According to Abrdn CEO Stephen Bird, stock market capitalisation in India and China might quadruple by 2050 as Asia moves from “laggard to leader” in the climate transition.
Bird commended the economic revolution that has lifted more than a billion people out of poverty in a letter seen by CNBC honouring the 30-year anniversary of the British investment firm’s first Asian headquarters opening in Singapore.
He also stated that the region’s contribution of the global economy has grown eight times since the Asia Financial Crisis in 1997.
“Capital markets have also evolved and the region has switched from being mostly a destination for foreign investors to one where local investors dominate its markets,” Bird said.
He added that “the next 30 years looks to be every bit as exciting as the last,” and recommended investors remain calm during periods of volatility, keeping their “eye on the long game.”
Chinese stocks have had a difficult year as President Xi Jinping’s “zero-Covid” policy has choked economic growth and produced supply chain bottlenecks that have reverberated throughout global markets.
Analysts at Goldman Sachs recently stated that they were “seeing light at the end of the tunnel,” and Bird agreed with the long-term perspective that Asian equities can move from “laggards to leaders” in terms of both performance and involvement in addressing the climate catastrophe.
“China and India are expected to become the world’s largest and third largest economies respectively in the next decade while their consumers will increasingly dictate global tastes and trends. Capitalization of their equity markets could also increase by a factor of four or more by 2050,” Bird predicted.
“Other countries in the region present exciting opportunities too. Bangladesh, Indonesia and Vietnam have some of the highest potential growth rates in the world, while Japan and South Korea’s aging populations have built up significant savings that need to be put to better work. And, as the region’s most open global financial center, Singapore will be at the heart of all of it.”
However, Bird noted that development is unlikely to be linear, with the globalisation that has fueled Asia’s economic growth under jeopardy and climate change offering a “acute challenge” to the area.
“A by-product of Asia’s growth is that it has accounted for the lion’s share of the increase in global carbon emissions over the past three decades. This increased human footprint is also evident in rising air pollution and biodiversity loss,” he said.
While Asia cannot address the climate catastrophe alone, its big economies must find ways to detach economic growth from fossil fuels, according to Bird. The majority of the region’s main economies have now adopted net-zero targets, and Asia is also playing a role in creating technological solutions to climate change.
“Whether in the form of solar panels, batteries for electric vehicles or green hydrogen, decarbonisation is dependent on Asian innovation,” Bird said.
According to Abrdn, which has approximately £464 billion ($586.35 billion) in assets under management as of the most recent results, interest in sustainable investment among local investors is also on the rise, as is active engagement between asset managers and companies, potentially opening up new opportunities for “sustainability-linked loans and bonds.”
(Adapted from CNBC.com)