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-fiveyearsofchange 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 Theartofinfluence:theAsianCentury 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 Tradewinds,tradewars:wherenextforUS-Chinatariffs? 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-fiveyearsofchange 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.