Investment fund manager Baring has identified the Association of Southeast Asian Nations (ASEAN) as a future epicentre for foreign investment, and a key opportunity for capital returns.

From 2000 to 2011, net foreign direct investment (FDI) into the ASEAN region increased at over 400% with particularly strong momentum over the past three years to the point where gross FDI into South East Asia matches China in terms of volume. This level of international investment bodes extremely well for future economic development, believes Barings’ investment manager for its ASEAN Frontiers Fund, SooHai Lim. “We continue to see very good growth prospects in the ASEAN region. Multinational companies are increasingly considering a 'China+1 strategy' for the geographic diversification of their manufacturing bases”, Lim explained.

One of the leading ‘+1’ candidates is Singapore, which has established itself as one of the region’s focal economic hubs. It is also emerging as an epicentre for superyacht activity in SE Asia, having [arguably] established the continent’s most respected yacht show. The managing director of the show’s organiser Singapore Yacht Events, Andy Treadwell, believes the growth of the luxury market in Asia, when contrasted against European and US downturns, presents an attractive proposition for superyacht industry investors. But he is also dismissive of the ‘China+1’ approach.

“For builders, brokers, dealers, and the charter industry, there is a wonderful opportunity here, but the superyacht industry is not going to explode overnight. I think it will be relatively low volume in the highest value, largest yachts for a while, with much greater volume for the lower value, smaller boat market, and most importantly, it will come from every part of Asia.

The stunning cruising grounds available make SE Asia an obvious target for an ever-expanding superyacht industry.

“People who think ‘China’ for Asia are making a big mistake. For the next 10 years there will be more opportunities in the rest of Asia put together than in China alone. The smart players will have smaller, but nonetheless important, representation in Asia; Singapore is the primary hub and logical regional platform in which to have a base. So with regards to foreign investment in Singapore, I think we should be looking at Singapore as a hub for Asia, rather than a market on its own.”

Stakeholders in the SE Asian superyacht market are in no rush to trigger a surge in traffic. Image courtesy of APSA.

Indonesia is another shining example of a rapid-growth economy that is now attracting foreign suitors. "Indonesia's economy is large, at $1 trillion, making it robust and resilient. And while there might be short-term concerns, we believe economies of this size and influence pose good long-term investment opportunities”, Lim added.

Treadwell though, is cautious about trying to develop the market artificially too quickly. “There is a risk that too many foreign investment while the market is still small, and not yet mature could create market overcrowding, fragmented market share, price competition, and thus, poor returns overall”, he explained. Rather than flooding the market, he believes, “there is room for a limited number of top players to come in, with full knowledge of how difficult it may be to make much headway initially, but who are willing and able to put in the investment for the long term, which will ultimately pay off.”

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