Two longer term themes that we simply shouldn’t take our eyes off
Over the last ten days, we have released two reports that have refocused me on just how constructive I need to be on Asia over the course of the next five years. I have outlined in the blotter how we can be distracted by things that just don’t matter. Our recent Expert Series Conversations on TPP-11 and the dominance of Chinese fintech just drove home how compelling these themes are on a five-year view. These are the narratives that truly matter, and it is easy to lose sight of them.
The Trans Pacific Partnership (TPP-11)
Trade is one of those issues that most investors give very little attention to and ironically, the US / China trade dispute is a small negative for Asia versus the long-term benefits of both TPP-11 and eventually RCEP. It is very difficult not to get extremely bullish on the economic outlook for TPP countries when tariffs on 90% of goods and services will go to zero by early 2019. It is clear from this conversation with Deborah Elms, Founder of the Asian Trade Centre, that the United States has screwed up by exiting TPP as the deal that was signed was a major benefit to US corporates in the aggregate. While the chance of the US being readmitted at some stage in the next few years is high (if they choose to), any “better deal” would be a marginal improvement at best.
This report highlights in the most dramatic way how advanced China is regarding not only Fintech AI, but all facets of machine learning. When combined with our recent conversation with Deborah Elms regarding the enormous benefits to the region of both the Trans Pacific Partnership and the Regional Comprehensive Economic Partnership, it is very easy to lose sight of the long-term opportunities in Asia. While I appreciate that structural narratives can often be lost in the daily and weekly gyrations of markets, it is difficult to see emerging market underperformance continuing for much longer in 2018.