Abrdn CEO says Indian and Chinese stock markets could grow fourfold by 2050

A guard walks past the National Stock Exchange building in Mumbai, India, on February 9, 2018.

Danish my friend | Reuters

Indian and Chinese stock market capitalization could grow fourfold by 2050 as Asia turns from “lazy to pioneer” in climate transition, according to Abrdn CEO Stephen Bird.

In a letter seen by CNBC marking the 30th anniversary of the British investment firm’s first Asian office opening in Singapore, Baird hailed the economic transformation over the past three decades that has seen more than a billion people lifted out of poverty.

He also noted that the region’s share of the global economy has become eight times what it was during the 1997 Asian financial crisis.

“Capital markets have also developed and the region has gone from being a destination predominantly for foreign investors to one where its markets are dominated by local investors,” Bird said.

“The next 30 years look as exciting as the past,” he added, and recommended investors remain calm during periods of volatility, while “paying attention to the long game.”

Chinese stocks suffered bruising a year as President Xi Jinping’s “zero COVID” strategy has stifled economic activity And it caused bottlenecks in the supply chain that spread to global markets.

Goldman Sachs Analysts recently said they were “Seeing the light at the end of the tunnel,” Byrd endorsed the long-term view that Asian stocks could go from “behind the leaders” in terms of performance and their role in tackling the climate crisis.

“China and India are expected to become the world’s largest and third largest economies respectively in the next decade as consumers increasingly determine global tastes and trends. Their stock market capitalization could increase fourfold or more by 2050,” Bird predicted.

“Other countries in the region present exciting opportunities as well. Bangladesh, Indonesia, and Vietnam have some of the highest potential growth rates in the world, while aging populations in Japan and South Korea have generated significant savings that need to function better. And, as the financial center The most open world in the region, Singapore will be at the center of it all.”

However, Baird acknowledged that progress is unlikely to be linear, as globalization has pushed Asia’s economic growth to the brink of fading and climate change poses an “acute challenge” to the region.

“A by-product of growth in Asia is that it accounts for the lion’s share of the increase in global carbon emissions over the past three decades. This increasing human impact is also manifested in increased air pollution and biodiversity loss,” he said.

Baird suggested that while Asia alone cannot solve the climate crisis, its major economies must find ways to decouple their economic growth from fossil fuels. Most of the major economies in the region have now adopted net-zero targets, while Asia is also playing a role in developing technological solutions to climate change.

“Whether in the form of solar panels, batteries for electric cars, or green hydrogen, decarbonization depends on Asian innovation,” Baird said.

Abrdn – which has around £464 billion in assets under management (US$586.35 billion) as of the latest results – notes that interest in sustainable investing among local investors is also growing, along with active engagement between asset managers and companies, creating potential opportunities for new formats From “Sustainability Loans and Bonds”.

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Baird – who took over at Abrdn in September 2020 after a 21-year career with Citigroup’s operations in Asia and Latin America – urged Asian governments to bolster the credibility of their net zero commitments, providing investors with greater assurance in allocating capital to the region.

“More countries should follow China’s lead and set carbon pricing that brings certainty and encourages investment in low-carbon technologies and infrastructure. The revenue generated can be recycled to ensure that the transition to zero-carbon emissions is just,” he said.

“We are also encouraging increased use of customized climate-related instruments such as green bonds; this should help align the interests of capital market participants while also encouraging increased issuance of portfolio diversification.”

Beard said the continent’s political, trade and economic forums should be an opportunity to align climate and sustainability standards, suggesting that a common continent-wide framework could boost financial flows to Asia.

“This century is the century of Asia. It must also be the century where economic and sustainability goals are reconciled,” concluded Bird. “The financial sector can and should play a pivotal role in bringing these two priorities together, and directing investment to support both outcomes.”

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