Eastern Sovereign Funds Bullish on Asian Transformational Economies

Temasek Holdings and other sovereign funds are taking big bets on Asia. Temasek has taken positions in Chinese banks such as China Construction Bank and the Bank of China; understanding that investing in financial institutions can be a profitable undertaking for a burgeoning economy. Confidence and optimism in China’s long-term economic growth play into Temasek’s investment themes. The Chinese government has made strides on making it easier for foreign investors to invest in domestic markets by lessening capital controls.

China, India, and Indonesia, along with other Asian nations are developing large middle classes, creating vast pools of consumers. In fact, it is projected in the next decade as much as 67% of global growth of the middle class will be derived from China and India. Annual household income levels continue to rise in the region; however, household incomes still dwarf nations such as Spain or the United States. On the other hand, the consumer credit market of Asia is beginning to expand, augmenting consumer spending. The West will still account for greater consumer spending power in the next decade, but Asia is providing a noteworthy alternative for multinational corporations.

Infrastructure investing is also an avenue for sovereign funds to capitalize on the growing middle class populations of India and China. On February 18, 2013, the United Arab Emirates and India created the India-UAE High Level Taskforce on Investment. The vehicle will be used to push through investments in industries such as infrastructure and the food supply chain.

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