Key Points

The macro environment for Asian equities is changing, fast. The USD is weaker, and there has been discussion in the US government about the cost of carrying the world's reserve currency.

“In such an environment, financial resilience is important -- build financial systems that are more ‘local’ and less dependent on the buck,” said the report.

There are various ways to do this. One option is to garner local savings and channel these into local investments. Across the region, we call this “Asia buys Asia”.

“Asia buys Asia is a mega trend we have tracked since 2012. Since then, it's ballooned faster than we ever expected. Asians have increasingly preferred mutual funds and insurance products for saving over jewellery and gold cars,” the HSBC report mentioned.

This shows up in assets under management in the region that were $22 lakh crore at end-2024, more than triple the 2012 level. That's an 11 per cent CAGR over the period. It also works out as 76 per cent of regional GDP in Asia, up from 44 per cent in 2012.

“China and India have grown the quickest. Collective investments (such as mutual funds) have outpaced pensions and insurance products across Asia, though pensions have recently grown faster,” the report noted.

To mobilise savings further, local investors need a regulatory environment that educates and encourages them to invest in their home markets.

In India, tax benefits for so-called Systematic investment Funds (SIPs) -- a way of investing fixed sums regularly in mutual funds, both for inflows and capital gains -- have been key.

In Singapore, the Monetary Authority of Singapore (MAS) supports growth in local asset managers that invest in small and mid-caps.

“We think 'Asia buys Asia' is good news for asset managers, banks, insurers, exchanges and brokers. Banks can help households to switch savings from gold and jewellery into financial products, especially in rural areas that traditionally have a lower financial participation rate (this is still the case in Indonesia, the Philippines and India),” the report highlighted.

Asset managers can develop tailor-made pensions and savings products. Exchanges and brokers can enjoy increased local liquidity in the equity market, it added.

- IANS