December 2020 Building tomorrow Aberdeen Standard Asia Focus PLC – capturing Asia's future potential today

A collection of articles celebrating 25 years of Aberdeen Standard Asia Focus PLC – by the region's leading investors, commentators, politicians and business leaders including; Andrew Neil Richard Han Alexander Downer Kiran Mazumdar-Shaw Krish Shanmuganathan Danny Alexander Liam Halligan Parwati Surjaudaja Flavia Cheong Beh Swan Gin Parag Khanna Nihal Kaviratne

a Aberdeen Standard Asia Focus PLC Building tomorrow Harnessing opportunity in Asia – past, present and future

Fifteen leading contributors explore 25 years Contents Sector innovation of transformation across the Asia-Pacific 02 Twenty-five years of change 44 Eureka! Groundbreaking moments for pandemic science Nigel Cayzer, Chairman, Aberdeen Standard Asia Focus PLC Kiran Mazumdar-Shaw, Chairwoman and Managing Director, region – and the investment opportunities Biocon, India’s leading biopharmaceutical company 04 Changing face of Asia in numbers 48 Move fast and make things: delivering Asia’s ahead for Asia's smaller companies. 06 The incredible journey: travelling to the heart digital transformation of Asian innovation Danny Alexander, Vice-Chairman, Asian Infrastructure Hugh Young, Managing Director, Aberdeen Standard Investment Bank Investments, Asia 54 Building the bank of tomorrow Geopolitics Parwati Surjaudaja, President Director, Bank OCBC NISP 08 The art of influence: the Asian Century Andrew Neil, Chairman, GB News Country focus 58 The isle of innovation: Singapore 12 Balance of power: how Asia will keep China in check Beh Swan Gin, Chairman, Singapore Economic Alexander Downer, former Australian Foreign Minister Development Board 18 Powering prosperity: Asia’s case against Aberdeen Standard Asia Focus PLC Western-style democracy Asian companies Krish Shanmuganathan, Non-Executive Director, 62 The fortune in Asia’s backyard A fundamental, high conviction portfolio Aberdeen Standard Asia Focus PLC Nihal Kaviratne, founder, St Jude India Child Care Centres of well-researched Asian small caps. Trade 68 Small but mighty: Asia’s small-cap revolution Hugh Young, Managing Director, Aberdeen Standard 22 Shifting East: Covid-19 and the building Investments, Asia of the Asia Powerhouse Aberdeen Standard Asia Focus PLC was high-quality companies with talented Liam Halligan, Economics Editor, The Sunday Telegraph launched in September 1995 to harness management, strong balance sheets, and Last word its management team's deep insight into compelling market propositions and franchises 28 After the pandemic: explaining Asia’s speedy recovery 74 Rethinking tomorrow, rebuilding resilience the dynamic smaller company opportunities – many of which have grown to become leaders Flavia Cheong, Head of Equities – Asia Pacific, Sir Douglas Flint, former Chairman, HSBC Holdings plc emerging throughout the Asia-Pacific region. in their sector at home and abroad. Aberdeen Standard Investments and Chairman, Standard Life Aberdeen plc Investing across both Asia and Australasia, Now managing gross assets of more than 34 Bringing it back home: how Asia’s supply 80 Asia in context over the last 25 years excluding Japan, the company brings together £420mn (as at end-Oct 2020), the trust's chains are changing a high-conviction portfolio of around 60 performance record speaks for itself: £1,000 Parag Khanna, author of ‘The Future is Asian’ 90 Appendix companies, each with a market capitalisation invested when the trust launched 25 years 40 Trade winds, trade wars: where next for US-China tariffs? of typically US$1.5bn or less at the time ago would be worth more than £18,000 today Richard Han, CEO, Hana Microelectronics of investment. The team's steadfast focus with dividends reinvested, and shareholders on first-hand, on-the-ground company have seen their annual dividend increase Front cover: Supertree Grove at Gardens by the Bay, Singapore. analysis has consistently helped to uncover from just in excess of 1p to 19p. Piotr Kloska / Shutterstock

1 Aberdeen Standard Asia Focus PLC Twenty-five years of change

Nigel Cayzer, Chairman of Aberdeen Standard Asia Focus PLC, introduces our in-depth exploration into Asia over its first – and next – 25 years and the prospects for Asia’s Twent y-five dynamic smaller company universe.

ive years ago, on Aberdeen Standard helping to co-ordinate a great deal of this work. Asia Focus PLC’s 20th anniversary, As ever, the success of Aberdeen Standard F we published a booklet entitled Asia Focus over the last 25 years has been years of change ‘Twenty years of transformation: Asian smaller founded on the investment team at Aberdeen companies 1995-2015’. In it, we outlined the Standard Investments, led by Hugh Young, development of the Asia region, how in that ably assisted in recent years by Gabriel period the economies of the Indian Sacks, together with the support staff whose Nigel Cayzer subcontinent, the ASEAN region, China and dedication and hard work ensure the smooth Chairman, Australasia had navigated the traumas of the turning of the corporate wheels. Aberdeen Standard Asia Focus PLC Asian financial crisis of 1997-9, the dot-com I have had the honour to serve as boom and bust of 1999-2000, the SARS Chairman of the company from its inception outbreak of 2003, global financial crisis in 1995. During this period I have been well of 2008-9 and the market volatility of 2015. supported by a board of directors, whose Despite massive geopolitical shocks, the Asian composition may have changed through the stock markets have powered through these years while the high quality of their advice storms. Smaller companies, the focus of Asia has remained consistent. Focus, have thrived with a considerable number emerging as market leaders in the countries in which they operate. These two As with every listed company, we depend decades of change were also highly rewarding on the support of our shareholders and for those who invested in the region. Five years later, on our 25th anniversary, in return, we aim to deliver good returns with the help of a distinguished panel of contributors, we thought it would be interesting and a secure, steadily increasing income. to pose the question of Asia: the next 25 years. 2020 saw the world beset by the greatest Lastly, as with every listed company, we economic crisis since the Second World War. depend on the support of our shareholders It started in Asia but through the incredible and in return, we aim to deliver good returns discipline for which the peoples of Asia are and a secure, steadily increasing income. As such an exemplar, it has also been the first this publication demonstrates, our confidence region to emerge towards recovery. in the future of Asia and the prospects for The articles on the following pages explore Asia’s smaller companies justifiably remains both the broad global question of whether the undiminished. In the 25 years since we made 21st century will be the Asian Century and the our first investment, £1,000 with dividends economic impact of this on the broader market reinvested would be worth more than £18,000 and also smaller companies. Our contributors today and we have seen the annual dividend also consider an array of issues that are shaping increase from just in excess of 1p to 19p. business, consumption trends and policy in Although I will be long retired, I am Asia, including technology, supply chains, tariffs confident that this fascinating and beguiling and disease control. I would like to thank all part of the world can be relied on to deliver our contributors for their time and thought- exceptional returns to our shareholders in provoking comment and, in particular, one the next quarter of a century, as it has done Ho Chi Minh City and the Nhieu Loc canal, Vietnam. of our directors, Krish Shanmuganathan for in the last. Nguyen Quang Ngoc Tonkin / Shutterstock

2 3 Aberdeen Standard Asia Focus PLC The changing face of Asia in numbers

The changing face of Asia in numbers

The scale of Asia's ongoing transformation into a modern economic powerhouse is breathtaking. Here are some 2040 30,000 66% numbers highlighting the region's growth, consumption and business trends. By 2040, Asia is expected China filed more than 66% of the world’s to represent 40% of global 30,000 public patents for middle class will live consumption and generate AI in 2018 – about 2.5 in Asia by 2030 52% of global GDP times more than the US

Source: McKinsey Source: Nikkei Asia Source: OECD Observer https://www.mckinsey.com/featured-insights/asia-pacific/ https://asia.nikkei.com/Business/Business-trends/China- https://oecdobserver.org/news/fullstory.php/aid/3681/ sias-future-is-now overtakes-US-in-AI-patent-rankings An_emerging_middle_class.html

43% 2030 US $6.8trn 1.7x 2.3bn 3/4 43% of the world’s largest By 2030 China and India US$6.8trn in goods were Asia’s services trade is Asia accounts for over half In shopping, Asia is companies have their are set to be the largest exported from Asia in 2019 growing 1.7 times faster (2.3 billion) of the world’s generating about 3/4 of headquarters in Asia economies in the world, than the rest of the world internet users global retail growth and overtaking the US about 2/3 of online growth

Source: McKinsey Source: World's Top Exports Source: KPMG Source: McKinsey Source: DataCentre News/ Learnbonds.com Source: Bain & Company https://www.mckinsey.com/featured-insights/asia-pacific/ http://www.worldstopexports.com/top-asian- https://www.afr.com/companies/professional-services/ https://www.mckinsey.com/featured-insights/asia-pacific/ https://datacentrenews.eu/story/asia-home-to-half- https://www.bain.com/insights/the-future-of-retail-in-asia-pacific/ corporate-asia-a-capital-paradox export-countries/ china-india-set-to-overtake-us-economy-by-2030-20191223-p53mfg asias-future-is-now# of-the-world-s-internet-users

4 5 Aberdeen Standard Asia Focus PLC The incredible journey: travelling to the heart of Asian innovation

Launching an investment trust focused on Asia’s smaller companies may have seemed a radical step in 1995, says Hugh Young. But as our contributors on the following The pages show, Asia’s ongoing transformation continues to reap dividends.

t is 25 years since we launched Aberdeen GSK Pharma, Titan, and ConAgra in India, Standard Asia Focus PLC, then known gives his perspective on the region’s incredible Ias Aberdeen Asian Smaller Companies emerging opportunities, while Richard Han, Investment Trust. It was a modest Stock CEO of international technology group Hana Exchange placing back then. We toured the Microelectronics, discusses shifting supply larger UK institutions across the UK, explaining chains in the wake of Covid-19. Founder of this pioneering opportunity, and raised biotech group Biocon, Kiran Mazumdar-Shaw Hugh Young £35mn in September 1995. talks about the future for her business, while Managing Director, journey Our aim was to capture the exciting growth Parwati Surjaudaja, President Director of Aberdeen Standard and innovation happening across Asia through Indonesian bank OCBC NISP explains how Investments, Asia a focused selection of listed smaller companies the banking industry is digitising and in the region, Asia ex Japan, which were often promoting financial inclusion. poorly analysed and understood. If anything, Travelling to the heart the continent has proved even more dynamic than we expected, now leading the world in Today, we see real resilience across Asia. areas such as e-commerce and social media and It is at the forefront of global innovation and navigating global and local crises with skill and of Asian innovation resilience. The trust has grown too, with assets brand creation, some barely known in the today of over £400mn, with a greatly diversified shareholder base, as wealth managers and UK but often dominating their own markets. private investors joined our journey over time. In this special 25th anniversary publication, Today, we see real resilience across we aim to give you a flavour of how Asia is Asia. It is at the forefront of global innovation developing today and looking ahead: its key and brand creation, some barely known in trends, its innovative businesses, its economic the UK but often dominating their own markets. might in a changing world. Growing Asian It has also learned the lessons of excessive consumer markets and intra-regional trade are debt, helping it weather both the global a recurring theme for many smaller companies’ financial crisis and now Covid-19 more own growth stories. To pull the stories of the adeptly than its Western peers. Governance future together, we have compelling thinking is stronger than it has ever been, while from leading UK commentators, such as governments across the region recognise Andrew Neil and Liam Halligan, alongside the power of co-operation. This makes it insight from regional leaders, such as Swan a fertile region for active investment and Gin Beh, head of the Singapore Development discovery. Board, Danny Alexander, vice president at the We are every bit as excited to invest Asian Infrastructure Investment Bank, and in Asia now as we were in 1995. We hope this former Australian politician and diplomat publication brings the region to life for you Alexander Downer. in all its idiosyncrasies. I thank our shareholders We also hear from those locally who who have been on this exciting journey of Opposite: Night view of Shanghai, China: lead the businesses in which we invest. growth and discovery with us and, hopefully, Aberdeen Standard Asia Focus PLC Nihal Kaviratne, whose business career has are ready to accompany us over the next has sought to capture the growth and innovation happening across Asia. included senior roles for Unilever, AkzoNobel, 25 years. Ioana Catalina E / Shutterstock

6 7 Aberdeen Standard Asia Focus PLC The art of influence: the Asian Century

The art of influence: The Asian Century

With the United States’ grip on geopolitical dominance slipping, Asia’s economic and political power is sharply in the ascendant, says Andrew Neil. However, securing global supremacy will also require adopting a new, subtler set of skills.

8 9 Aberdeen Standard Asia Focus PLC The art of influence: the Asian Century

Andrew Neil is chairman of GB News, Less access to US markets founding chairman of Sky News and There are caveats, of course: the pandemic is former editor of The Sunday Times. likely to see a far tougher line on China from the US. This is a bipartisan position. While Biden he United States exerted cultural, has obfuscated on China, those around him are economic and geopolitical dominance hawks. Chinese companies are unlikely to enjoy T for much of the 20th century, but its the same unfettered access to US markets they grip on global leadership has slipped. Even as have naively been offered before. It may be that Joe Biden promises to re-engage with the world their domestic market is large enough for it not after four years of retreat, it is not clear that it to matter, but ultimately it must place limits can scramble back to its former pre-eminence. on growth. Asia has the economic might to take its place, but its hold on the 21st century will depend not Should China overtake America to become only on its ability to seize geopolitical leadership, Previous page: Leeza SOHO by Zaha Hadid but its mastery of soft power as well. the world’s largest economy, it will be hugely is a skyscraper located in the Lize Financial Biden has vowed to restore American Business District in Beijing, China. symbolic – and not necessarily in a good way. maliao / Shutterstock leadership, backing away from the unilateralism China and USA national flag. that dominated the Trump administration. He Shutterstock has promised to lead by the ‘power of example’ For the first time in 200 years, the link between Shri Narendra Modi, Prime Minister of India. rather than the ‘example of power’, potentially recognising the potential harm to US China’s stories well, present a true, multi- freedom and prosperity will be broken. iTechGuru / Shutterstock taking America back into global agreements influence, may attempt to rejoin the Trans- dimensional, and panoramic view of China, President Xi Jinping shakes hands with the such as the Trans-Pacific Partnership and the Should China overtake America to become Pacific Partnership. and enhance our country’s cultural soft power,” then US Vice-President Joe Biden 2013. Xinhua / Alamy Stock Photo Paris Agreement on climate change. It is not too the world’s largest economy, it will be hugely Can China be a constructive force in global said President Xi at the 19th Communist Party late for him to make a difference, though symbolic – and not necessarily in a good way. governance? The lack of coordination among of China (CPC) National Congress in 2017.4 without a Senate majority (still unclear at the For the first time in 200 years, the link between Western powers has ‘ stalled reform of global Beijing has developed an international media time of writing) his hands may be tied. freedom and prosperity will be broken. From institutions, leaving severe governance deficits’ network and has been busy promoting its values the rise of Britain in the 19th century, to the according to the World Economic Forum, but it and traditions around the world, but whether Overtaking the US economy predominance of America in the 20th century, isn’t clear that China is the right country to this has the same seductive appeal as American The question is whether this will be enough to to the German and Japanese economic miracles, provide it. President Xi has returned China to a culture is open to question. The Chinese halt the rise of an increasingly ambitious Asia. the West has always been able to claim a link totalitarian state. That may inhibit its dynamism government’s cloth-eared PR response to the Economic dominance is already given. This year, between political freedom and economic and ability to innovate. Nor is it clear that China pandemic – boasting about how much better it Asia’s GDP overtook that of the rest of the world success. No longer if China is top dog. can afford to do all it has set out to do — build has handled Covid-19 than the West – suggests combined and by 2030 is expected to contribute Economic vigour has been accompanied by the Belt and Road network, build a military to China has some way to go before it understands approximately 60% of global growth. These greater ambition on the world’s political stage. rival America in the Pacific and create a welfare how to handle this subtler global influence. The lofty predictions tend to focus on China and, China has already start to muscle in on the safety net for its fast-ageing population, which West may mount a significant rebellion against while it is undoubtedly dominant, the role of space left by the US. The ambitious ‘Belt and the Communist party’s Faustian pact with the the idea that authoritarianism is somehow a India should not be forgotten. On current Road’ international trade network is a modern people will require it to do. Something may ‘better’ approach to running an economy. growth rates it will overtake the US economy equivalent of the ancient Silk Road. It goes have to give. by 2030.1 beyond trade links, but also serves as a Asia’s century – Asia’s challenges The 2020 pandemic has accelerated this marketing tool to promote China’s influence In search of China’s soft power There are risks to Asian power in the 21st redrawing of global economic power. Asia through the world.3 Its cultural dominance is as yet unclear. century. As it watches an increasingly confident has emerged from the Covid-19 outbreak, its Part of the US’s supremacy has come from Asia, the US may decide it wants its position economies returning swiftly to full capacity. Sidelining Western powers its soft power, what US political scientist back. The region remains vulnerable to trade This speedy recovery has helped ensure its China has revived its relationships with Joseph Nye defined as – “the ability of a wars and economic transition can be messy. governments are less indebted and its societies India, Japan, and South Korea. Amid regional country to persuade others to do what it wants China’s humanitarian record makes it an less fractured than the embattled West. Asia cooperation pacts, Western powers are without force or coercion”. The US has been uncomfortable global champion, while India’s had already shaken off much of its dependence increasingly sidelined – from the China-Japan- uniquely skilled at spreading its values across sclerotic administrative machine will act as a on global demand. Far from being a widget ROK trilateral summit to cooperation platforms the globe. It is certainly China’s ambition – brake on growth. maker for the West, more of what is made in such as APEC, ASEAN and the Shanghai “We will improve our capacity for engaging Could this be the Asian century? It will be Asia stays in Asia.2 Cooperation Organisation. Biden, in international communication so as to tell if the US blinks.

10 11 Aberdeen Standard Asia Focus PLC Balance of power: how Asia will keep China in check Balance of power How Asia will keep China in check

Asia’s economic ascendancy isn’t in doubt, but it will be vital for the region to tackle the risks that could compromise its prosperity. Most notably for many countries in the region, this means addressing China’s dominance, says Alexander Downer, the longest serving Australian foreign minister.

12 13 Aberdeen Standard Asia Focus PLC Balance of power: how Asia will keep China in check

Alexander Downer is a former Australian away from its tradition of economic nationalism, politician and diplomat. He led the Liberal realising that to achieve higher rates of growth Party from 1994 to 1995, was Minister for will require greater openness and transparency. Foreign Affairs from 1996 to 2007, and High It would be a mistake to ignore Indonesia Commissioner to the United Kingdom from and other Asian countries as part of the 2014 to 2018. He is currently chair for the wirtschaftswunder of Asia. China itself will International School for Government at increasingly invest in Asian countries. Much Previous page: Two spiritual creatures King's College London. of this investment will be in infrastructure and in Buddhism representing the spirit manufacturing. So will Japan. The Japanese heaven and matter earth. Shutterstock t has become a media cliché to talk of the government is concerned about the impact Display of vintage wine bottles. 21st century as the Asian century, just as of China’s regional economic diplomacy and Barossa Valley, South Australia. Ithe 20th century was the American century. believes that if Japanese companies and the Ekaterina Kamenetsky / Shutterstock These tropes deserve careful examination. They Japanese government invest more heavily in the are often half-truths clothed with hyperbole. region, it will balance China’s power. There are It is worth starting with the good news: clear signs of this in countries such as Myanmar there are reasons to be optimistic about the and Indonesia. economic prospects for the Asia-Pacific region and India over the next few decades. China’s new five-year plan suggests a very rational, The Americans and the Australians also albeit authoritarian, approach to economic policy-making. China is determined to work know that increasing investment in Southeast itself out of the middle-income trap and drive its per capita GDP up to the level of mainstream Asia will help to limit the influence of Beijing. European countries over the next 20 years. This is not just wishful thinking. The This is prompting an increase their economic government in Beijing knows that it has to activity across the region. push China further up the technology curve if it is going to increase productivity at a time of declining population. It also knows that Rebalancing regional power China cannot permanently rely on being an The Americans and the Australians also know export-oriented manufacturer. It has to build that increasing investment in Southeast Asia a stronger economy around domestic will help to limit the influence of Beijing. This economic growth in the region and to habits China? China under Xi Jinping may aspire to View of modern bridge in the busy Sudirman Street in the evening, consumption and services. China is already is prompting an increase in their economic of trade liberalisation more generally. dominate East Asia with a latter-day equivalent Central Business District of Jakarta. on this path. activity across the region. of the Monroe doctrine. If it was to succeed, this Sony Herdiana / Shutterstock As for trade policy, the Asia-Pacific region Risks to prosperity would lead not to permanent subservience in Going beyond China driven initially by APEC is strongly committed to Governments now recognise that more open the region but growing resentment, heightened As China’s economy continues to grow, it will trade liberalisation including at the plurilateral economies are going to be more prosperous tensions and even conflict. Most countries in provide an ever-expanding market for its level. There are three major trade agreements: economies. This augurs well for the economic the region are well aware of this danger and neighbours. It will also become an increasingly the ASEAN bloc of 10 countries, which have future of the region and supports the view of while happy to benefit from China’s economic attractive destination for investors from the their own liberal trading arrangements; the US an ‘Asian century’. miracle, they want to ensure there is an Indo-Pacific region. As such, one of the drivers driven Comprehensive and Progressive Trans However, it pays to think of possible risks. appropriate balance of power in the region to of economic growth throughout the region will Pacific Partnership, which includes a number Asian economic growth over the last half curb Chinese dominance. be China itself. of key Asian economies but not yet the United century has been made possible by the security Secondly, can the balance of power be There is much more to the Asia-Pacific States; and finally, there is the Regional provided to the region by, inter alia, the United maintained? To maintain it requires active region than China, of course. Indonesia, the Comprehensive Economic Partnership which States. It is, after all, a region that over the engagement by the United States, its allies and third most populous democracy in the world brings together a number of Asian countries centuries has been torn by conflict. other like-minded countries. How easy will this and the fourth most populous country, is with Australia, New Zealand, Japan, China and There are at least three questions about the be? All the signs are that the United States will increasingly opening its economy and focusing the Republic of Korea. future security of the region. If that security is maintain a strong commitment to the security on achieving higher rates of economic growth Whatever the strengths or limitations of not maintained, then prosperity will collapse. of the Asia-Pacific region. Both US political with improved per-capita incomes. It is moving these agreements, they will contribute to First, how will the region manage the rise of parties regard China as a strategic competitor.

14 15 Aberdeen Standard Asia Focus PLC Balance of power: how Asia will keep China in check

View of corporate offices in Gurugram, No United States administration will want China diplomacy, the Association of Southeast Asian New Delhi. India is one of the 18 to become excessively dominant, even in East Nations (ASEAN). The EAS brings together 18 countries in the region that have joined economic forces as the East Asia. Its two most loyal allies in the region – of the key countries in the region from India to Asia Summit (EAS). Japan and Australia – are enthusiastic not just New Zealand. Importantly, it includes China and Naveen Macro / Shutterstock to maintain their alliances with the United the United States as well as Japan. APEC’s States but to build that relationship further into membership is more diverse, including not just the region. Noteworthy is the decision to add Asia-Pacific countries but also North and South India to the security dialogue between Australia, American economies. It also includes Hong the United States and Japan. Kong and Taiwan.

Maintaining regional peace It is also reassuring that countries such as Not only is there architecture to maintain Indonesia – not, strictly speaking, allies of any nation – are privately anxious for the United an appropriate power balance in the region, States to remain engaged in the region. Indonesia already has a security treaty with Australia but there are several multilateral institutions, (the Lombok treaty), which underscores the commitment of Indonesia to a strong security which will also help to maintain a peaceful relationship with an American ally. environment. It isn’t often said, but the truth is the Indo-Pacific region broadly is developing Tensions could erupt in the South China and poor faith on the Joint Declaration on constructive architecture, which will help to Assessing Asia’s flashpoints Sea where China has asserted territorial Hong Kong illustrate the type of issue that manage the rise of China peacefully. Not only Thirdly, for all this optimism, there is always the sovereignty in defiance of international law. could raise international tensions and prompt is there architecture to maintain an appropriate risk of miscalculation. There are several possible It is using force to assert its claims for contested international intervention. power balance in the region, but there are flash points. There is no resolution to nuclear- maritime territory. The US and its allies will That said, it is hard to see what this issue several multilateral institutions, which will also armed North Korea and some fear that North continue freedom of navigation exercises in the will be. No nation wishes to intervene to help to maintain a peaceful environment. Korea could launch an attack on South Korea. South China Sea to maintain the international protect the Uighurs and ultimately the United These include the East Asia Summit (EAS), My judgement is that this is improbable; if it status of the Sea and defy China’s claims to States and its allies would see Hong Kong as the Asia-Pacific Economic Cooperation (APEC) took action, it would swiftly be eliminated by sovereignty. This could lead to conflict, though dispensable. If China’s economy goes into and at the very heart of Southeast Asian the United States and its allies. this is likely to be on a minor scale. Having said deep recession, perhaps driven by a severe that, it is worth noting this as a possible source financial crisis and civil unrest erupts, it could of conflict coming from miscalculation rather arouse international activity. There is no sign A US seaman on lookout watch on the aircraft carrier USS Ronald than specific planning. of this happening but it is important to flag Reagan in the South China Sea. Then there is Taiwan. There is no doubting the risk. ABACAPRESS / Alamy Stock Photo Beijing’s ambition to incorporate Taiwan into the People’s Republic of China and Beijing might A stable outlook be prepared to take military action to do that. Overall, the prospects for the Indo-Pacific For as long as China believes the United States region are positive and benign. In security and its allies would come to the support of terms, a balance of power is likely to be Taiwan, then conflict seems unlikely. However, maintained and it is unlikely that war will erupt if Taiwan miscalculates and, for example, as a result of miscalculations over North Korea, declares its formal independence from China – Taiwan or the South China Sea. That all bodes and there is pressure for it to do so from within well for the financial and economic stability Taiwan – then that could incite military action of the region. from China without necessarily the guarantee And finally, for reasons that are explored of defence from the United States. elsewhere in this publication, East Asia, from The greatest risk to the security of the China to Australia, has handled the Covid-19 Indo-Pacific region may not come from these pandemic better than many other parts of traditional concerns but from within China the world. This will have medium-term itself. The mistreatment of the Uighur people economic consequences.

16 17 Aberdeen Standard Asia Focus PLC Powering prosperity: Asia’s case against Western-style democracy

One-party rule may be a contentious form of government Powering prosperity – but there’s no denying the political stability and economic success it has helped to deliver in China and elsewhere. Krish Shanmuganathan examines the political models Asia’s case against Western-style democracy behind Asia’s economic transformation.

18 19 Aberdeen Standard Asia Focus PLC Powering prosperity: Asia’s case against Western-style democracy

A canteen of a central government Krish Shanmuganathan is a leading advisor innovation. For example, it is little surprise institution in Beijing : the CPC on geopolitics following a career in diplomacy, to find the Chinese central bank leading understands that if people have a job, they are less likely to rebel. asset management and corporate advisory. the technological revolution in the changing Xinhua / Alamy Stock Photo He is a non-executive director of Aberdeen architecture of money. By trialling a digital Standard Asia Focus PLC. renminbi in Shenzhen through its state- owned banks, the People’s Bank of China is he transformation of China over the potentially opening the way for a controlled last 25 years has been nothing short internationalisation of the renminbi in T of remarkable: an industrial revolution decades to come – offering a potential that has taken a handful of relatively peaceful challenge to US dollar hegemony, decades when, for most Western liberal particularly in the Asia-Pacific region. democracies, it has taken centuries, punctuated by major continental wars. Whisper it quietly in Democracy vs prosperity the coffee shops of Washington, London and Strong criticism is rightfully made when it Previous page: Chinese President Xi Jinping Brussels, but the Communist Party of China comes to the treatment of minorities or the speaks during the opening session of the (CPC) must be applauded for its handling of curtailing of personal freedoms, amongst 19th National Congress of the Communist Party of China at the Great Hall of the this economic transition. other things, but to what extent are people People in Beijing. willing to make such sacrifices on the altar REUTERS / Alamy Stock Photo Monument at the Chairman Mao Backing the China model of economic prosperity? There is little sign of Memorial Hall, Beijing. Concerns are rising The argument, oft heard around Asia, is that mass discontent within China – and the recent that China is moving from one-party to one-person rule. Western-style liberal democracy is ill-suited to security measures imposed in Hong Kong are cowardlion / Shutterstock to oversee its continued economic success perhaps poses the most questions. If internal the challenges faced by many emerging Asian perhaps more widely supported on the island The Indonesian Parliament, Jakarta. for the next 25 years, to such extent that, challenge and consensus decision-making nations. Instead, that the Chinese model of a itself than many Western commentators would Indonesia continues to maintain in parts of the UK’s political leadership, it is become replaced with a narrower command a multi-party political model. single party authority, in which debate and like to admit. A similar story could be told in Bimo Pradsmadji / Shutterstock held up as the shining example of what a and control, are more policy mistakes likely elements of democratic expression are allowed India: it remains the world’s largest democracy post-Brexit UK could look like. And it could be in the future? under the strictures of that party umbrella, but, politically, it increasingly resembles China, argued – and indeed many do – that Indonesia’s brings political stability. This allows for longer- with the BJP continuing to extend its success development has not been as impressive as Managing peaceful transition term decision-making that in turn enables at the electorate, and over state institutions, its regional rivals, in part because its Western- In India, in the short term at least, such better capital allocation – including such as the central bank and the judiciary. style multi-party democracy has acted as a moves away from democratic norms might infrastructure development – and improves This expanding party influence has been brake on its infrastructural development and in fact help cement political stability, allowing the economic lot of its peoples. Where the made possible by its popular support and economic growth. further economic reforms to take place West seems obsessed with GDP, debates has met surprisingly little resistance. thereby spurring growth and prosperity. within the CPC have focused on another One-party or one-person rule In the longer term, however, the danger is metric: employment. It is perhaps a simple Although economic progress has been that corruption is allowed to infect the political calculation: make sure people have a job and It could be argued that Indonesia’s largely serene in China over the last 25 years, system and vibrant internal challenge is they are less likely to rebel. And it is one that the the danger with the evolution of its political replaced with a cult of personality with no West is increasingly adopting with many central development has not been as impressive system lies less in whether any local discontent obvious means of transitioning power from banks now including employment levels in their as its regional rivals, in part because its at curtailed freedoms leads to domestic one generation to the next. A well-established mandates, rather than just managing inflation, instability, but more in whether the system democracy allows for (largely) peaceful and the widespread adoption of furlough Western-style multi-party democracy itself has changed from one-party rule to transitions to happen; in autocracies, there schemes during the pandemic. one-person rule. The CPC has succeeded in is often a tendency towards a more violent But this is no paean to one-party rule, has acted as a brake on development. part because of the strength of its internal coming-together. nor an apology for any abuses made by states debates, the ability of the best and the brightest The next decade should be one of under the guise of economic advancement, The Community Party of Vietnam has to rise to the top within the party structure, and unprecedented political stability in both China merely a recognition of what many in Asia see, operated in a remarkably similar manner to for the party itself to be open to all comers. and India – and of continued transformational hear and understand. It has been a recipe for China – providing political stability and leading Has President Xi started to alter that economic success. These are both remarkable economic success and is likely to power parts the economic transformation of the country. successful dynamic? Recent constitutional domestic growth stories. Whether that will of Asia to further success. Singapore’s People’s Action Party has equally changes in China have further blurred the lines remain the case when the Aberdeen Standard The West also needs to recognise China’s overseen the modernisation of the country between the party and the state but it is the Asia Focus PLC celebrates its 50th anniversary resultant ability to lead in areas of policy over the last 25+ years. It looks well placed removal of term limits for the president that is perhaps a more difficult question to answer.

20 21 Aberdeen Standard Asia Focus PLC Shifting East: Covid-19 and the building of the Asia Powerhouse

Shifting East Covid-19 and the building of the Asia Powerhouse

Having traditionally relied on markets elsewhere, the world’s most populous continent is now irrevocably replacing the West as the global growth engine – a process that the region's more successful handling of the pandemic has powerfully accelerated, says Liam Halligan.

22 23 Aberdeen Standard Asia Focus PLC Shifting East: Covid-19 and the building of the Asia Powerhouse

A coffee shop in Shanghai, China in Liam Halligan is an economist, journalist roughly a third of the world’s population, had May 2020. By November 2020, China and broadcaster. Since 2003, Halligan has registered less than a fifth of all fatalities linked was reporting Covid-19 cases below one case per million per day. written his weekly ‘Economics Agenda’ to this virus. Robert W / Alamy Stock Photo column in The Sunday Telegraph, where Over the last 25 years, Western economies he is economics editor. have clearly lagged Asia when it comes to the pace of economic expansion. The highly uneven he Covid-19 pandemic may not have incidence of Covid-19, in terms of both cases ushered in an entirely new global world and deaths, means established West-East T order, but it has certainly accelerated growth disparities are now widening even more. and accentuated existing political trends. The ‘advanced’ economies grew by just 1.7% Chief among those is the shift in the economic on average during 2019, prior to this pandemic. balance of power from West to East. Prolonged and repeated lockdown meant As 2020 came to an end, a surge in heading for a deep 5.8% GDP contraction in Covid-19 infections forced the US and most 2020, according to the International Monetary European nations to once more shut down Fund. Rebounding with 3.9% growth in 2021, their economies and limit social gatherings. Western nations are forecast to return to their Across much of Asia, however, such restrictions modest 1.7% ‘steady state’ growth by 2025. were becoming distant memories.

Returning to normal With Covid-19 infections contained, As the time of writing this, in countries including China, India and South Korea life has mostly bars and restaurants are bustling, buses returned to normal. With Covid-19 infections contained, bars and restaurants are bustling, and trains are crowded and concerts and buses and trains are crowded and concerts spectator sports have resumed. and spectator sports have resumed. The vast majority of Western nations, meanwhile, as Back in 2007, prior to the sub-prime global on course to end 2020 with state liabilities they went into winter, reimposed regional or A 2021 bounce-back financial crisis, the advanced nations were of just 47% of national income – the lowest national lockdowns, crushing signs of a post- The story across ‘emerging and developing Asia’ shouldering an average national debt of 71% debt burden of any sub-region in the world. Covid-19 recovery. is different. The region saw pre-Covid growth of GDP, rising to 103% by 2019. Grappling with So Asian governments, in general, borrowed By mid-November 2020, the US was of 5.5% in 2019, much faster than the West of Covid-19, Western governments have spent very and spent far less than the West during the registering almost 500 new Covid-19 cases course, before managing the pandemic far heavily on furloughing and other anti-Covid-19 pandemic, having started with much per million people daily, with around 350 better, imposing shorter, more concentrated measures, as their locked-down economies lower debts. across Europe – both experiencing a ‘second lockdowns, or avoiding them altogether due have struggled to generate tax. That’s why wave’, in terms of cases, much higher than to more effective ‘test and trace’. the average national debt across the West during the Spring. Growth across ‘emerging and developing rocketed during 2020, now standing at 124% The contrast in the 'cost of Covid-19' Asia, in contrast, seemed to have Covid-19 Asia’ was expected to contract just 1.7% in of national income. between the West and East has been largely under control. The continent as a whole 2020, according to the IMF, with the region was reporting just 20 daily cases per million in then on course for a much more pronounced Asia’s lower debt burden dramatic – in terms not only of lives mid-November, with India recording 30, the 8.0% GDP bounce-back in 2021, before The fiscal picture across ‘emerging and Philippines at 13, South Korea down to five and returning to buoyant mid-decade trend developing Asia’ is much healthier. With no but economic growth and debt. Vietnam, Thailand and China itself, the original growth of 5.9%. marked increase after the sub-prime crisis, source of the virus, well below one case per While Asia is rapidly recovering, the negative the region’s combined state debt was just The G7 nations were set to run an average million per day. effects of lockdown across the mature 53% of GDP by 2019 – around half that of the 2020 budget deficit of no less than 13% of GDP, As of November 2020, the US and Europe economies of the US and Europe are set to advanced nations. That rose to just 63% of with annual fiscal shortfalls twice those in the combined, home to just 15% of the global endure. The large Western economies have GDP by the end of 2020, the IMF predicted aftermath of the sub-prime collapse. A more population, had endured almost half of the implemented quite extraordinary fiscal and – again, half that in the West. measured slowdown and much lower lockdown world’s 1.4 million Covid-related deaths. The monetary measures to support businesses and The ‘Asean-5’ – the biggest South East spending saw budget deficits across Asia stay densely populated nations of East Asia and households – which are extremely expensive Asian economies, namely Indonesia, Malaysia, well within single-digit GDP percentages, Southeast Asia, though, while accounting for and, politically, difficult to reverse. Philippines, Singapore and Thailand – were keeping national debts in check.

24 25 Aberdeen Standard Asia Focus PLC Shifting East: Covid-19 and the building of the Asia Powerhouse

The contrast, then, in the ‘cost of Covid-19’ $7,000bn. The Bank of England’s balance Fast-growing, far less indebted Asian economies, between the West and East has been dramatic sheet has also ballooned, from £425bn to – in terms not only of lives, but economic £875bn, with the European Central Bank meanwhile, having shunned central bank largesse, growth and debt. Asia’s different kind of and Bank of Japan unleashing similarly rapid medicine more centralized and disciplined, monetary growth. should see local currencies strengthen. often with more effective technology – has There is a risk such massive policy allowed the region to limit both the human interventions will normalise and intensify, like Aberdeen Standard Asia Focus PLC, as the Asia-focused firms and economic damage. raising the prospect of developed world secular shift in West to East asset allocation By targeting small- and mid-cap stocks, inflation spikes and sovereign debt crises. over the past 25 years extends into the next particularly those exposed to the domestic Western panic And while the US dollar’s reserve status quarter century. growth story, Aberdeen Standard Asia Focus Across the Western nations, with far less surely protects it, the combination of slow The past year has seen Taiwan, South PLC is working with the grain of economic experience of pandemics, politicians have growth, spiralling debt and money-printing Korea and many other Asia-Pacific nations and geo-political history. The fund’s local panicked – resulting not only in greater surely suggests other leading Western suppress Covid-19, then maintain tighter manufacturing and consumer-facing fatalities, but economic stagnation, dramatic currencies will lose ground. restrictions against a resurgence. Having companies, often family-owned with strong ‘money printing’ and borrowing surges, which Fast-growing, far less indebted Asian controlled the virus, their economies and corporate governance, are less well known than Asia has largely avoided. economies, meanwhile, having shunned societies are increasingly open and recovering, the big Asian multinationals – so are priced Commuters in Seoul, South Korea – like Since lockdown in March 2020, the central bank largesse, should see local other Asia-Pacific nations, it maintained in contrast to still struggling nations across more keenly, offering greater potential returns. Federal Reserve has extended its quantitative currencies strengthen. This adds ‘currency tight restrictions again a resurgence of the West. Such firms are unashamedly Asia-focused, the Covid-19 virus. easing programme from $4,500bn to over overlay’ to the investment case for a fund WireStock / Alamy Stock Photo insulated from any escalation of East-West A shift in gravity trade wars, as the diplomatic fallout from this With much of the developed world in lockdown, pandemic intensifies and post-Covid economic Asian manufacturing hubs are benefiting from differentials come more clearly into view. a shift in global consumption towards goods The global outlook remains uncertain. and away from services. Intense US and Despite the roll-out of effective vaccines, new European demand for medical equipment waves of Covid-19 could yet appear. Yet Asia and working-from-home necessities like remains, unequivocally, the emerging Federal Reserve Chairman Jerome personal computers, has rippled through powerhouse of global growth and commerce – Powell – the US Federal Reserve Eastern supply chains. a shift that has long been inevitable, but has extended its QE programme to over $7,000bn in 2020. But this is the Asian century and, having now been hastened by a global pandemic. REUTERS / Alamy Stock Photo traditionally relied on markets elsewhere, the world’s most populous continent is now replacing the West as the global growth engine, as the centre of economic gravity continues shifting inexorably eastward – a process quickened by this pandemic. This Covid-19 crisis has exposed serious weaknesses in Western institutions, while badly impairing state balance sheets and decimating countless otherwise viable companies. Asian economies, in contrast, are expanding and increasingly confident, emerging relatively unscathed. Pumped up on QE, the main Western stock indices look detached from economic and corporate fundamentals. Rocketing valuations and all-time highs, amidst lockdown, seem premature, even illogical. But while US stocks are trading at 23-times earnings, Asian equities are priced more conservatively, at a multiple close to 15.

26 27 Aberdeen Standard Asia Focus PLC After the pandemic: explaining Asia’s speedy recovery After the pandemic Explaining Asia’s speedy recovery

Asia was the first region to bear the full brunt of the 2020 Covid-19 virus outbreak – but it was also the first region to recover from it. Flavia Cheong examines the economic and policy reasons for Asia’s strong rebound and what it means for the region’s future resilience.

28 29 Aberdeen Standard Asia Focus PLC After the pandemic: explaining Asia’s speedy recovery

several policy levers to mitigate the impact Swift policy responses and positive on the economy. Companies tightened their costs and capital expenditure, while cutting fundamentals have supported Asia’s rebound. or deferring dividends and raising equity to boost cash reserves and strengthen Painful lessons from past currency and financial balance sheets. crises, with the 1997 Asian financial crisis top China has led the way of mind, have been well learnt. China best illustrates this. The country, which was the initial epicentre of Covid-19, has led Asia’s recovery, thanks to initial drastic actions to contain the virus, its huge reserves and an ...and benefited other markets arsenal of policy tools at its disposal. For other technology-heavy markets like Its economy is becoming far more self- Korea and Taiwan, electronics companies reliant, and Beijing is pivoting its fortunes more have benefited from demand for remote towards domestic factors, such as consumer work. Taiwan is also benefiting from the spending. This should bode well for investment dispute between China and the US. opportunities focused on rising consumption. Taiwanese companies with factories in The exposure to domestic spending is not China and customers in the US are relocating only a structural growth story, but also a some production back home. Also, its buffer against the vagaries of geopolitics. government has helped with tax breaks Higher disposable incomes will spur demand and other support. Flavia Cheong is head of equities – Asia Pacific structural swoops. For some countries, for health-care products, wealth management We have also seen tech companies at Aberdeen Standard Investments. decades of development gains have been services, insurance and luxury goods and increasingly diversify their production bases, wiped out in just months. services. resulting in spill-over benefits for Malaysia Opposite: Commuters at Shinagawa 0 20 is likely to be a year that most China’s steady recovery could set the tone and Vietnam, which are part of the electronic station in Tokyo, Japan in March 2020. want to forget. On March 11, the Asia’s first in, first out recovery for the rest of Asia, given its importance as a manufacturing services supply chain. StreetVJ / Shutterstock Food and water being distributed to World Health Organisation declared Through the pandemic, Asia was the first region key trading partner. 2 migrant workers leaving Jaipur, Rajasthan, the Covid-19 outbreak a global pandemic. to bear the full brunt of the virus outbreak, and India yet to meet its potential India due to the Covid-19 pandemic. At that time, few could have foreseen the was the first region to recover from it. By contrast, Technology leadership has helped India has always been a land of much promise Mukesh Kumar Jwala / Shutterstock Many Asian businesses adapted to the unprecedented crisis that would ensue. Europe and North America were still struggling A key aspect of Asia’s recovery has also been but has still yet to live up to its full potential. pandemic with employees working The human toll has been devastating. with fresh Covid-19 waves in late-2020. its sweet spot in the growing adoption and While Covid-19 has benefited certain sectors from home. Shutterstock More than 57 million people have been Asia’s recovery has come in spite of an integration of digital technology globally, which like IT software services, it has also exposed infected and close to 1.4 million have died. increasingly complex geopolitical landscape, as is shaping the new economy and transforming the country’s structural fault lines: inadequate Virus containment measures such as closed the tussle between China and the US broadens the way businesses operate. The region’s tech healthcare infrastructure, bloated state banks, borders, lockdowns, contact tracing, social beyond trade and technology, with significant supply chains are well positioned for structural and liquidity stresses among non-bank distancing and mobility curbs would seem spill-over impact on the rest of the region. growth related to 5G, digital connectivity and financial companies. more at place in a dystopian novel than in Swift policy responses and positive e-commerce. To its credit, the Modi government the real world. Yet, here we are. fundamentals have supported Asia’s rebound. While many companies have found the has kept to its reform agenda despite the The economic fallout has been Painful lessons from past currency and financial going tough during the pandemic, others have challenging conditions. It has passed landmark immense. Growth has slumped. Poverty crises, with the 1997 Asian financial crisis top emerged as winners. The technology sector bills on labour and land reforms to attract and unemployment have climbed. Human of mind, have been well learnt. has been a key beneficiary. As social distancing foreign investments and promoted investment capital has been shaken to its roots, with Most governments have made major forced people to remain indoors, more of them in agriculture. livelihoods, learning and working, and progress in managing their current accounts, began to rely on digital services including online The longer-term opportunity lies in productivity irrevocably changed. while companies are also more keenly attuned payment systems, e-commerce and work-from- how India best positions itself as a preferred Trade and investment flows have to the pitfalls of weak balance sheets and home solutions. low-cost manufacturing base for multinationals. been disrupted, along with supply chains. inadequate cash. Covid-19 has also accelerated the drive For the country to compete globally, much more This has created winners and losers. For In a time of pandemic, this made the towards artificial intelligence, cloud computing still needs to be done. Fiscal consolidation to some industries, outdated processes, mind- difference. Governments had room to ramp and the Internet of Things, and the auto reduce debt and that will free up resources for sets and the like have been excised in big up spending and central banks could pull industry’s electrification push. private investment is also overdue.

30 31 Aberdeen Standard Asia Focus PLC After the pandemic: explaining Asia’s speedy recovery

That said, India is home to great The growing middle class has fuelled the entrepreneurs and many of Asia’s most successful companies, which have been tested creation of new companies across the region. and tried by earlier economic crises. It also has a rapidly growing middle class that is The rise in disposable incomes has led to upwardly mobile and increasingly affluent. expanding domestic markets that are much Asia is shaping its own destiny less dependent on exports than before. In the light of evolving geopolitical dynamics, Asia is taking its destiny in its own hands. It has pressed ahead with regional integration Asia is also a leader in many aspects of via the Regional Comprehensive Economic emerging structural technology trends, such as Partnership (RCEP), which aims to reduce electrification, automation, artificial intelligence tariff and non-tariff barriers across and machine learning. These fundamental 15 countries. changes combined with the rise of e-commerce The RCEP will be the world’s largest free continue to transform the dynamics of many trade agreement (FTA). Members include industries, presenting both risks and the 10 ASEAN nations, plus Australia, China, opportunities for companies. Japan, New Zealand and South Korea. Together The growing middle class has fuelled the they comprise nearly 30% of the global creation of new companies across the region. population and global GDP. India is the notable The rise in disposable incomes has led to absentee, perhaps part of a plan to align with expanding domestic markets that are much us to search for strong consumer companies Such a scenario favours our intensive due Vietnam’s Prime Minister Nguyen Xuan the US. less dependent on exports than before. All this that are well positioned to benefit from this diligence. We have an experienced and well- Phuc addresses his counterparts during the 4th Regional Comprehensive Economic Being the first FTA that links China, leads to larger and more complex markets; it structural dividend. resourced team of managers stationed across Partnership (RCEP) Summit. The RCEP Japan and Korea together, the RCEP will open means greater opportunities but the flip side Environmental, social and governance key markets in the region, providing us front- is set to be the world's largest free trade agreement, covering 30% of the global up new opportunities along these corridors. of this is that greater efforts are needed to (ESG) issues and responsible investing are row seats to the rapidly changing investment population. The Peterson Institute for International identify and select the right holdings that entering into investors’ thinking more as landscape that is being shaped by long-term NHAC NGUYEN / AFP via Getty Images Economics expects the deal to boost intra- can deliver sustained returns. the Covid-19 pandemic has forced nations structural changes. RCEP trade by up to US$428bn by 2030. to rethink their priorities when pursuing More than that, the RCEP will also enhance Opportunities lie in structural growth economic growth. As governments pledge Economic activity set to gather pace regional integration and trade liberalisation. As active managers, we focus on investing trillions of dollars to support businesses Three potential vaccines and a potential China and Japan would gain the most, but in good quality companies that are able to and save jobs, it will present substantial easing of political risk on the back of a Biden countries like Thailand would benefit as a weather storms. We believe our holdings’ opportunities for investments in a presidency brought some much needed manufacturing hub. Frontier markets Vietnam defensive traits, including balance sheet sustainable future for the planet. cheer for the world at the end of 2020. and Cambodia will also gain as foreign strength, visible revenue streams and healthy In Asia, we should see economic activity businesses look to locate factories in those profit margins, will be invaluable. Smaller companies are well placed gather pace with Covid-19 past its peak across lower-cost markets. We favour market-leading businesses that Asia’s developing economies provide fertile most countries and given abundant policy are hitched to structural growth drivers in Asia. ground for smaller companies, with a rising support. The region’s strengthening growth Regional efforts enhance Asia’s potential These include trends that have boomed during urban middle class that has money to spend. profile and reasonable valuations leave its Trade deals aside, Asia’s prospects remain the pandemic, such as e-commerce and online Smaller companies are typically domestic stock markets well placed to continue to intact with structural growth drivers that will activity, alongside longer-term shifts, including in focus and benefit especially from higher outpace global peers. Furthermore Asian play out for years to come. The region accounts rising demand for healthcare and infrastructure. demand for discretionary goods and services. equities remain under-represented in global for nearly two-thirds of global growth and is We also see opportunities in the increased Smaller companies should offer faster portfolios and we expect that to change as still the most dynamic economic region in the digitalisation and automation of manufacturing growth because they are at an earlier stage investors realise the critical role of the region world by a wide margin. Its vast potential is to cut production costs and increase utilisation, of development. Although Asia is home to in driving growth and prosperity for the global underpinned by a huge domestic market, young as factories are reconfigured for social many good quality small companies, market economy; powered by the dynamism of its workforce and continued urbanisation. It will be distancing, remote working and monitoring. research remains scant. Despite a large and smaller companies. home to more than 60% of the world’s middle Growing populations and rising middle varied universe, individual stocks are often Looking ahead, 2021 could be a year class by 2030 and account for over half of classes and wealth can power domestic under-researched and hence more likely for Asia to remember, and for all the right global demand. consumption for years. That encourages to be mispriced. reasons this time.

32 33 Aberdeen Standard Asia Focus PLC  Bringing it back home: how Asia’s supply chains are changing

Bringing it back home How Asia’s supply chains are changing

Asia’s shift to more regionalised trade and supply chains may not have begun with the Covid-19 pandemic but has definitely been accelerated by it.Parag Khanna looks at the opportunities and changes being wrought by the region’s drive to greater self-sufficiency.

34 35 Aberdeen Standard Asia Focus PLC  Bringing it back home: how Asia’s supply chains are changing

(cultivating internal and international markets) China’s rising wages and industrial policies have suggests a country poised to become more prompted the US, Europe, and Japan to launch self-sufficient. Already in recent decades, China robust near-shoring programs. However, has slashed its import share of exports to below Asia’s growing markets instead compel its 20%; most electronics are now produced multinationals to pursue ‘make where you sell’ domestically end-to-end. strategies that will reinforce Asia’s collective China – along with South Korea, Japan, and leadership in global supply chains. Singapore – is making massive investments in Southeast Asia and India have taken note industrial automation as its workforce ages of China’s industrial and financial strategies to and begins to decline. This explains how the fuel its meteoric ascent and have devised similar country’s output has remained so high (and playbooks suited to their situation. The road for even grown) despite its worrying demographics. a diversification of Asia’s supply chain footprint was paved in the region's 1998 financial crisis, Open for business after which governments focused on building That said, China’s economic recovery and trade surpluses and currency reserves, adopting rebalancing towards consumption sends a flexible exchange rate regimes, and stabilising strong signal to multinationals that they still interest rates and controlling inflation. have large opportunities in the Chinese market Macroeconomic stability allowed them to issue – and therefore they should continue to produce longer maturity, bonds in local currency, there despite local competition and regulatory diminishing their dependence on US dollar obstacles. Tech companies such as Apple and financing – a crucial advantage during the Philips have had significant success in the recent ‘taper tantrums’. Previous page: Shipping and freight import, export and delivery of goods Chinese market and plan to remain rooted there According to a 2019 AmCham survey, at port in Bangkok. even as they branch out. The same goes for about 17% of companies have considered or Shutterstock Tesla, despite it being named on China’s actively relocated their supply chains away from Opposite: Assembly workers at the Geely automobile manufacturing plant ‘unreliable entities’ list and the surge in electric China, which demonstrates the fungibility of in Zhejiang Province, China. The country Parag Khanna is a leading global strategy From global to local recovery car output from BYD and Nio. investment today. These include tech giants is making massive investment in industrial automation as its workforce ages. Linhai, advisor, world traveller, and best-selling After the 2008 global financial crisis, G20 Another reason why it is far too soon to Samsung, Sony, GoPro and Dell, sports apparel Zhejiang Province, China. author. He is an international relations governments undertook coordinated stimulus speak of deglobalisation is China’s unfolding manufacturers Nike, Adidas and Puma, South Jenson / Shutterstock Samsung, Sony and Hyundai, three of specialist and founder and managing partner aimed at resuscitating economies and capital account liberalisation. Foreigners already Korean motor companies Kia and Hyundai, the many business relocating their supply of FutureMap, a data and scenario-based promoting the restoration of global trade flows. represent 5% of China’s onshore equity and fashion companies Steve Madden and Old chains away from China. strategic advisory firm. By contrast, today their instincts are bond markets, and the government has Navy, among others. SUNG YOON JO, Morumotto, Ki young / Shutterstock protectionist, with stimulus measures focused signalled a willingness to let that rise to 10% and mid the deep Covid-19 pandemic- on local recovery. Instead of a synchronised higher. The inclusion of Chinese government induced uncertainty across the world global recovery, we will instead have an bonds in the FTSE Russell World Government China’s economic recovery and rebalancing A economy, we can be fairly confident asynchronous set of regional recoveries – Bonds Index is expected to bring in at least towards consumption sends a strong signal that the years ahead will witness an accelerated with the scales tilting in Asia’s favour. US$140bn more foreign capital into China’s trend towards regionalisation, particularly for Asia’s ‘Sinodependency’ appears to be a government debt as well. Both onshore financial to multinationals that they still have large trade and supply chains. blessing – for now. With China’s economy first activities and offshore listed ETFs are attracting In North America, for example, the Trump to rebound, Asia’s exports will recover more wide interest in the search for yield. opportunities in the Chinese market. administration signed the United States-Mexico- quickly. At the same time, China’s newest Five Canada (USMCA) trade agreement which came Year Plan and strategy of ‘dual circulation’ The ‘China plus’ model Most of them relocate their manufacturing into effect in July 2020. US trade with both However, investors and manufacturers to Vietnam or elsewhere in Southeast Asia. The Canada and Mexico topped US$600bn in 2019, operating in Asia have a growing range of money has continued to follow Asia’s growing while US-China trade fell to approximately Instead of a synchronised global recovery, options beyond China. Indeed, we are rapidly capacity as a supply chain hub. As of 2017, US$500bn. In Europe, 60% of trade is within moving beyond even a ‘China plus’ model of American foreign direct investment (FDI) into and among EU members, a figure that may we will instead have an asynchronous set supply chains towards Asia representing ASEAN countries stood at US$329bn, larger also rise on the back of the robust new of regional recoveries – with the scales multiple ‘factory floors’ for the world including than its footprint in China, Japan, Korea and eurozone stimulus and regulatory measures Japan, China, Southeast Asia, and India. India combined. Precisely because the US did aimed at near-shoring. tilting in Asia’s favour. Protectionist trends as well as concerns over not join the Trans-Pacific Partnership (TPP)

36 37 Aberdeen Standard Asia Focus PLC  Bringing it back home: how Asia’s supply chains are changing

trade agreement, its firms will need to invest circulating in Southeast Asia rings true: more in Asia to get behind the tariff wall. It is ‘The US-China trade war is over – and Vietnam not likely that the next US administration will has won.’ reverse course on TPP, meaning that those Trade liberalisation within Asia has also multinationals that depend on overseas significantly facilitated supply chain shifts and revenue will be looking ever more to Asia. cross-border linkages. Again, going back to the 1998 Asian financial crisis, governments learned Europe’s free trade agreements the importance of enabling interdependence to Europe’s approach has been quite different, flourish. Intra-Asian trade crossed 50% of the and ultimately far more significant for Asia’s region’s total by 2005, just in time to cushion future as a supply chain centre. The EU now the region’s exporters from the demand shock has free trade agreements with South Korea, created by the global financial crisis of 2008. Japan, Singapore, and Vietnam – the latter Since then, it has risen to more than 60%, two paving the way for an eventual FTA with with the impending Regional Comprehensive Thai Air Asia Airlines at Don Mueang the ASEAN community as a whole. Europe’s Economic Partnership (RCEP) set to expand Asia’s International Airport, Bangkok. Thailand overall trade in goods with Asia – including internal trade even further. Already China trades is one of the countries benefiting from ASEAN membership. China, ASEAN members, Japan, and India – more with the ASEAN region than it does with Skies Clear / Shutterstock stands at $1.6 trillion annually, far larger than the US, and has been seeking to actively offset Forrest Li, chairman and group chief even Europe’s trade with North America. industrial, technology, agricultural, and energy executive officer of Sea, based in Singapore, the first ASEAN-born tech This is one of the strongest indicators of imports from the US with exports from Asian company to be listed on the New York the irreversible shift in the global economic trading partners and Europe. Stock Exchange. Wei Leng Tay / Bloomberg via Getty Images centre of gravity from transatlantic to Opposite: View of downtown Bangkok: Eurasian domains. Service sectors on the rise a strong privatisation wave lies ahead Asia’s rising prosperity also means that for Thailand and other Asian countries Trade within Asia the economic role of supply chains differs as they seek to attract investment. Shutterstock Supply chain dynamics within Asia have been markedly from generations past where rapidly evolving and shaped by geopolitics, manufacturing (and agriculture) represented trade agreements, wage pressures, technological the largest share of economies. Now, only automation, industrial policies, and many other an average of 15% of Asian workforces are factors. While Southeast Asian countries such employed in manufacturing despite lower per as Malaysia and Thailand have been favoured capita incomes than Western societies. Instead, destinations for mid-range manufacturing for much as in the West, services dominate both several decades, Vietnam illustrates how rapidly the Asian labour force and GDP. these forces have come together to elevate one The stellar rise of services across the other platforms. Vietnam’s VinGroup also companies are set to be strong performers of Asia’s poorer nations. As Japanese, Korean, region is embodied in cross-border champions epitomises this economic diversification within as national champions ready to expand American, and European firms pour capital into such as Air Asia and, in the digital domain, a single conglomerate. Beyond manufacturing, regionally and beyond. the country’s special economic zones to produce Sea. Sea is the first ASEAN-born tech company it is active in real estate, retail, services, everything from apparel to automobile parts to be listed on the New York Stock Exchange, e-commerce, hospitality, healthcare, and even Small-caps on the rise to mobile phones, the country’s trade-to-GDP and has delivered superb growth during the education in a new partnership with Cornell Supply chains are not just connections among ratio has shot up to 210%. The joke widely pandemic across its e-commerce, gaming, and University in the US. production nodes. In reality, each node is an South and Southeast Asia meanwhile has ecosystem of suppliers and other players much going for it despite the Covid setback. whose production and output spills over into Already China trades more with the ASEAN region India has attracted record FDI into its tech logistics and transportation, accounting and sector with the rise of Reliance Jio as a legal, and other sectors of the economy. The than it does with the US, and has been seeking to telecoms platform. growing density and breadth of Asia’s supply A strong privatisation wave lies ahead chain activities, coupled with its rapid transition actively offset industrial, technology, agricultural, for countries such as Thailand, Indonesia, towards services industries, ensures that and energy imports from the US with exports from and the Philippines as they seek to attract small-cap companies across many sectors investment amid the slowdown in portfolio will continue to gain market share. Asian trading partners and Europe. capital inflows. The region’s under-valued

38 39 Aberdeen Standard Asia Focus PLC Trade winds, trade wars: where next for US-China tariffs? Trade winds, trade wars Where next for US-China tariffs?

The Trump era may have come to an end in the US – but decoupling from China may be one of its more lasting legacies. Richard Han considers what ongoing trade tariffs and technology export restrictions mean for companies like his, operating both in China and the US.

40 41 Aberdeen Standard Asia Focus PLC Trade winds, trade wars: where next for US-China tariffs?

US President Donald Trump shakes hands with China’s President Xi Jinping Rethinking operations demand of China to become self-reliant on before starting their bilateral meeting As one of many cogs in the machinery that specific supply chains currently controlled and during the G20 leaders summit in Osaka, Japan, June 29, 2019. intertwine within the complex supply chain, dominated by the West. As the fastest-growing REUTERS / Alamy Stock Photo the Hana Microelectronics Group – with major economy for a long time to come, this is factories in Thailand, China, Cambodia and the an opportunity that many companies do not USA – has had to reposition itself over the past want to miss. The question will be how, as a four years to ensure we can not only survive non-China entity, can this be achieved? these fundamental changes, but flourish. Firstly, we have re-focused our China Harnessing a megatrend: the EV market operation on the domestic market. The initial To do so, it is important to identify the growing tariff impositions had already forced a number mega-trend industries that are globally in of our US accounts away and we have been demand and where Hana can participate fortunate to be able to transfer them over (avoiding any areas considered sensitive). to our Thai operations. We believe over the We have identified the fast-growing electric course of the next three years, the domestic vehicle (EV) market and more specifically share of our China operations will be over 75%. within that industry, the on-board/off-board Secondly, we have set up a robust supply charging process. This requires designing and chain transfer process to substitute step-by- developing electronic power modules that step non-China suppliers in order to bring up will improve battery charging speeds – an the local content, thereby qualifying for area where currently China still lags the ‘assembled in’ Thailand/Cambodia. This is easier West technically. said than done and while there is a definite It is hoped that within the next few years Richard Han is CEO of Hana Microelectronics, The most interesting challenge will be how pathway it will take time. However, from a we will be successful in bringing these power the leading independent electronics competitive view point, China still dominates modules to the fast-growing China EV market manufacturing service company in South East to navigate the growing demand of China and therefore it is unlikely that in the near – especially as most major governments (China Asia, and a long-term holding for Aberdeen term all parts can be locally substituted at included) pledge to focus on emissions control Standard Asia Focus PLC. to become self-reliant on specific supply similar costs. At this stage the ‘assembled in’ and carbon neutrality within the next 20-30 chains currently controlled and dominated configuration is allowable as opposed to years. These power modules will be assembled mong the many changes anticipated ’made in’ and therefore this buys us time. in China for the local market and outside China from a Biden administration, trade by the West. The final and probably most interesting for the rest of the world, mitigating the US- A tariffs will be closely watched. Will the challenge will be how to navigate the growing China decoupling challenge. new President repeal Trump’s more onerous tariffs and how should companies impacted by Reducing importer dependency China's electronic vehicle market is those tariffs be looking to position themselves While this maybe the current thinking, it may fast-growing but lags the West technically going forward? not be what actually happens and it is clear that – offering opportunity to companies such as Hana Microelectronics. The new administration has many domestic many US importers have been and will continue Shutterstock problems to address, notably a re-grouping to to move forward with plans to reduce their fight the Covid-19 pandemic. It’s possible that dependency on China. Conversely and more the China trade issue may be put on the aggressively, we are seeing the same from back-burner, which would mean there would China. It has assumed that the status quo will be no significant reversal of tariffs or changes in continue (more or less), even in the face of technology export restrictions. However, we do a Biden administration, with ambitious plans believe a more pragmatic approach will prevail to accelerate its home-grown industries – with a focus on the core issues. particularly in areas such as semiconductors, It could mean less of the blanket tariff where it clearly lags the West. structure currently in place, which mostly serves As the Trump era comes to an end, we to tax the US consumer while not really hurting believe the cold war he ignited and expanded the China export machine, while keeping the will not. Although we may see a welcome change pressure on those high-tech areas that have in the tone – decoupling with China may be one more sensitive or military applications. of his more enduring legacies.

42 43 Aberdeen Standard Asia Focus PLC Eureka! Groundbreaking moments for pandemic science

Eureka! Groundbreaking moments for pandemic science

The Covid-19 pandemic has shown how swiftly resources can be allocated to find solutions and the regulatory agility that’s possible to enable treatments to be delivered. By continuing to embrace bold new ways of thinking, the global fight against disease could reach even greater heights, says Kiran Mazumdar-Shaw.

44 45 Aberdeen Standard Asia Focus PLC Eureka! Groundbreaking moments for pandemic science

Kiran Mazumdar-Shaw is one of the most hinges on the balance between human and enzyme, then a single antiviral agent can be pertaining to the safety and efficacy of a successful female entrepreneurs in the world microbial cells. When an invader – such as designed to effectively fight several viruses. drug, rather than data from clinical studies and founder and executive chairperson of a virus or a bacterium – disrupts this For new scientific breakthroughs in conducted under a controlled setting. Biocon, India’s largest biopharmaceutical homeostasis, it leads to sickness and disease. fighting viral disease, the global scientific company, manufacturing generic active We are living with the constant threat of community needs to more closely study Demanding disruption pharmaceutical ingredients sold in over emerging viral infections. In the span of the last how viruses replicate, how they infect and The Covid-19 crisis has offered several Eureka 120 countries. Syngene, a publicly-listed two decades, the world has had to contend with how the human immune system reacts to moments for pandemic science. subsidiary of Biocon, is a long-term holding the Nipah, SARS, MERS, H1N1 flu viruses as well a viral intrusion. Research must span It has triggered a massive allocation of of Aberdeen Standard Asia Focus PLC. as the re-emergence of the Ebola virus. Localised surveillance, rapid response through resources to finding solutions that address outbreaks of Zika, Chikungunya, Dengue viruses antivirals and vaccine development, which viral pandemics – from identifying life-saving he Covid-19 pandemic has exposed the have also occurred from time to time. could represent a longer-term solution for treatments, tracking how viruses spread and deep fault lines underlying the North- To prevent the recurrence of a Covid-19- fighting viral pandemics. ultimately to preventing infection with vaccines. T South economic divide, laying bare the like pandemic in future, early identification, The high level of effectiveness reported structural inequities in the way the world monitoring and survey of the viruses circulating Accelerating the pace of discovery for Pfizer’s and Moderna’s messenger RNA From testing for viruses to developing approaches disease control and mitigation. among humans and other animals is essential. vaccine programmes, governments will From antiviral therapies that stop viral (mRNA) based vaccines have been a Eureka Before the novel coronavirus struck, For this, we will need fast, sensible, cheap and have to strike a better balance between replication to vaccines that can help the body moment as they have shown that mRNA regulation and innovation to support infectious diseases were perceived as a Third broad-spectrum methodologies. public health. fight the virus, we need research to come up vaccines can produce robust immunity and World problem as the wealthier, industrially- Shutterstock with potential solutions as rapidly as possible. can be developed rapidly, thus providing advanced North was thought to have almost Tackling viral pandemics The regulatory system also needs to evolve an effective solution for mass vaccination. completely eradicated them. Our bodies fight viruses by producing to help this rapid response. Globally, we have A recent study by Lancet Global Health antibodies, wherein our adaptive immune risk-averse healthcare systems that prioritise found that historical funding for Covid-19 system kicks in to fend off a viral pathogen. regulation and strict bureaucratic oversight From the development of thermo-stable research was very low, even after the high- The Covid-19 crisis has demonstrated that of pharmaceutical research and development. profile outbreaks of severe acute respiratory viral pandemics spread so rapidly that vaccines' The Covid-19 crisis has taught us that we need vaccines to efficient vaccine delivery syndrome (SARS) and Middle East respiratory availability tend to lag a major outbreak by to usher in a paradigm change in the way syndrome (MERS). In fact, coronavirus-related months. Thus antiviral drugs have a key role pharma research and innovation are currently mechanisms, pandemic science is poised research received a mere US$0.5bn from to play in tackling any pandemic virus. regulated. 396 grants between 2000 and 2017. In Governments worldwide will have to to scale greater heights. comparison, HIV/AIDS received US$42bn. strike a better balance between regulation Overall, annual investment in infectious To prevent the recurrence of a and innovation in the interest of public health. Another Eureka moment is the agility diseases research witnessed a general decline There is an urgent need to speed up the exhibited by regulators globally in fast- tracking between 2007 and 2017, according to the study. Covid-19-like pandemic in future, early regulatory processes to get new testing kits and the development of treatments and vaccines The world is now paying for this decade- supplies manufactured and get new drugs and against Covid-19, in some instances allowing long neglect of studies into infectious diseases identification, monitoring and survey of vaccines into development. Now that our Phase 1, Phase 2 and Phase 3 clinical trials and the over-prioritisation of research into priorities have radically changed, our regulatory to be conducted in parallel. non-communicable diseases (NCDs). the viruses circulating among humans frameworks need to change, too. I believe there are several more such Covid-19 has demonstrated that the and other animals is essential. If the world can take a risk-based approach moments in the offing. From the development economic impact of infectious pandemics is far to Covid-19-related treatments and vaccines, of thermo-stable vaccines to efficient vaccine more devastating than NCDs. The IMF forecast it can extend the same approach to other delivery mechanisms and advances in global output to shrink by 4.4% in 2020 and The most important enzyme that a virus diseases. Why should it take 5-10 years for surveillance mechanisms to effective models make only “a partial and uneven recovery carries with it is its polymerase, which is a drug to go from the lab to patients? for immunising entire populations, pandemic next year.” responsible for replicating the viral genome. If the ‘lab to market’ journey of any therapy science is poised to scale greater heights. To An antiviral agent that inhibits the polymerase can be compressed like it has been for vaccines make this quantum leap, the world will need A constant viral threat enzymes can stop the replication of the virus. against Covid-19, then many unmet healthcare to embrace change and adopt disruptive new Latest scientific findings estimate that in any This opens up the opportunity to create a needs can be addressed and rapidly. ways of thinking. human body there are around 30 trillion human combinatorial library of antiviral agents that This would also allow for medical science cells, but our microbiome has an estimated can block the polymerase agents of each to quickly devise alternative solutions to combat 40 trillion microbial cells, the basic material virus, as each such pathogen will have its communicable as well as non-communicable of all microbes, including bacteria, viruses and own polymerase enzyme. If a cluster of diseases. Regulatory agencies would be able fungi that live on and in us. Human health viruses share the same kind of polymerase to base their decisions on real world evidence

46 47 Aberdeen Standard Asia Focus PLC Move fast and make things: delivering Asia’s digital transformation

Move fast and

make things Delivering Asia’s digital transformation

Bringing digital infrastructure to Asia is helping to transform the region’s economies, not only opening up new industries, skills and job opportunities but also providing new possibilities in healthcare, distance learning and connecting the region’s remotest areas, says Danny Alexander.

48 49 Aberdeen Standard Asia Focus PLC Move fast and make things: delivering Asia’s digital transformation

Previous page: Girls are learning online Danny Alexander is former UK chief secretary with laptops in rural areas of Thailand. to the Treasury and now vice-chairman of the Shutterstock Digital advances are breaking Asian Infrastructure Investment Bank (AIIB) down geographic barriers, which aims to improve social and economic transforming economies and creating opportunities for greater trade outcomes in Asia by investing in sustainable and social connection worldwide. infrastructure, other sectors and beyond. Shutterstock

igital technology is continuously transforming the global economy. D Digital applications have successfully lowered barriers posed by geography, solving market imperfections, and connecting people both for trade and social purposes. They have transformed economies and created new opportunities across countries, regions and industries including the reskilling of workers where required. A range of industries have embraced digitalization, including finance, healthcare, entertainment and sports, travel and transportation and marketing.

Infrastructure key to growth It is estimated that the digital economy is on helping member economies that contend safer and more reliable. An example would provision of social services. The need for more footprint represents between 6% and 15% with limited or poor quality infrastructure. be the ability for nurses and doctors to record and better digital infrastructure has become of global gross domestic product (GDP). Sectors we have committed to include transport, important real-time patient data and share it more evident and the demand for broadband It contributes to about 25% of GDP growth urbanisation and water – technology can help instantly within their updated medical history is higher than ever. In parallel, the pandemic in developing countries, 80% of which is to make the most of these investments. through handheld computers. also exposed the limitations of the digital accounted for in sectors other than information infrastructure network and revealed the communication technology. In the decades Delivering digital transformation vulnerability of the unconnected, who to come, the quality of digital infrastructure Given the economic impact of the digital Given the economic impact of the digital represent nearly half of the global population will be a key driver of economic growth. The economy and the role it plays in society, economy and the role it plays in society, The adoption and mainstreaming of Asian Infrastructure Investment Bank (AIIB) the AIIB sees a clear need to support its technological applications to traditional has defined our goal for the next decade the AIIB sees a clear need to support development. Digital infrastructure was infrastructure also leads to better allocation as ‘investing in infrastructure for tomorrow.’ therefore recently included as a thematic and management of resources, efficiency We aim to invest in infrastructure projects its development. sector in our Corporate Strategy – Financing gains, and productivity increases. Technology, that meet the needs of our members in the Infrastructure for Tomorrow. We know through as diffused through digital applications, next few decades. The need for a digital solutions was our own experience that organizations that contributes to a more sustainable Infrastructure for Tomorrow has four crystallized and accelerated during the successfully undertake digital transformations infrastructure sector. components: green infrastructure, tackle Covid-19 pandemic. Normal ways of working reap huge benefits from doing so. Hence we The positive economic impact of digital climate change; connectivity to enhance and socializing were changed considerably, want to be able to offer a better experience infrastructure, the necessity to bridge trade and regional co-operation; private replacing in-person interaction with virtual and an expanded range of products and the growing digital divide and reduce the capital mobilization to generate investment interaction due to the ongoing need for social services to our member countries. financing gap, alongside the benefits of at scale; and technology-enabled and digital distancing and the inability to travel due to technology applications in traditional infrastructure. This final component is key quarantine measures. Connecting the unconnected infrastructure, are all reasons why digital to help close the digital divides that, if Countries have jumped on the opportunity Digital infrastructure provides critical solutions, infrastructure investment is set to be a major perpetuated, will slow growth and deny to embrace change, most notably in especially so at times of crisis such as the recent focus of AIIB. opportunities in many of our low and organizations to ensure work carries on and Covid-19 pandemic. Quality internet access and middle income members countries. in the health care sector to support data digital platforms allow for remote work, As an infrastructure bank, our focus collection, research and patient care, making it distance learning, distance medicine and Overleaf: Examples of AIIB projects

50 51 Aberdeen Standard Asia Focus PLC Move fast and make things: delivering Asia’s digital transformation

Digital infrastructure projects supported by AIIB

By investing in sustainable infrastructure and other productive sectors in Asia and beyond, AIIB aims to connect people, services and markets better to improve the lives of billions and build a better future.

Oman Cambodia China Indonesia Oman Broadband Fiber Optic Communication Legend Capital Healthcare Multifunctional Satellite Infrastructure Network Project Technology Fund Public Private Partnership US$152mn US$75mn US$30mn (PPP) Project

View over the city of Muscat at night. Father and children use a laptop outdoors. A scientist at a biomedical laboratory. A barista managing online orders, Indonesia. Shutterstock Shutterstock Shutterstock mohammad aldi purnomo / Shutterstock

This project aims to help improve Oman’s infrastructure in This project will support the development of both the fiber optic This financing supports the Legend Capital Healthcare This project supports the Government of Indonesia’s goal the information and communication technology sector, thereby cable backbone network and the metro network in Cambodia. Technology Fund, a venture capital fund which invests to provide connectivity to more than 149,000 Public Service increasing the attractiveness of Oman as a destination for in healthcare technology and digital hospital companies Points in Indonesia. manufacturing business and strategic logistics services. By building out these two networks across the country, the in China. project is expected to support increased access to telecom The project involves High Throughput Satellite (HTS) technology The finance provided to Oman Broadband will be used for its services in both rural and urban areas. It is expected to provide It aims to foster more mature applications of technology with Ka-Band2 Frequency providing data transfer capacity rollout of a fiber optic broadband cable network to 406,003 greater capacity for operators in the telecommunication and digitalization to improve capacity, efficacy, inclusiveness of 150 gigabits per second (gbps). Indonesia’s Ministry of homes/premises by the end of 2021. sector and improve both outdoor and indoor coverage for and resilience in Chinese healthcare infrastructure and Communication and Information Technology (KOMINFO) initiated service providers. service delivery. The Fund targets early stage and growth the project to provide fast internet access to remote areas in It comprises 4,097 km of laying cables, 9,535 km of drop cables stage healthcare companies, covering medical technology, Indonesia, enabling easier access by various government sectors, and supporting infrastructure such as fiber distribution hubs. digital health and biotechnology. such as maritime, education, health, agriculture, communication By the end of 2021, 80% of Muscat will be fiber-ready for and others. Satellite-based technology is the only feasible means connection with the gigabit-capable optical networks. The to cost-effectively connect these remote locations. This was project is in alignment with the country’s goal to progressively the first telecommunication satellite PPP project in Indonesia diversify its economy away from its current dependence on for AIIB. the export of hydrocarbon products.

52 53 Aberdeen Standard Asia Focus PLC Building the bank of tomorrow

Parwati Surjaudaja explains how Bank OCBC NISP in Building the bank Indonesia is responding to the challenge of ultra-low interest rates, digital disruption, the changing needs of retail and corporate customers – and the growing of tomorrow demand for strong corporate governance in Asia.

54 55 Aberdeen Standard Asia Focus PLC Building the bank of tomorrow

Parwati Surjaudaja is president director of sustainability through transformation initiatives subsidiary, OCBC NISP Ventura (ONV), which Consumers have started to put more Bank OCBC NISP in Indonesia, a holding in while maintaining strong integration and started operating in early 2020. ONV focuses on Aberdeen Standard Asia Focus PLC. alignment with the Bank’s core business. promoting financial inclusion, bringing together emphasis on the environmental footprint Digital innovation is key. the banking sector, start-ups companies and fter the Asian financial crisis in 1998, Our personal mobile banking application, micro, small and medium enterprises (MSMEs). of businesses. This has prompted a shift in the Indonesian banking industry took called ONe Mobile, enables individual Through ONV, Bank OCBC NISP opens up business innovation and operations, requiring A steps to become more resilient. As a customers to manage their personal wealth. opportunities to create synergies and result, when the global financial crisis hit in This is not just about executing daily collaboration with start-up companies. support from the banking sector. 2008, it weathered the storm. In 2020, the transactions with convenience and flexibility, Covid-19 pandemic irreversibly reset the but also providing access to various products Governance principles economy and have weathered recent crises. world and dented the global economy. – mortgages, currency exchange and mutual Strong corporate governance has become Furthermore, the Bank promotes gender Indonesia has been no exception. Banks have fund products. We also offer a digital banking increasingly important across Asia and we are equality by tailoring its products to support been significantly impacted and may take solution for business – Velocity Mobile. committed to implementing the good corporate female business owners through gender loan one to two years to recover. Nevertheless, More than 90% of banking activities carried governance (GCG) principles at all organisational programs, which provide banking and other the industry was better prepared for a crisis out in branch offices can be executed through levels. The Bank’s GCG implementation refers solutions, using digital platforms. than it has ever been. these applications. This has enabled us to to the applicable Regulations on Corporate Banking had already been experiencing transform our branches to offer higher value- Governance for Commercial Banks and Public Wealth management: The Bank also sees Previous page: OCBC NISP bank interior. considerable disruption from digital technology added and advisory type services, as well as Companies, and ASEAN Corporate Governance opportunity to tap into the growing working- Opposite: The ONe Mobile app enables and the rise of a younger generation that transactional ones. (ASEAN CG), in addition to best practices. age population (around 60% today). Disposable OCBC NISP's customers to manage their personal wealth and access a range of increasingly make up our customer segments. Given the low interest rate environment, GCG management and implementation income is expected to increase and, given lower financial products. At the same time, the all-time low interest rate customers have been looking for more than requires commitment not just of the top interest rate trends, demand for wealth H_Ko / Shutterstock environment has shifted customers towards just traditional banking products. Wealth management team but everyone across the management is expected to rise. The Bank The Association of Southeast Asian Nations (ASEAN) flag: Bank OCBC NISP wealth and investment products. management has become a key focus. For organization. The Bank has established provides financial solutions through wealth is ranked top 10 under the ASEAN In terms of delivery channels, with less example through ONe Mobile, we can now offer fundamental policies, vision, mission, and management products that can be tailored to Corporate Governance scorecard. Shutterstock than 7% of our banking transactions done products such as mutual funds, bancassurance, corporate values as an initial step of GCG individuals’ profile and life-stages, plus advisory through branches, digital has become a corporate and retail government bonds. implementation. The Code of Conduct is part services. necessity for both retail and corporate banking The group’s ‘Beyond Banking’ strategy of daily conduct for all employees. To our mind, customers. Bank OCBC NISP is committed to aims to create a digital ecosystem. With this in corporate culture is the cornerstone of GCG Green projects: Financing for green projects is building competitive advantage and maintaining mind, we have established a venture capital implementation. also on the rise. Consumers have started to put We have our GCG practice externally more emphasis on the environmental footprint assessed by, among others, ASEAN Corporate of businesses. This has prompted a shift in Governance, the domestic ranking body business innovation and operations, requiring appointed by the Financial Services Authority support from the banking sector to provide (OJK). Based on the ASEAN CG scorecard, the ‘green-focused’ loans – for example, for water Bank is listed as Top 10. The Bank has also treatment, low-cost green cars and green received a Most Trusted Companies rating for buildings. its GCG for the last eight years from 2012-2019. This is really important to us. Bank OCBC NISP has been a public company since 1994 and understands the Long-term growth importance of maintaining good relationships We believe the Indonesian banking market with shareholders that have given their trust promises some exciting growth opportunities to the Bank. The Bank will continue to work in the next few years. Key areas of growth towards sustainable performance and will are likely to be: ensure that good governance is in place while serving its customers with the best banking Small and medium-sized enterprises solutions. This is done by implementing including gender loans: Indonesia has one Transparency, Accountability, Responsibility, of the world’s largest populations and has a Independency and Fairness (TARIF) in all significant base of small and medium-sized aspects of our organizations. enterprises (SMEs). SMEs drive Indonesia’s

56 57 Aberdeen Standard Asia Focus PLC The isle of innovation: Singapore The isle of innovation Singapore

Beh Swan Gin, explains the ambitious initiatives, featuring both local enterprises and global multinationals, that are helping to drive Singapore's transition to an innovation-led economy.

58 59 Aberdeen Standard Asia Focus PLC The isle of innovation: Singapore

Beh Swan Gin is the Chairman of the started to pay attention to the growth A critical success factor for Singapore's research, Singapore Economic Development Board, the opportunities in Southeast Asia. government agency responsible for promoting The gross merchandise value of the innovation and enterprise journey will be the Singapore’s role as a Global-Asia hub for internet economy in this region reached an business, innovation and talent. estimated US$100bn in 20196 and held steady in continued availability of talent. The government 2020 despite the headwinds from Covid-19. has invested heavily to help Singaporeans acquire ingapore began its research, innovation It is projected to reach US$300bn by 2025. and enterprise journey in earnest in Some 140mn people have come online since the necessary skills and experience. S the early 2000s with the S$7bn 5-year 2015. This rapid growth has led to the Science & Technology Plan 2005. A major emergence of billion-dollar companies like and large corporates (as well as small and Talent management focus then was to broaden and deepen the Grab, Sea (previously Garena), medium enterprises) need to get involved. A critical success factor for Singapore’s R&D capabilities in our universities as well as Lazada as well as the Indonesian unicorns The going was slow initially, but the initiative research, innovation and enterprise journey the research institutes under the Agency of like Gojek, Traveloka, Tokopedia and others. is gaining traction and we now have promising will be the continued availability of talent. Science, Technology & Research. That was VC investments in Singapore have grown projects with SIA, ST Engineering, SATS, Procter The government has invested heavily to Singapore is benefiting from when the National University of Singapore exponentially from S$380mn in 2010 to reach & Gamble, Unilever, Schneider Electric and help Singaporeans acquire the necessary enterprise across Southeast Asia, (NUS) and the Nanyang Technological University S$13.4bn during the first 9 months of 20197 many others. skills and experience, in tech as well as such as 'super app' Gojek which supports more than 20 different (NTU) began their transition from teaching to alone, up from S$10.5bn in 2018. more generally in product management on-demand services and e-commerce research-intensive universities. In the rankings In addition, the Economic Development Innovation spending and entrepreneurship. These initiatives platform provider Tokopedia. Chinnapong / Shutterstock of top global universities, both are now Board started an initiative in 2017 to encourage For the next stage, the Singapore government are targeted at both students as well as Creativa Images / Shutterstock regularly placed amongst the top ten large corporates to create new businesses from has announced a S$25bn budget to support adult learners. universities in Asia5. Singapore. We are actively supporting efforts research, innovation and enterprise from To supplement and complement the The government also attempted to grow by multinational companies and also our large 2021-2025 (RIE2025). This is up from S$19bn training efforts in Singapore, we also started the start-up ecosystem around the same time. local enterprises to pursue open innovation, for 2016-2020. Under RIE2025, there will be the Singapore Tech Forum to reach out to The initiative proved premature with the corporate venturing and strategic partnering three priorities: the first is to extend the focus Singaporean and international tech talent conditions not conducive. This started to with start-ups. It was and it remains our belief areas to a broader spectrum of national needs working in California’s Silicon Valley and change from 2012 as successful venture that for Singapore to successfully transition such as human potential and climate change elsewhere. The third edition of the event capitalists (VC) and entrepreneurs who had from an investment-driven to an innovation-led mitigation solutions; the second is to sustain was held virtually last month and attracted made their mark in China and elsewhere economy, we cannot depend on start-ups alone and enrich our scientific base by strengthening more than 7000 attendees from the US and interdisciplinary research and explore around the world. We took the opportunity emerging areas where Singapore can be to announce the Tech.Pass initiative, a new Previous page: Singapore Merlion Park at night. competitive; thirdly, we intend to scale up visa that is more flexible than the regular Netfalls Remy Musser / Shutterstock platforms to drive technology translation and Employment Pass. Tech.Pass allows Owned by Alibaba – the world's largest retail and e-commerce company – foster networks across industry, academia established tech entrepreneurs, leaders Lazada is Southeast Asia's leading and government, with the view of growing or technical experts to come to Singapore online shopping platform, aiming to serve 300 million customers by 2030. the base of enterprises with innovation to start, operate or be involved in one or Quality Stock / Alamy Stock Photo capabilities. more Singapore-based companies. In the near term, we see accelerated We are also establishing stronger adoption of digital tools and services by links with leading innovation hubs around consumers, enterprises and governments the world under our Global Innovation Alliance as a major driver of innovation. For instance, programme. These connections enable our the use of health tech went up fourfold during companies to tap into overseas talent pools Covid-19. While poor US-China relations are and also find partners, capital and markets. casting a shadow over the global economy We firmly believe that it is only by working and global trade, the diversification of supply together that we can all emerge stronger. chains is an opportunity for Southeast Asia We are optimistic that the journey Singapore and Singapore. A third area of opportunity is started in the early 2000s to become an healthcare and wellness products and services. innovation-led economy is gaining momentum. Despite Covid-19, the ‘dry powder’ available for VC and private equity investments reached record levels of US$439bn on May 20208.

60 61 Aberdeen Standard Asia Focus PLC The fortune in Asia’s backyard

The fortune in Asia’s backyard

As Asia’s economies continue to grow at a faster rate than the rest of the world, Nihal Kaviratne, a 40 year veteran of Unilever, explores some of the innovative and dynamic Asian companies attracting local and global attention.

62 63 Aberdeen Standard Asia Focus PLC The fortune in Asia’s backyard

Nihal Kaviratne spent 40 years of executive 'Developing Asia' is on a secular growth Asia has been the key driver of global sharing on motorcycles) in the congested life in senior roles with Unilever around the growth for some time now. Already accounting cities of Indonesia, Thailand and Vietnam and world, is a former or current chairman/ path that is supported by several long-term for the largest share of global output at 36% eventually ousted Uber from Southeast Asia. director of AkzoNobel, GSK Pharma, Titan, in 2019, versus 28% for the US and 25% for While Sea began in 2009 with a and ConAgra in India, as well as DBS Bank, structural factors such as favourable Europe. Asia will drive increasingly more communication application for internet SATS, Wildlife Reserves, StarHub, Olam and demographics, rapid urbanisation, rising of the world’s economic growth as it continues gamers, the company progressed quickly into Caraway in Singapore. He is former chairman to grow at a faster rate than the rest of third-party game publishing and then created of the Indian Cancer Society, Founder of St. smartphone and internet penetration. the world. its own game. Its digital entertainment arm Judes India ChildCare Centres, and serves on 'Developing Asia' is on a secular growth Garena is now a billion-dollar revenue business the advisory board of Bain Consulting for path that is supported by several long-term that is highly profitable. Meanwhile, Sea has Sea/Indonesia and on the global McKinsey and display their wares – from mass market structural factors such as favourable also leveraged its digital experience to develop Risk Advisory Council. goods to the top end of luxury and fashion. demographics, rapid urbanisation, rising an e-commerce platform, Shopee, in 2015, smartphone and internet penetration, a which has since become the leading opular depictions of Asian culture – Home-grown demand fast-growing middle-class and increasing e-commerce platform in Southeast Asia. from Crazy Rich Asians to Slumdog China is, of course, the poster child. Its economy wealth. Meanwhile, 'developed Asia' is also in The company’s share price has increased P Millionaire and Parasite – detract from has grown eight-fold since 2001 when it joined a strong position to benefit given its proximity over 10-fold since the beginning of 2019. the real story of a silent yet remarkable the World Trade Organisation, which helped and connectivity to developing Asia metamorphosis in Asia since the end of the drive its exports five-fold over the same period. The small-cap advantage Second World War; a large part of which has Today, China is not only the world’s largest Compelling growth Given this backdrop, small-cap companies been driven by its positioning as a factory and exporter of goods but also the world’s second- It is therefore no surprise that growth in Asia are in a strong position to generate IT body-shop to the world. largest economy. opportunities abound in Asia’s own backyard. attractive investment returns. This gives a lie to Gunnar Myrdal’s 1968 It will not be long before it takes prime Besides Samsung, Huawei and Xiaomi have prediction that a growing population would position. In 2019, exported goods from Asia risen rapidly in recent years to challenge stunt Asia’s economic growth. Led by Japan and were worth an estimated US$6.8 trillion, Apple in terms of quality, innovation, and As smaller companies largely serve mimicked by the Tigers (and their cubs), then representing over one-third of all global popularity, eroding Apple’s market share. China and India, export earnings spearheaded exports, though exports as a share of GDP Asian companies also benefit from having domestic markets, they will be among this transformation. Today though, the in PPP terms have been steadily declining as local market knowledge, knowing how to the greatest beneficiaries of incoming economies of Asia represent huge consumption Asia creates more home-grown demand for navigate local regulations better. Ride-sharing centres, attracting Western brands to enter the goods and services it produces. company Grab introduced GrabBike (ride- monetary impulse flows.

Previous page: Playing the Garena RoV Ride-sharing company Grab's local Mobile Game online. city knowledge to help oust Uber TZIDO SUN / Shutterstock from Southeast Asia. The Bund in Shanghai; China's economy Naypong Studio / Shutterstock has grown eightfold since it joined the World Trade Organisation in 2001. Shutterstock

64 65 Aberdeen Standard Asia Focus PLC The fortune in Asia’s backyard

95% of listed companies in India are smaller 30% market share by focusing on halal- Opposite: Asia-focused shipping companies, but they still account for only logistics company SITC has seen its compliant products. Jollibee Foods, selling share price more than triple in the 10.45% of the market. As smaller companies fast food, started with five outlets in 1978 past four years. largely serve domestic markets, they will be in the Philippines. By 2019 it had 1,150 outlets Akio Kon / Bloomberg via Getty Images Indian pharmaceutical Laurus Labs among the greatest beneficiaries of incoming at home and 234 outlets abroad. It opened has outpaced compound growth for monetary impulse flows. its first outlet in North America in California, its sector. Sara Hylton / Bloomberg via Getty Images Smaller companies are nimble by nature, in 1998. Its signature product is a hamburger, Jollibee Food's signature Yumburger, and are able to respond quickly to a fast- called ‘Yumburger’. A Filipino will walk miles the company now has over 1,150 changing environment, allowing them to gain to buy it. THP (Tan Hiep Phat) the Vietnamese outlets in the Philippines and 234 abroad. market share and grow revenues and/or Beverage Group, a family business, held its Imaginechina Limited / Alamy Stock Photo earnings rapidly. They give high returns in times markets, and spurned a US$2.5bn offer from Wardah Beauty Cosmetics in Indonesia of economic growth but perform poorly in Coke. Today, THP’s brands are sold in has captured a 30% market share by focusing on halal-compliant products. times of recession. Investors would be more 16 countries. It produces over a billion litres Jason Kempin / Getty Images for Indonesia than happy to pay a higher valuation multiple of soft drinks per annum. Fashion Gallery as growth sustains or even accelerates. Smaller companies tend be under- Furthermore, those with a robust business researched and under-owned by the model and a strong economic moat could easily investment community, making the segment deliver compelling returns over a period of just a fertile ground for mispriced opportunities a few years. SITC International, a shipping over the long term. A major concern to logistics company focused on the intra-Asia address is judgement of the quality of area, has seen its share price more than triple management. Laurus Labs has a management in the last four years as its earnings steadily team with an average of 22 years of pharma doubled over the same period – a sharp experience. The three founders of B2B contrast to the earnings volatility we have seen e-commerce platform Udaan are all Flipkart for international container shipping companies. veterans. Small caps whose promoters have Haidilao International, which has expanded consistently held stakes of more than 30%, quickly in China and Asia by providing without pledging their holdings, are more exceptional levels of service, saw its share dependable. price nearly triple since its IPO in September Asia is currently well poised to emerge 2018 as customers flocked to its hotpot from the Covid-19 pandemic in better shape restaurants. than the rest of the world. As Asia looks to Laurus Labs, Persistent Systems and shine once again, one of the best ways to Dixon Technologies from India have all capture that shine is to invest today in Asia’s outpaced the CAGR of sector indices. Wardah dynamic small companies that could grow into Beauty Cosmetics in Indonesia has captured tomorrow’s next Asian or even global giants.

66 67 Aberdeen Standard Asia Focus PLC Small but mighty: Asia’s small cap revolution

Small but mighty Asia’s small-cap revolution

Backing smaller, dynamic and enterprising companies across Asia has been at the crux of Aberdeen Standard Focus Investment Trust’s success over the past 25 years. Will it be the key to performance over the next quarter of a century, asks Hugh Young.

68 69 Aberdeen Standard Asia Focus PLC Small but mighty: Asia’s small cap revolution

are substantially the same as they have been the Asian crisis in 1998 and now has a large since the start – namely the growing wealth regional bank as its major shareholder. of Asia in general and a far broader middle It has harnessed technology both to improve class, along with the building of infrastructure its services and to serve more customers and in the widest sense of the word. thereby to ensure its growth in the future. Yes, economic development has grown Technology has, of course, been a apace and there has been astonishing change double-edged sword. Asia has been a very particularly where information technology fast adapter of new technologies particularly and the internet are concerned. That has been when it comes to consumer behaviour. hugely disruptive for certain businesses but So while the theme of the growing buying also hugely enabling for others and particularly power of the Asian consumer, which was a enabling for vast swathes of rural and poorer core part of our investment premise 25 years populations throughout Asia, who are now ago, is still valid, looking ahead it is expressed enfranchised more than ever. not so much in traditional bricks and mortar retailers as through the medium of the Harnessing technology for growth internet. Hence Momo, Taiwan’s version of This has opened up even more investment Amazon, is now one of our largest holdings avenues, particularly in lesser developed and retailers that served us well in the past economies and has seen us grow our no longer feature as prominently as they exposure to the likes of Vietnam and Myanmar. once did. It has also created a more accessible audience Similarly today, in anticipation of future for existing holdings within the portfolio that trends, we have far larger exposure directly Hugh Young is the managing director of have from time to time been experienced in are able to use technology to expand their to the technology sector, from a digital Aberdeen Standard Investments, Asia, and various of the countries in which we invest. consumer base. Bank OCBC NISP immediately marketer in India to an accounting software portfolio manager for Aberdeen Standard springs to mind as a holding we have had provider in Korea, as well as exposure to Asia Focus PLC. He joined Aberdeen Asset from day one. It is a high quality conservative sophisticated hardware, an area where Management in 1985, moving to Singapore China and India should both see growth of lender that survived the extreme stress of Asia excels in manufacturing. in 1992 to set up its Asian operations. at least 5% per annum over the next five years, Opposite: Bangkok's famous Pratunam he simple belief, held passionately with a similar rate in Indonesia and faster rates shopping and business district: Asian at the birth of Aberdeen Standard consumption is still a strong investment theme – but is swiftly moving online. T Asia Focus PLC, was that small in smaller economies such as Vietnam, the Shutterstock companies offered a fantastic avenue for Commuters In Makati Central Business District. investment returns. The reasons behind that Philippines and Myanmar. Z. Jacobs / Shutterstock belief were straightforward: we could see Asia becoming the fastest-growing region in the World’s fastest growing region world. Equally, as a team on the ground in Today and fast forward another 25 years, Asia, we were ideally placed to identify suitable what do we see? Will Asia and smaller opportunities. Importantly, those opportunities companies still be the place to invest? were actually valued at a discount to their The answer is unequivocally in the affirmative. larger counterparts. In terms of economic growth the region will History proved our thesis correct with still be one of the fastest-growing in the world. an outstanding performance track record, The behemoths of China and India should weathering the various storms that have hit both see growth of at least 5% per annum economies and stock markets in that period over the next five years, with a similar rate – notably the Asian financial crisis in the late in Indonesia and faster rates in smaller 90s; the global financial crisis that struck economies such as Vietnam, the Philippines ten years later, the effects of which are still and Myanmar. arguably with us; and most recently Covid-19. And what of smaller companies? The That’s not to mention the political crises that opportunities still abound. The themes

70 71 Aberdeen Standard Asia Focus PLC Small but mighty: Asia’s small cap revolution

Chinatown in Singapore: urbanisation remains one of the key trends shaping Asia. John Wildgoose Opposite: Welcoming in the lunar new year in Ho Chi Minh City: Vietnam is one of Asia's lesser-developed economies offering compelling potential. Huy Thoai / Shutterstock

Undiscovered pools of value Am I still as excited today as I was 25 years ago? Turning to valuations, it is still the case that smaller companies trade at a discount Absolutely. The key themes remain the same, to their larger counterparts. This is at least in part explained by the growth in passive namely Asia’s growth and the spread of wealth investing, where money is allocated by more broadly across society, together with market capitalisation rather than by a company's its fundamental attractions further industrialisation and urbanisation. and strengths. If anything, smaller companies have become more overlooked in recent emphasising growth, companies and indeed years as both institutional investors and countries have become far more aware of their investment banks have concentrated on responsibility to society and to the environment. the upper echelons of the market. From our Against this backdrop there are great point of view, that’s exciting. Our large and opportunities across a spectrum of businesses. experienced team on the ground in Asia Newer businesses such as the internet, has a rich and comparatively undiscovered investment technology, health care and pool in which to fish… and it’s pretty pharmaceuticals obviously offer strong growth good value! potential, but so do what one could describe as traditional industries such as finance, consumer Wealth, industrialisation and urbanisation goods and real estate, providing they embrace Am I still as excited today as I was 25 years ago the new – particularly technological change. about Asia? Absolutely. The key themes remain Doubtless there will be bumps along the the same, namely Asia’s growth and the spread way as there have been in the past 25 years, of wealth more broadly across society, together but Asia's smaller company story remains with further industrialisation and urbanisation. the same – growth, opportunities, quality There is also a growing maturity: while still and value.

72 73 Aberdeen Standard Asia Focus PLC Rethinking tomorrow, rebuilding resilience Rethinking tomorrow, rebuilding resilience

As countries around the world address the need to strengthen systems and institutions against future global shocks, Asia is powerfully placed to be a beneficiary of the new world that will emerge, says Sir Douglas Flint.

74 75 Aberdeen Standard Asia Focus PLC Rethinking tomorrow, rebuilding resilience

Previous page: An inherent Sir Douglas Flint is former chairman within countries – and also the collection, entrepreneurial spirit is seeding of HSBC Holdings plc and is chairman use and transparency of data and the decision- the next generation of Asia’s emerging companies. Jaipur Metro of Standard Life Aberdeen plc. making models into which such data is fed to and Elevated Road. Jaipur. support policy choices. Umesh Gogna / Shutterstock An ageing population is one of am delighted to have the opportunity For companies, the challenges are primarily the biggest social and economic to offer some concluding remarks to around bolstering their resilience in terms of challenges facing Asia – and the world. I complement the outstanding contributions financial strength and reconsidering their Gabriela Lukacijewska / Alamy Stock Photo made by a truly distinguished and expert workplace policies and the stability of their group of commentators. Asia’s contribution to supply chains; the mantra of ‘just in time’ is the global economy over the next 25 years will, morphing into ‘just in case’ and in some cases in so many ways, define how the world adjusts ‘just at home’. to rebuild economic activity more sustainably For individuals, the primary issue is job in the aftermath of the Covid-19 pandemic. security in light of the scarring of the economy My fascination with Asia is founded upon from economic contraction driven by 22 years on the board of HSBC, ultimately as lockdowns; beyond that, individuals need to group chairman and currently serving as the consider the model of work that is optimal for UK Treasury’s Special Envoy for Financial and family circumstances, together with how to Professional Services to China’s Belt and Road build better personal financial resilience in Initiative. Aberdeen Standard Investments’ order to manage future shocks better. long history of commitment to and investment success in Asia was one of the key attractions to my joining as chairman of the Group in 2018. Asia’s contribution to the global economy As a leading global asset manager, Aberdeen over the next 25 years will, in so many Standard Investments shares a huge responsibility. It is critical, particularly in the ways, define how the world adjusts to rebuild post Covid-19 world, that investment activity through the global asset management industry economic activity more sustainably in the builds the economic growth and resilience profound and the lessons of the pandemic shocks. Where governments may be slow essential to the world we aspire to build for aftermath of the Covid-19 pandemic. need urgently to be embedded in public policy or resistant to the policy changes required, future generations. That future is, ever more globally. These lessons include: financial institutions must collectively take clearly, an interconnected future that I hope There is also a larger lesson from this First, the major challenges facing the world the lead in requiring this resilience through will precipitate an era of greater cooperation, experience as it relates to the global financial – climate change, pandemics, population sustainable credit decisions and environmental, collaboration and multilateralism while rejecting system. Had it not been for the coordinated growth, demographic ageing, economic social and governance (ESG) investment national and regional polarisation. actions taken during the global financial crisis inequality between and within countries and policies. Lessons learned from the global by policy makers and regulators across the the impact of all of these on migration flows, financial crisis forced significant shock- A need for new thinking world to force greater resilience into the largest are incapable of being solved by nations acting absorbing capacity into the banking world – The pandemic has driven the need for new financial institutions and market places, the alone or even regionally. A framework of global think how much less costly in economic and thinking among all sectors and stakeholders pandemic could have simultaneously cooperation and resource pooling will be human terms the current pandemic would be if involved in investment markets: precipitated a global financial crisis with needed with international coordination the same philosophy had been embedded into It is forcing governments to reset their disastrous consequences. The benefits of global that sets aside geopolitical rivalries. The healthcare provision and personal savings fiscal priorities and policies as indebtedness coordination and cooperation for shared risks challenges we face respect no physical or across the world. rises to levels unprecedented other than in are borne out by this example. It is imperative man-made borders, so we need to reflect Third, the pandemic demonstrated the times of war, as well as having to redefine that we use the lessons learned from the on the capabilities and capacities of the least criticality of having access to extensive, high their interaction with the private sector in order Covid-19 pandemic to further bolster the prepared nations, lest the impacts of their quality data to inform policy choices and enable to meet their primary role of securing safety resilience of economies and the financial inadequacies overwhelm the most the political communication of such choices and security for their citizens. systems that support them. prepared nations. – that means we need to build trust in data It is also requiring governments to Second, the world needs move away from collection and its uses and be prepared to share reconsider alliances, multilateralism, the role of Lessons for public policy ‘just-in-time’ business modelling and build more data globally. Quality data analysis is one of our the state versus private enterprise, centralised The pandemic has been a wake-up call to the resilience into global supply chains and improve most valuable tools, the spread of versus devolved powers and responsibilities world in so many ways; the implications are financial contingency to absorb unforeseen misinformation one of our greatest threats.

76 77 Aberdeen Standard Asia Focus PLC Rethinking tomorrow, rebuilding resilience

To counter this, the way we collect data for long-term investment opportunities. Commuters in Taipei, Taiwan in must be transparent and trusted. Financial Technological progress is reducing dramatically April 2020. Post-pandemic, individuals have to learn how build financial businesses have business models that are built the cost of preparing for the lower carbon resilience against future shocks. upon data integrity and transparency, and their future now demanded. And the explosion o1pok12 / Shutterstock A Global Climate Strike protest in responsibilities with regard to protecting the of data availability is informing better policy Bangkok, Thailand, September 2019: financial system from financial crime and from choices, creating network effects that boost addressing climate change demands a framework of global co-operation. misallocation of resources already depend economic efficiency and building platforms FIFTYONE by Athi / Shutterstock upon international collaboration to fulfil these that offer consumers extraordinary choice Commuter at the Andheri responsibilities. In the even more expansive and service levels. metro, Mumbai. Manoej Paateel / Shutterstock digital world of the future, such collaboration Nowhere is this more evident than in Opposite: Night view of the financial will be even more critical. Asia where a unique combination of data district of Shanghai. Finally, we should think of Covid-19 as availability, breakthrough technology, ease of Shutterstock providing an accelerant to trends already doing business and an inherent entrepreneurial underway. As we recapitalise economies spirit is seeding the next generation of Asia’s we have the opportunity to reshape business emerging companies that will scale to become activity in a more sustainable way, notably global leaders, the very companies that our on climate change; as digital business takes mission remains to identify early on. Building an ever greater share of transactions, the future we all desire for future generations international financial collaboration becomes requires vision; Asia is at the forefront, often in even more important both to facilitate and the lead, in imagining and acting upon the new to understand economic activity and to agree horizons opening up, which almost certainly how and where to tax such activity; and as ever suggests the next 25 years will be even more more data is collected, the urgency of global exciting than the last. collaboration on data localisation, data privacy and data sharing policies is clear.

Asia – a vision for future generations While challenges abound, the opportunities are equally clear. The necessary rebuild of the global economy is taking place at a time of unprecedented low interest rates available to finance the necessary hard and soft infrastructure. Demographic ageing in emerging markets is building retirement systems with considerable additional resources looking

78 79 Aberdeen Standard Asia Focus PLC Asia in context over the last 25 years

Asia in context over the last 1997 Hong Kong handover by the UK to China Hong Kong underwent a fairly smooth transition from British dependent territory to Chinese special 1999-2000 25 years The dot-com boom and bust autonomous region. However, it led to a period marked on the one hand by simmering political This saw the share price of technology and, Twenty-five years have shown the volatility of global tensions, and on the other hand by an specifically, internet-related stocks soar. The economies and markets in a period of growth in the infrastructure boom aimed at rapidly integrating subsequent collapse saw even the most stable of region. Political changes, economic upheaval and market Hong Kong into the Pearl Harbour region. Mainland technology companies lose a significant proportion China’s emerging financial centres, Shanghai and of their market capitalisation – Cisco, Amazon.com ups and downs have been common features of the Shenzhen, would increasingly challenge its status as and eBay.com, all of which were still healthy period as the region has developed and transformed. the financial gateway to China in subsequent years. businesses a decade later, saw 80-90% falls in value. Indonesian rupiah banknotes featuring President Suharto Shutterstock

1997-99 199 8 The Asian financial crisis The crisis widens The Asian financial crisis started with the collapse of After policymakers spend billions defending their the Thai baht, with the currencies of Indonesia and currencies, the IMF intervenes to make funds South Korea hot on its heels. It savagely exposed available to the most troubled Asian countries. By the ingrained habit of Asian governments to borrow April, Indonesia and the IMF have agreed their third excessively in foreign currencies. While tough at bailout pact in six months. In August, Wall Street the time, the subsequent capital discipline it forced reacts to the deepening crisis; the Dow plunges 300 upon governments and corporates was to set the points in its third-biggest loss. Singapore slips into foundation for the subsequent years of growth. recession for the first time in 13 years and in Cisco Facility in Silicon Valley Ken Wolter / Shutterstock Victoria Harbour, Hong Kong October Japan announces a $30bn aid package for Shutterstock Southeast Asia. As Hong Kong’s currency and stock market came under attack, Hong Kong Government Financial Secretary Donald Tsang takes extraordinary measures to calm the rout, buying 11% of the Hang Seng using foreign exchange reserves. The stock market rises rapidly and stayed high, giving future policymakers confidence that dramatic intervention in markets can work.

80 81 Aberdeen Standard Asia Focus PLC Asia in context over the last 25 years

2004 Indian Ocean tsunami An earthquake beneath the Indian Ocean caused a devastating tsunami to hit Indonesia, as well as Sri Lanka, India and Thailand. 20 01- 0 4 Asia starts to bloom 2004 These years saw Asian economies reap the rewards Madrid train bombings of the disciplines put in place during the financial crisis. In March, 3 days before its general election, Spain Regional growth was also accelerated by the elevation experienced its worst terrorist attacks, known as of China to global trading superpower with its accession the 2004 Madrid train bombings, killing more than to the WTO in 2001 and the Information Technology 2005-07 200 people. Al Qaeda took responsibility. Agreement (ITA) in 2003 being key milestones. Buoyant markets Economic growth was strong, particularly in China, In June, the US handed over power to the Iraqi These were buoyant times for global India and Vietnam with corporate earnings reflecting interim government; Iyad Allawi became prime stock markets, and Asia was no that strength. Corporate governance improved and minister. In November, George W. Bush was re-elected exception. Markets charged higher, Asia started to draw the attention of global investors. president, defeating the Democrat John Kerry. fuelled by readily available credit. Tsunami refugee camp, Indonesia A.S. Zain / Shutterstock

2005 saw the start of strong years of growth in the Asia Pacific region. Meanwhile storm clouds 2003 gathered in the US, as the The SARS outbreak sub-prime crisis revealed itself. The savage virus Severe Acute Respiratory Syndrome Ho Chi Minh City, Vietnam Matyas Rehak / Shutterstock (SARS), a precursor to COVID-19 today, hit Asian people and economies hard. Measures to prevent its spread stymied growth, closing up export markets and stalling domestic consumption. In April, Beijing announced that all primary and secondary schools would be closed for two weeks. The World Health Organisation (WHO) issued Citywire magazine leads with a profile on the manager, 2007 travel advisories against Beijing, Toronto, and Shanxi Province. By July, WHO declared the SARS outbreak contained and removed Taiwan from the list of affected areas. By May the following year, WHO announced China as free of further cases of SARS.

82 83 Aberdeen Standard Asia Focus PLC Asia in context over the last 25 years

2 0 0 8 -11 An unstable environment Asian progress slowed in the face of devastating natural disasters in the region. May 2008 saw the Sichuan earthquake kill 69,000 people, making it “Market exuberance led to inflated the deadliest to hit China since the 1976 Tangshan earthquake. In November, the central government China National Olympic Stadium projections of earnings growth. announced that it would spend 1 trillion RMB to Eastimages / Shutterstock Many investors overpaid. Happily, rebuild the worst-hit areas. Japan’s earthquake and tsunami in 11 March 2011 more attention is now being paid led to all the country’s nuclear reactors being shut 2008 down for inspection. Soon after, Thailand’s floods The Beijing Olympics to company fundamentals.” had a profoundly disruptive impact on Japanese Beijing comes under global scrutiny automobile and ICT manufacturers, leading to a as the host of the Olympic Games. Extract from the Manager’s review, Annual Report 2008 major re-evaluation of risk in global supply chains. The financial crisis made daily headlines, 2008 Shutterstock

2008 2 0 0 8 -11 “Although the problems in the mortgage- Lehman Brothers collapse An unstable environment backed securities markets surfaced in late The collapse of the investment bank precipitated the But other markets have also suffered. Even those such Asian progress slowed in the face of Global Financial Crisis. Asian stock markets were hit as Thailand and Taiwan, which had trailed behind in the devastating natural disasters in the region. July, it took a further three months for harder than many other countries as foreign money rally, and benefited earlier in the year from renewed May 2008 saw the Sichuan earthquake kill withdrew to ‘safe havens’. political hopes, have relapsed. 69,000 people, making it the deadliest Asian markets to be impacted. Hopes that to hit China since the 1976 Tangshan In the Manager’s review of the 2008 annual report we It continues: “Yet far from being pessimistic, as we earthquake. In November, the central wrote: “Asian stock markets, in fact, have fallen sharply, believe these developments may turn out positive: as Asian economies could ‘decouple’ from government announced that it would spend and by more than their Western counterparts. The share multiples became more elevated, with market 1 trillion RMB to rebuild the worst-hit areas. biggest winners in 2007 have fallen furthest, led by India leadership concentrated in a narrow area of cyclical their Western counterparts had underpinned and China. Perhaps that was to be expected – these stocks and China-related stories. Market exuberance Japan’s earthquake and tsunami in 11 March markets attracted the bulk of fund flows to the region led to inflated projections of earnings growth. Many 2011 led to all the country’s nuclear reactors markets but as the year progressed, it became over the past few years, stock prices became extended investors overpaid. Happily, more attention is now being shut down for inspection. Soon after, increasingly clear that regional markets and thus scope for profit-taking was greatest. being paid to company fundamentals.” Thailand’s floods had a profoundly disruptive impact on Japanese automobile and ICT and economies were still sensitive to events manufacturers, leading to a major re- evaluation of risk in global supply chains. in the West.”

Extract from the Manager’s review, Annual Report 2008

84 85 Aberdeen Standard Asia Focus PLC Asia in context over the last 25 years

In the 2012 annual report, 2014 -15 Nigel Cayzer, Chairman of European and Japanese QE Japan and, finally, the eurozone launched quantitative easing 2012 -13 the trust, wrote: “the fiscal measures, unprecedented in their size and scale, while Mario Draghi The taper tantrum 2015 promised to ‘do what it takes’ to save the single currency. Asian Volatility Emerging stock, bond and currency markets markets responded in line with global markets. The Chinese market problems of the developed nations, A problem that starts as a wobble in the were sold off as the prospect loomed of a tentative was one of the strongest performers over the year, but we remained Chinese domestic market culminates in a end to the Federal Reserve’s era of loose monetary sceptical of its charms. leading to America’s first-ever full-blown sell-off in global equity markets. policy. Asia was no exception, but the sell-off saw A glance at China suggests its institutions are weak and will take time A sudden 30% fall in the ‘A’ shares market, some much needed valuation discipline return credit rating downgrade and to build, the financial system being symptomatic. It doesn’t price prompted by Government intervention to to markets. persistent speculation of a capital properly, interest rates are artificially low and bad loans a prevent margin trading, is compounded by The 2013 Manager’s review reported: “The knee- potential cancer for its banks. Yet these weaknesses are the products weak economic data. The world comes to jerk sell-off (Bernanke taper tantrum) underscored eurozone breakup, weighed of deliberate choices, albeit ones that do enable flexibility elsewhere. fear a painful slowdown in China and the extent to which sentiment was driven by policy For example, China’s dirigisme does mean state-directed lending is markets fall while investors digest the expectations rather than fundamentals.” heavily on market sentiment.” quickly put to work. implications.

2014 2014 -Today Chinese e-commerce Indian liberalisation The $230bn flotation of Chinese e-commerce Since coming to power in 2014, Prime Minister giant Alibaba on the New York Stock Nahrendra Modi has driven through a series of Exchange – the world’s largest to date – was reforms to improve the Indian economy. This a landmark moment, proving that Chinese has included a controversial demonetisation of companies and entrepreneurs could attract high denomination bank notes aimed at tackling Western capital. The float made founder Jack the black market. At the same time he has Ma, an English teacher-turned businessman, liberalised India’s foreign direct investment a billionaire. policies, allowing more foreign investment in Ben Bernanke several industries. He has made it harder for Albert H. Teich / Shutterstock workers to form unions and easier for employers to hire and fire them. His re-election in 2019 has given him a mandate to continue. Bank of Japan (Nippon Ginko) building in Ginza, Tokyo YMZK-Photo / Shutterstock

86 87 Aberdeen Standard Asia Focus PLC Asia in context over the last 25 years

2020 Covid-19 arrives 2018 Believed to originate in November 2019 in a seafood market in The US/China trade war Wuhan, the capital of Central China's Hubei Province, coronavirus The US launched a broadside against the Chinese 2019 (Covid-19) spread rapidly across China in January 2020. On 31 in 2018, accusing them of intellectual property January 2020, Europe had its two first confirmed cases – two tourists theft and unfair trade practices. The attack had its in Italy from China. Although Asia was the epicentre of the pandemic, roots in the burgeoning US trade deficit with China, swift action by governments in China, South Korea and other over $420bn and counting. The US initiated tariffs countries to impose tough lockdowns and comprehensive test and on steel and aluminium in March 2018. China trace programmes (probably helped by previous experience of SARS retaliated, tentatively at first, but with increasing epidemics) has enabled the region to emerge from the crisis to vigour as the US stepped up its attacks. Behind the relative normality far more swiftly that its Western counterparts. scenes, the trade war has grown into a battle for Moreover, leading tech firms in the region are clear beneficiaries economic supremacy, which is likely to define US/ of the global shift to e-commerce and remote working that's been China relations for the long-term. accelerated by the pandemic. The City of Shanghai hosts one of two stock exchanges operating Songkhla Province in Thailand opens a Covid-19 independently in the People’s Republic of China screening station oceanfishing / Shutterstock Wittaya Sunbu / Shutterstock

On 9 November 2018 Aberdeen Asian Smaller 2019 Companies Investment Trust PLC changed its China’s STAR market China introduced a new Nasdaq-style tech board – name to Aberdeen Standard Asia Focus PLC the Science and Technology Innovation Board, or “STAR Market”. At launch, 25 companies were listed, with many and reduced its number of holdings from 80 more waiting in the wings. The new market is designed to address some concerns over governance and volatility to 60 – highlighting its emphasis on identifying that have deterred international investors. The market is focused on high-growth technology-based industries, small-cap companies that can deliver on such as high-tech equipment manufacturing and biotechnology. growth and returns. China’s STAR market Shutterstock

88 89 Aberdeen Standard Asia Focus PLC Appendix

Appendix Important information

For more information please visit us at asia-focus.co.uk Risk factors you should consider prior to investing:

World Economic Forum • The value of investments and the income from them can fall Other important information: weforum.org/agenda/2019/12/asia-economic-growth/#:~:text=In%202020%20Asia’s%20GDP%20 and investors may get back less than the amount invested. Issued by Aberdeen Asset Managers Limited which is will,class%20entering%20the%20global%20economy • Past performance is not a guide to future results. authorised and regulated by the Financial Conduct Authority • Investment in the Company may not be appropriate for in the United Kingdom. Registered Office: 10 Queen’s Terrace, ESG Clarity investors who plan to withdraw their money within 5 years. Aberdeen AB10 1XL. Registered in Scotland No. 108419. esgclarity.com/interest-in-esg-investing-grows-in-asia • The Company may borrow to finance further investment An investment trust should be considered only as part of (gearing). The use of gearing is likely to lead to volatility in a balanced portfolio. Under no circumstances should this Aberdeen Standard Investments the Net Asset Value (NAV) meaning that any movement in information be considered as an offer or solicitation to deal aberdeenstandard.com/docs?editionId=10c3bd62-eafc-4b1c-b607-59cbe35bff51 the value of the company’s assets will result in a magnified in investments. movement in the NAV. • The Company may accumulate investment positions which GB-081220-136086-1 Endnotes represent more than normal trading volumes which may make it difficult to realise investments and may lead to Page 20-21 Page 7 and 70 – Performance data volatility in the market price of the Company’s shares. 1 weforum.org/agenda/2019/01/india-will-overtake-the-us Please refer to relevant Key Information Document (KID), which • The Company may charge expenses to capital which may economy-by-2030 can be found at asia-focus.co.uk, prior to making an investment erode the capital value of the investment. 2 weforum.org/agenda/2019/07/the-dawn-of-the-asian-century/ decision. The MSCI information may only be used for your • The Company invests in the securities of smaller companies 3 aabri.com/manuscripts/193067.pdf internal use, may not be reproduced or redisseminated in any which are likely to carry a higher degree of risk than larger 4 chinausfocus.com/society-culture/examining-chinas-soft- form and may not be used as a basis for or a component of any companies. power-and-cultural-influence financial instruments or products or indices. None of the MSCI • Movements in exchange rates will impact on both the level information is intended to constitute investment advice or a of income received and the capital value of your investment. Page 70-71 recommendation to make (or refrain from making) any kind of • There is no guarantee that the market price of the Company’s 5 Such as Times Higher Education and QS World University investment decision and may not be relied on as such. Historical shares will fully reflect their underlying Net Asset Value. Rankings data and analysis, should not be taken as an indication or • As with all stock exchange investments the value of the 6 Annual e-Conomy Sea report conducted jointly by Google, guarantee of any future performance analysis forecast or Company’s shares purchased will immediately fall by the Temasek and Bain & Company prediction. The MSCI information is provided on an “as is” basis difference between the buying and selling prices, the bid-offer 7 Press release by Enterprise Singapore in October 2019 and the user of this information assumes the entire risk of any spread. If trading volumes fall, the bid-offer spread can widen. 8 EY Private Equity briefing: Southeast Asia (June 2020) report use made of this information. MSCI, each of its affiliates and each • The Company invests in emerging markets which tend to other person involved in or related to compiling, computing or be more volatile than mature markets and the value of your creating any MSCI information (collectively, the “MSCI” Parties) investment could move sharply up or down. expressly disclaims all warranties (including without limitation, • Specialist funds which invest in small markets or sectors of any warranties of originality, accuracy, completeness, timeliness, industry are likely to be more volatile than more diversified non-infringement, merchantability and fitness for a particular trusts. purpose) with respect to this information. Without limiting any of • Yields are estimated figures and may fluctuate, there are no the foregoing, in no event shall any MSCI Party have any liability guarantees that future dividends will match or exceed historic for any direct, indirect, special, incidental, punitive, consequential dividends and certain investors may be subject to further tax (including, without limitation, lost profits) or any other damages on dividends. (www.msci.com).

Discrete performance (%)

Year ending 30/11/20 30/11/19 30/11/18 30/11/17 30/11/16 Share Price 4.0 8.9 (1.6) 11.6 27.2 Diluted NAVA 5.9 4.6 (2.9) 13.7 29.7 MSCI AC Asia Pacific ex Japan 18.0 8.3 (2.9) 21.6 30.8 MSCI AC Asia Pacific ex Japan Small Cap 19.5 2.0 (7.2) 18.0 23.9

A Including current year revenue. Total return; NAV to NAV, net income reinvested, GBP. Share price total return is on a mid-to- mid basis. Dividend calculations are to reinvest as at the ex-dividend date. NAV returns based on NAVs with debt valued at fair value. Source: Aberdeen Asset Managers Limited and Morningstar. Past performance is not a guide to future results.

90 91 Aberdeen Standard Asia Focus PLC

Aberdeen Standard Investments Aberdeen Standard Investments is dedicated to helping investors around the world reach their desired investment goals and broaden their financial horizons.

Aberdeen Standard Investments has been Today, Aberdeen Standard Investments is pioneering investment opportunity for over one of Europe’s largest active asset managers. 140 years. Starting in the 1870s, our heritage We are proud to manage assets of £455.6bn companies established investment trusts (€501.2bn/$562.9bn) on behalf of governments, that enabled ordinary investors to harness pension funds, insurers, companies, charities, opportunity in the new world of North America. foundations and individuals across 80 countries (as at 30 June 2020). Over the past 40 years, we have looked to lead the way in broadening investment potential as new markets have emerged globally. In Asia, in particular, our deep-rooted networks of on-the-ground investment specialists and strong local corporate relationships have allowed us to uncover opportunities that other overseas investors may miss. This has allowed us to offer specialist strategies such as the smaller-company focused Aberdeen Standard Asia Focus PLC, profiled here.