Looking from afar, from Europe or America, it is very easy to label the Far East as an "Asian market" for investment. They might appear to have the same culture, businesses, and approach to investment, but is this really the case on the ground?

 

Let's take a whistle-stop tour of the Far East, looking at the major markets, what drives them, what makes them different and why it might be wrong to label them as an "Asian market". It may be that we need to be more focused with investment in the Far East, matching risk profiles with long-term aspirations, to deliver better returns.

 

Overall view of the Far East

 

A simplistic outsider's view of the Far East would likely include several characteristics, such as:-

 

· Heavily populated

· Dominated by China

· Technology heavy

· Forward-thinking investors

· Young mobile workforce

· Dependent on global exports

· Similar cultures

 

It is tempting to get drawn into this broad-brush approach to the Far East, but when you dig a little deeper, you will notice very different characteristics for each country.

 

Hong Kong and China

 

While Hong Kong and China are heavily politically intertwined, they have very different make-ups regarding investment, business and culture. As two of the largest stock markets in the region, they attract huge international investment but can sometimes move in different directions.

 

China, the main economic force in the Far East, is dominated by traditional banks, retailers, property and manufacturers. At the same time, Hong Kong is more tech-based, with cutting-edge technology and innovative investment instruments. Therefore, it is easy to see occasions where the two can move in different directions.

 

Korea, Taiwan and Japan

 

Many would suggest that Korea, Taiwan and Japan make their own "Asian market", as they are all dominated by hardware companies with the supply of semiconductors heavily influencing their economies. For example, hardware companies make up more than 60% of the stock market in Korea and Taiwan.

 

When it comes to trading, hardware suppliers are heavily reliant on the US, Europe and mainland China, with, surprisingly, domestic demand almost irrelevant. Consequently, they are heavily exposed to overseas economies and currency movements.

 

India

 

The Indian stock market is one of the more diverse in the region and has, on the whole, been one of the better performers over the last 20 years. There is a definitive split between international companies and those supplying everyday products to the enormous local market. The global pharmaceutical and IT service companies depend on Europe and the US. In contrast, local companies with massive distribution networks can tap into cities, towns and villages, some of which are isolated, right across India.

 

Indonesia, Philippines and Thailand

 

Indonesia is one of the leading economies in the APAC region and is set to become one of the largest economies in the world over the next 30 years. In tandem with the Philippines and Thailand, and in a similar fashion to India, these countries are dominated by companies able to tap into isolated consumers across their vast lands. While it may be misleading to say they are not dependent on China, which leads the region's economy, they are a little less dependent than most and more self-sufficient.

 

Summary

 

This quick whistle-stop tour of the Far East should give you an idea of the very different economies, stock markets and opportunities. This is before we even look at the likes of Vietnam and Bangladesh, emerging economies attracting the interest of domestic and international investors. So, next time you are tempted to group far eastern markets into one "Asian market", it may be time to think again.

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