SINGAPORE (Jan 6): DBS Group Research says companies in Singapore and Thailand are leading the way among the 10 member states of the Association of Southeast Asian Nations (Asean) in the expansion of their regional footprints.
“Among Asean countries, Singapore and Thailand firms have a greater tendency to invest abroad due to their mature, high-cost and small home markets,” says DBS regional equity strategist Joanne Goh in a report on Thursday.
The companies, Goh adds, are aided by the Thailand and Singapore governments, which “provide supportive policies and measures for regional expansion.”
“Singapore is often seen as a gateway to the entire Asean market, thanks to its comprehensive FTA (free trade agreement) networks, pivotal geographic location and easy environment for doing business,” Goh says.
But while Singapore is the largest recipient of foreign direct investment (FDI) flows in the region, most of the flows end up in other countries mainly through equity and bond financing.
Meanwhile, Goh says Thailand’s deep-rooted auto and electronics hubs continue to attract international investors building on their market presence in the region.
“Thailand’s geographic proximity to the new Asean frontier markets such as Cambodia, Lao, Myanmar and Vietnam (CLMV) allows itself to be the regional hub for access to these markets and also to tap on their resources,” Goh says.
The allure of the rapidly expanding CLMV markets has also seen many Thai companies investing into the region to achieve higher growth.
Apart from Singapore and Thailand, however, Goh believes each Asean market offers its own “unique attractiveness”.
In Malaysia, for example, a cheaper ringgit and commodities has seen the cost of doing business drop significantly.
“Investors could re-look at Malaysia as a favourite FDI destination,” says Goh. “Investments into Malaysia can be expected to pick up, taking advantage of the lower costs and the resource-rich country.”
In addition, the upcoming Kuala Lumpur-Singapore high-speed rail is also attracting quite a bit of investors’ interest.
As a regional bloc, the Asean Economic Community (AEC) is also working towards providing an effective platform for investors to utilise and maximise the key industries within Asean countries.
According to Goh, these key industries include agriculture, aviation, automotive, e-commerce, electronics, fisheries, healthcare, logistics, tourism, textiles and apparels.
“The AEC has provided companies opportunities in this region to access greater market opportunities and revenue, and resources for better competitiveness,” Goh says.
Goh adds that companies with regional aspirations and longer-term vision, the ability to raise finance to support growth, and supportive governments in their home countries are sustainable investment options.
Some of the SGX-listed companies with regional exposure are: Dairy Farm International, Raffles Medical Group, and Fraser & Neave.
Goh points out that Dairy Farm runs a chain of supermarkets, convenience stores, health & beauty and home furnishing stores in Singapore, Malaysia, Indonesia, and the Philippines.
Goh also reports that Raffles Medical Group now operates clinics in Vietnam and Cambodia following the acquisition of a 55% stake in international medical group MCH.
With manufacturing plants in Malaysia and Thailand, Goh says Fraser & Neave is looking to further establish its presence in Indonesia and Indochina. In addition, F&N has an 11% stake in Vinamilk, the largest dairy company in Vietnam.
As at 1.27pm, Dairy Farm is trading 1 US cent higher at US$7.32, Raffles Medical is trading 2 Singapore cents higher at S$1.475, and Frasers & Neave is down 1 Singapore cent at S$2.08.