Indian and Chinese stock markets could quadruple by 2050, says Abrn CEO

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

Danish Siddiqui | Reuters

According to Stephen Bird, CEO of Abrn, Indian and Chinese market capitalization could quadruple by 2050 as Asia moves from “lagging behind to leading” in the climate transition.

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

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

“Capital markets have also evolved and the region has moved from being a destination primarily for foreign investors to one where local investors dominate its markets,” Bird said.

He added that “the next 30 years promise to be just as exciting as the previous ones” and advised investors to remain calm during periods of volatility, keeping an “eye on the long term”.

Chinese stocks had a killer year as President Xi Jinping’s “zero-Covid” strategy stifled economic activity and caused supply chain bottlenecks that spilled over into global markets.

Goldman Sachs analysts recently said they “see light at the end of the tunnel,” and Bird backed the long-term view that Asian stocks can go from “laggards to leaders,” in terms of performance and growth. their role in the fight against the climate. crisis.

“China and India are set to become the world’s largest and third largest economies, respectively, over the next decade, as their consumers increasingly dictate global tastes and trends. The capitalization of their stock markets could also increase fourfold or more by 2050,” Bird predicted.

“Other countries in the region also present attractive opportunities. Bangladesh, Indonesia and Vietnam have some of the highest potential growth rates in the world, while the aging populations of Japan and South Korea have accumulated significant economies that need to be better leveraged. And, as the most open global financial center in the region, Singapore will be at the heart of it all.”

However, Bird acknowledged that progress is unlikely to be linear, with the globalization that has driven Asia’s economic growth at risk of stalling and climate change posing an “acute challenge” for the region.

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

While Asia cannot solve the climate crisis alone, its major economies must find ways to decouple their economic growth from fossil fuels, Bird suggested. Most 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 vehicles or green hydrogen, decarbonization depends on Asian innovation,” Bird said.

Abrdn – which has around £464 billion ($586.35 billion) in assets under management according to the most recent results – observed that interest in sustainable investing among local investors is also on the rise, as well as active engagement between asset managers and companies, creating potential opportunities for new forms of ‘sustainability related loans and bonds’.

To take part

Bird – who took the helm at Abrdn in September 2020 after a 21-year career with Citigroup’s Asian and Latin American operations – urged Asian governments to bolster the credibility of their net zero commitments, offering investors a greater security in the allocation of capital to the region.

“More countries should follow China’s lead and establish carbon pricing that would provide certainty and encourage investment in low-carbon technology and infrastructure. The revenue generated could be recycled to ensure that the zero transition carbon is fair,” he said.

“We would also encourage greater use of climate-dedicated instruments such as green bonds; this would help align the interests of capital market players while increased issuance would also encourage portfolio diversification.”

The continent’s political, trade and economic forums should provide an opportunity to harmonize climate and sustainability standards, Bird said, suggesting that a common continent-wide framework could boost financial flows to Asia.

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

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