How Can Investors Invest In An ASEAN Bank?

The Association of Southeast Asian Nations, or ASEAN is made up of 10 countries. It started with just five countries, namely, Indonesia, Malaysia, Philippines, Singapore and Thailand. Brunei, Vietnam, Laos, Myanmar and Cambodia joined later on.

Below are some basic statistics about ASEAN


Source: Data from ASEAN Secretariat 

Two numbers stand out. Firstly, the total population. Secondly, the GDP per capita.

ASEAN is the third most populous area in the world behind China and India. Its GDP per capita is small when compare to developed countries like the US – USD$55.8k or even developing country like China – USD $7.9k (World Bank).

Put in simple terms, their could be huge opportunities for growth. Given the huge potential, how could investors participate in the growth?

Banks are one possibility.

Searching for proxies

United Overseas Bank Ltd (SGX: U11), DBS Group Holdings Ltd (SGX: D05) and Oversea-Chinese Banking Corp Limited (SGX: O39) have exposure in Asia. Yet, not all have the same level of exposure. For example, DBS operates mainly in Singapore and Hong Kong, with minor exposure to other countries.

OCBC, on the other hand, has significant exposure in Singapore, Malaysia, Indonesia and Greater China.

UOB’s geographical exposure is similar to OCBC, but it has a major presence in Thailand.

Other options

Apart from the three local banks above, there are opportunities in Malaysia. For instance, Malayan Banking Berhad (KLSE: MAYBANK) and CIMB Group Holdings Bhd (KLSE: CIMB).

In fact, investors who want pure ASEAN exposure may want to take a closer look at Maybank and CIMB Group.

CIMB has more than 90% of its interest income derived from Malaysia, Indonesia and Thailand.

As for Maybank, more than 90% of its operating income comes from Malaysia, Singapore and Indonesia.

Key takeaway:

ASEAN is a region with potential for growth due to its large population and low GDP.

To benefit from such growth, investors interested in the banking industry might consider banks listed both in Singapore and Malaysia.

Yet, it is important to pay attention to the focus on the individual bank, as each one has exposure in different regions.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.