Southeast Asia seen as best investment destination this year, poll shows

Southeast Asia has eclipsed China as the region most likely to produce the best investment returns, as the ongoing trade war between Washington and Beijing puts a chill on the world’s second-largest economy, according to a survey at the Asian Financial Forum 2019.

About 39 per cent of respondents viewed Southeast Asia as having the best investment returns, while 35 per cent voted for China and 16 per cent for the US. The vote took place during the panel discussion “Global investment in the new economy” in Hong Kong.

However, last year about 55 per cent of respondents to a similar survey at the forum said China would offer the best investment returns in 2018.

Figures showing the number of respondents to this year’s survey were not made available.

Vietnam was another hotspot identified in a recent poll of chief executives at Asia-Pacific companies by PwC.

“We surveyed CEOs across the region where they wanted to put their money in the next 12 months. For two years in a row, Vietnam has come out on top. This has much to do with what is happening around the world, and that some CEOs are making adjustments to their supply chain in response to the current environment,” said Raymond Chao, Asia-Pacific and Greater China chairman at PwC, referring to the ongoing trade war between the US and China.

Victor Fung Kwok-king, chairman of the Fung Group and the moderator of Monday’s panel, said his companies are seeking to find a new base for manufacturing outside China.

“We really need to think twice before finishing your products in China and attaching the ‘Made in China’ label, which will have tremendous duty problem in the US,” said Fung.

He said the manufacturing sector in Vietnam suffers from capacity constraints that may cause some manufacturers to max out their production capacities.

The Fung Group is the major shareholder of Hong Kong-listed supply chain manager for brands and retailers, Li & Fung.

“Then the question becomes, which country is the one you would pick after Vietnam. Eventually, this could be countries within the ‘Belt and Road’ region … or perhaps moving into some of the Middle East countries,” said Fung.

Last week, US and Chinese officials held three days of talks in an effort to reach a trade deal to avoid a rise in US tariffs from March 2. Thus far, there have been few details on the progress of the talks.

The clock is however ticking for both sides, as failure to reach an agreement at the end of the current 90-day trade truce could mean tariffs could rise to 25 per cent, from 10 per cent, on US$200 billion worth of Chinese goods.

Foreign direct investment flows into Asean, comprising 10 countries in Southeast Asia, rose to a record US$137 billion in 2017, from US$123 billion in 2016.

Three member states, including Vietnam, Indonesia and Singapore accounted for some 72 per cent of the foreign direct investment inflows into the Association of Southeast Asian Nations, according to a report in November.