Home to two of the world’s biggest technology companies – Samsung and Tencent – Asia’s tech sector is increasingly becoming a global force to be reckoned with, offering good value for investors and consumers alike.
‘Winner takes all’ is the new mantra for Asia’s cash-rich tech companies, which span the technology spectrum from cloud computing to internet shopping, as they spend to increase their market share. The growing trend for mergers and acquisitions in the sector helped Asia tech stocks rise by an impressive 60 per cent in 2017.
Meanwhile, sovereign wealth funds are eager for a piece of the pie. They’ve been pouring money into Asia’s technology ‘unicorns’ – private companies valued at USD1 billion or more – in a bid to get maximum exposure to the most promising tech companies, and their eggs are not confined to one basket.
“Despite the huge wave of investment, Asia's technology industry is still in its infancy”
In some cases, private funds are backing two or more companies that provide the same services in the same country, in a bid to ensure they end up the winner, whichever investment comes out on top. Moves like this demonstrate just how big investors think the prize is.
And as the battle to back the right companies continues, consumers in some of Asia’s fastest-growing economies are proving to be the biggest winners of all as they leapfrog their way into the future. Across India, Indonesia, the Philippines and China, affordable smartphones act as the gateway to the internet for those who could not dream of owning a personal computer, while the traditional aspiration to own a car is being replaced with the convenience of on-demand transport apps.
A growing, but infant, industry
Yet despite the huge wave of investment, we believe Asia’s technology industry is still in its infancy, especially given the significant demand for infrastructure across the region. Developing Asia needs to invest USD26 trillion by 2030 to resolve its infrastructure gap , according to the Asian Development Bank.
Across the region, hundreds of billions of dollars need to be spent to expand telecommunication and broadband networks, water supply, power and transport systems. These investments are expected to push technology to the limits, given the increased focus on energy efficiency and promoting a cleaner environment. Think about all buses in China switching from oil to electric transmission, not to mention the introduction of self-driving cars, in the not-too-distant future; or solar power accounting for a greater share of India’s electricity grid; or hi-tech desalination plants helping Asia tackle a growing water deficit.
These possibilities will likely present investors with unprecedented opportunities to make long-term returns. If you add to this the fact that tech unicorns in Asia, which are not currently accessible to ordinary investors, could start to list their shares on regional exchanges in the coming months, the tech industry will likely continue to boom.
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