According to a recent Bloomberg article, some Southeast Asian countries are among the fastest growing economies in Asia. The Bloomberg report cited data from the World Bank and showed how countries such as Cambodia, Laos, and Myanmar are forecast to achieve growth rates of around 7% each through to 2019.
Given that the three countries mentioned are starting with a low base in terms of the state of their economies, the opportunities lying ahead for them may be immense. The trio also have a model to learn from; Vietnam has already set an example by transforming its agriculture-based economy into an export-driven one.
Many companies in Singapore are also investing heavily in some or all of the three fast-growing Southeast Asian countries. In fact, Singapore was the largest investor in Myanmar in 2015 with foreign direct investments of US$3.5 billion. That’s nearly 8 times more what Myanmar’s next largest investor, China, had pumped in.
But for retail investors in Singapore, it’s hard to invest in countries such as Cambodia, Laos, and Myanmar directly. They still have capital controls in place and some even forbid foreigners from owning land or shares in their domestic stock market.
Yet, investors in Singapore can still gain exposure to these countries. This is because many Singapore-listed companies have investments there. For example, companies such as Yoma Strategic Holdings Ltd (SGX: Z59) and SembCorp Industries Limited (SGX: U96) have business interests in Myanmar. In fact, the country is Yoma Strategic Holdings’ main geographical market.
For companies with investments in Cambodia, some examples are HLH Group Ltd (SGX: H27), Oxley Holdings Ltd (SGX: 5UX), and KrisEnergy Ltd (SGX: SK3). In Laos, Olam International Ltd (SGX: O32) had started a coffee plantation all the way back in 2009.
Given Singapore’s position as close neighbours of the trio, it makes sense for us to cheer for them and wish that they would one day become economically thriving and stable nations. Nevertheless, investors also need to understand the risks of investing in frontier markets before jumping in.
History has shown that not all frontier market investments become winners. As the economic, political, and social structures of these countries are still developing, there will always be a risk of things falling apart along the way. For example, Myanmar ended nearly 50 years of military rule and adopted a democratic political system only in late 2015. There could be plenty of speed bumps along the way as the country’s political system matures.
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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 writer Stanley Lim doesn’t own shares in any companies mentioned.