8 Oct, 20
Emergent Wealth in Asia: A New Age of Investors
The world economy faced numerous obstacles throughout this century. Whether through depressions, financial bubbles or as of more recently, Covid-19, the globalised structures of capital are constantly challenged. Nations still have a long way to go before recovering from the current pandemic recession. The value chain shock caused by the crisis has shed light on the fragility of traditional systems and has shown how drastic changes can occur so rapidly. With emergent wealth in Asia, a new wave of investment promises to hit the markets and bring innovation to the Eastern ecosystem.
Despite its hurdles, the past twenty years have been a period of immense economic growth, particularly throughout Asia. According to a recent report from Financial News Asia, China now creates more billionaires than India and the US combined, producing 40% per cent of all ten-figure holders in the world. Such a tremendous rise in wealth has also created an opportune environment for the emergence of the Asian, middle class, a rising demographic of young investors with unprecedented strategies for expanding their capital.
Throughout this article, we’ll dive into the central Asian countries leading this economic spurt, whilst detailing the persona of the contemporary investor, what they look for when creating an investment portfolio and how digital assets play a vital role in this new era of Asian emergent wealth.
Economy Growth in Asia – Aiming Forward
In an article published in March of 2019, the Financial Times (FT) called 2020 “the beginning of the Asian Century”. Although things have not progressed as was predicted, due to the economic effects of Covid-19, their arguments still stand. By examining the International Monetary Fund (IMF) data, the FT concluded that Asia would soon be a larger economy than the rest of the world combined. Merely twenty years ago, the continent’s capital represented less than a third of the worldwide economy.
Out of the 48 countries in Asia recognised by the United Nations, there are a few who stand out amongst the others. A recent study by OECD Paris predicts that Cambodia, Vietnam and Myanmar will have the largest GDP growth in the next five years, from 6 to 9% per year. The countries mentioned above have also received a fast and steady capital boom in digital assets over the past few years. Cambodia, for instance, is home to a more significant amount of bitcoin mining activity than all of Southeast Asia combined, mostly due to low electricity costs and flexible regulations. Myanmar, who achieved a GDP growth of 13.4% in 2014, has been fluctuating steadily in the 7-9 percentage margin. As of 2019, this emerging economy had targeted 5.8 billion US dollars in foreign direct investments, which as of earlier this year was on track to hit 4.4 billion. Additionally, in 2019, the Central Bank of Myanmar (CBM) attempted to ban cryptocurrencies from circulation; however, this has had little effect as no official federal laws are prohibiting them. Although Myanmar and their Central Bank do not recognise digital currencies as official assets, crypto exchanges and traders are still actively functioning regularly in the country.
Autonomous city-states Hong Kong and Singapore should come as no surprise for their exponential growth observed in the past decades, but their recent demand for crypto and digital assets might. As protests in Hong Kong for sovereignty from China spread across several months, digital assets became a way for citizens to take control of their capital amidst an internal crisis. Since the 8th of June 2020, Bitcoin has seen a surge in demand of over 41% amongst Hong Kong residents. Singapore, also opening up to the crypto ecosystem, has recently allowed digital asset firms to operate without a license for six months. The exemption, which expired in late July, grants Digital Currency Exchanges (DCE) half a year to regulate their business as crypto service providers, as Singapore begins a new, crypto-friendly era of finance.
Regarding the southern portion of Asia, Pakistan and Bangladesh are economical underdogs on the way of becoming key-players for Asia’s global leadership. Despite decades of corruption and political conflicts, the South-Asian countries have been steadily gaining ground in the playfield. A June 2019 report by Nasdaq puts Bangladesh as the fourth fastest-growing economy in the world. In 2018, an HSBC report put Pakistan in the same position. One of the exciting considerations about Pakistan is that they are one of the youngest nations in the world with one of the largest youth populations, with over 60% under the age of 30. It brings new challenges in how they integrate the emergent youth population into the traditional and digital economies. In April of 2019, the Pakistani government released its first guidelines on regulating cryptocurrency, a sizeable revision from its previous stance of banning digital assets.
An article on the growth of the emergent wealth in Asia must mention the two economic titans of the continent; China and India. As of August of 2019, China and India together represented almost half of the entire global wealth (46.64%). In a recent report released by KPMG, it states that both countries will independently overtake the US economy by 2030, relegating the American nation to third position. In 2019, China produced three times more billionaires than the US, according to a report published by Reuters. A Credit Suísse survey also shows that China has overtaken the US as the first place in the ranking of the world’s wealthiest people.
Such predictions will most likely change, as the repercussions from Covid-19 unfold throughout the world. But one thing is certain: the Asian wealth is already the leading figure in global capital.
To have a grounded outlook on the emergent wealth in Asia, one must look into what is causing it: the new wave of Asian investors.
Asian Middle-Class Rising – The modern Asian Investor
As banking systems and trust in traditional investments weaken, the middle class is gradually losing ground in first world countries. According to Pew Research Centre, income disparity has been rising significantly in the US since 2010, as the lower class populations grow and the income of the top 5% grows faster than the rest of the demographics combined. The same goes for most of Europe and South America; countries are facing a downward trend of wealth per capita as income inequality is on the rise.
That is not the case for the majority of the emergent wealth in Asia, where the middle class is rising at full tilt and showing no signs of slowing down. An early 2020 report published by Statista indicates that Asia currently has a middle-class population of 2 billion, expected to rise to 3.5 billion before 2030. In comparison, Statista predicts that the South, Central and North Americas will have 689 million people in that demographic by the next decade.
Along with growing numbers of middle-class families, comes a new wave of investors seeking to carve their path. In the case of thriving Asians, the continent is experiencing market enthusiasts in search for unique opportunities with non-traditional values.
For starters, they are more entrepreneurial than traditional investors, focusing on digital opportunities. As countries like India, China, Malaysia and Taiwan become more technologically proficient, so does their interest in building start-up enterprises in their thriving ecosystems. The Global Entrepreneurial Index has put the four mentioned countries as the fastest-growing nations for digital entrepreneurship.
The modern Asian investor is also more open to high-risk opportunities. Since Asia is home to the highest growing population in the world, it also has the most significant growth in working-class households, including those consisting of single dwellers, or couples without children. For that reason, the rising middle class has higher disposable income to invest in up and coming businesses and technologies. Euromonitor Research Centre registered a 2,694% rise in disposable income in China between 1990 and 2019. In the US, the median household income between the same 30 years period grew merely 15%.
Most importantly, for their unprecedented profile, the new Asian investor looks for investments with a socially beneficial impact, where the stakes are not just about profit but also purpose. Popularly called “ethical investing” or “corporate soul-searching”, the Asian market is leading the world in interest for social and environmentally-sustainable opportunities. There are also substantial private incentives from ethical investment funds that focus on companies with significant environmental and sustainability credentials.
In a nutshell, the emerging Asian investor is entrepreneurial, purposeful and with enough disposable income to invest in groundbreaking, unpaved endeavours. Such a mindset is an ideal match for capitalising on the digital economy, especially in the aftermath of Covid-19 as businesses migrate to a more digitised landscape. From the diverse portfolio options available for the new Asian persona, investing in digital assets has proven to be one of the more attractive choices. Such trend is evidenced by how the Asian continent has adopted blockchain and digital assets over the years. From world-leading exchanges to ground-breaking projects, and significant institutional to retail investment, Asia has been a lighthouse within the space.
Emergent wealth in Asia and digital assets
Asia’s interest in digital assets grows more robust and more relevant by the day. The most prominent example of that change is China, who went from banning cryptocurrencies six years ago to developing their own digital currency, the Digital Yuan currently in private stages of testing. It should come as no surprise that the Chinese government wants to compete with the cryptocurrency market, as these assets have proven to be extremely resourceful tools for Asian investors to move funds out of their shores. More accurately, over $50 billion US dollars in digital assets were transferred from China in the past year, mostly through bitcoin, Ethereum and tokenised USD Tether (USDT), according to a recent report by Coinanalysis.
Asian investors are currently in the economic sphere with the most opportunities for the expansion of digital assets. The adoption of cryptocurrencies has been consistently breaking new highs in the continent. In South Korea, according to the Saramin research portal, about one-third of the entire workforce has claimed to invest a large portion of their funds in digital assets. The rise in Asia’s cryptocurrency and digital asset adoption is further enhanced at a political level. The leading Asian nations in crypto trade volume are consistently advancing in regulations for digital assets, either embracing accessibility policies or recognising crypto’s disruptive frameworks against traditional banking (which also puts digital assets in a positive light).
As a continent leading the globe in technological innovation, this puts emergent Asian wealth in a prime position to capitalise on the new wave of digital asset investments. An excellent example of their transition from traditional investments is property value. Global property prices, a consolidated and traditional path of investments for Asians, are moving further out of reach. It is happening mainly in Asia, where prominent cities are consistently topping the list of the most expensive housing prices, year on year. For that reason, the emergent wealth class who might be considering investing in real estate are now looking for alternatives in building true wealth over debt, and the digital asset markets are providing compelling choices.
The class of emergent wealth in Asia is more in tune with the digital economy, preferring technology and digitally-native investments that complement the persona of the age. They grew up in the digital age, and interact with the digital world daily. It makes sense that they look towards digital assets to invest in and build out their wealth, as they break from the traditions of older generations. Furthermore, and in addition to investing in emergent technologies and digital assets, the new wave of emergent wealth are also looking to purposefully invest in impactful, meaningful projects and assets that make the world a better place.
Zerocap provides digital asset investment and custodial services to forward-thinking investors and institutions globally. Our investment team and Wealth Platform offer frictionless access to digital assets with industry-leading security. To learn more, contact the team at [email protected] or visit our website www.zerocap.com
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