.
So economic security initiatives have come back to the focus for
investors. Over recent years, we've seen a number being set up
across the region, including Japan's Economic Security Promotion
Act, the Self-Reliant India framework, and South Korea's Supply
Chain Stabilization Act, as well as Australia's National
Reconstruction Fund. So, we see a number of investment
opportunities flowing from these reforms.
Ultimately the critical mineral and permanent magnet supply chain
is very much in focus, but we're also expecting to see semi
localization. So, semiconductor localization efforts are
continuing to drive investment and activity. Naturally, defense
has been a key area of focus for investors in 2025, and overall
we see defense spending rising in Asia from 600 U.S. billion
dollars in 2024 to [$]1 trillion in 2030.
So, Tim, the energy security theme fits as part of this overall
future of energy theme that you've been exploring with the team.
How do you see this intersection with the multipolar world and
what are the key investment opportunities?
Tim Chan: For the future of energy, I think
the energy story is really at the core of Asia multipolar world
positioning. Take an example, we are seeing for Southeast Asia,
the region is importing gas from U.S., and then also Korea and
Japan are also trying to export their nuclear technology to the
Western world as well.
I think all these have a part to play in the multipolar world;
but at the same time, they are also crucial for these countries
to meet their own energy target and strategy. In Asia Pacific,
when we look at the future of energy, there are a few driving
force[s]. One is the very strong growth of renewable energy. Take
an example, in India, we are seeing a huge CapEx going into the
renewable energy sector and solar sector as well. China is
already the biggest market in solar panel. Then also Korea and
Japan are developing their nuclear capacity as well. And as I
have mentioned, they also export their nuclear technology to the
Western world.
So, I would say, these Asian countries are balancing the
multipolar world priorities with their future of energy target as
well. And then there were also lots of opportunities between
these dynamics; I will highlight two examples. One is a nuclear
renaissance thesis that we have written extensively in the past
two years.
We have highlighted Japan and Korea being the key beneficiaries
under this multipolar world and future of energy dynamics. And
then the other would be the gas globalization in Southeast Asia
or ASEAN region, where we see opportunities in the gas
distributor, gas infrastructure in Southeast Asia. And then gas
is going to be much more important when it comes to the energy,
security and transition agenda in Southeast Asia region.
So we are seeing lots of development in the future of energy in
Asia Pacific. But when it comes to the other big theme that is
AI. Asia Pacific is also a leader in a global AI race. So, Danny,
what are the most reputable trend that you're seeing on a
national or regional level? On tech diffusion and AI in Asia
Pacific?
Daniel Blake: So, the concept of
competitive reinvention also is useful in understanding Asia's
response to AI and technology diffusion. So, we've seen China in
particular, looking to strengthen its position in the development
phase of new technologies. And we're also seeing on the export
competition front, more incentives to compete for the next phase
of supply chain diversification.
We're also seeing the emerging class of China MNCs that are
sitting at the heart of our China Emerging Frontiers research.
And another key area of discussion and research for us is
understanding China's unique AI path. Where we're seeing more of
a focus on policy makers and corporates playing to strengths in
terms of power, data and talent, given the shortages of compute,
and at the same time wanting to pursue a localization strategy
over the medium term.
On the technology front, we think the India stack is also still
underappreciated as a digital enabler of opportunities in the New
India. And then more broadly, we are looking for companies that
we see in Asia that will prove to be AI adoption leaders. So,
this underpins a really another key work stream for us in
identifying opportunities from AI and tech diffusion into the
region.
So, Tim, how about when we turn to the theme of longevity, what
are the key investment opportunities you see in Asia
Pacific?
Tim Chan: First of all, let's look at
China. So, China is entering a super age society and by 2030,
China's elderly population will hit 260 million. So that is a big
number, which accounts for 18 percent of the population. And
Japan as well, and Korea as well. Korea is already entering the
super aged society. And then there have been reform program on
healthcare, financial system pension and labor market in order to
support these, old aging population. And for Japan, the focus is
really on not just living longer but also living more
healthy.
Take an example, we have done some reports on the healthy food
industry in Japan. And how different companies are providing
affordable, healthy food to consumer. And we think that will
create opportunities for investor, if they would like to look
into longevity as a theme.
Overall, we are seeing new market in healthcare, pharmaceutical,
and affordable healthy food, as well as the reform in the wealth
management and pension system that will create opportunities in
the financial market as well. And the longevity economy and or
the silver economy is becoming a big theme for Asia Pacific for a
long time to come.
Daniel Blake: Tim, thanks for taking the
time to talk.
Tim Chan: Yeah, great speaking with you,
Daniel.
Daniel Blake: And thanks for listening. If
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