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

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

Siddiqui, Denmark | Reuters

By 2050, India and China’s stock market capitalization could quadruple as Asia moves from “laggard to leader” in the climate transition. Abden CEO Stephen Bird.

In a letter seen by CNBC marking the 30th anniversary of the British investment firm opening its first Asian office in Singapore, Bird praised the economic transformation of the past 30 years that has lifted more than a billion people out of poverty.

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

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

“The next 30 years look as exciting as the last,” he added, advising investors to stay calm during volatility and “focus on the long-term game.”

China’s stock market has had a bleak year President Xi Jinping’s ‘zero-coronavirus’ strategy stifles economic activity And lead to supply chain bottlenecks spread to the global market.

Goldman Sachs Analysts recently said that they are “See the light at the end of the tunnel” Bird supports the long-term view that Asian equities can go from “laggards to leaders” in terms of performance and their role in tackling the climate crisis.

“China and India are projected to become the world’s largest and third largest economies respectively over the next decade, while their consumers will increasingly determine global tastes and trends. The capitalization of their stock markets by 2050 is also likely to quadruple or more,” Bird predicted.

“Other countries in the region also offer exciting opportunities. Bangladesh, Indonesia and Vietnam have some of the highest potential growth rates in the world, while aging populations in Japan and South Korea have accumulated significant savings and need for better jobs 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 was unlikely to be linear, that the globalization that fueled growth in Asia was in danger of failing, and that climate change posed a “serious challenge” to the region.

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

Bird 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 major economies in the region have adopted net-zero emissions targets, and Asia is also playing a role in developing technological solutions to combat climate change.

“Whether it’s solar panels, electric car batteries or green hydrogen, decarbonization depends on innovation in Asia,” Bird said.

Abrdn – which manages around £464 billion ($586.35 billion) in assets as of recent performance – observes that local investor interest in sustainable investing is also on the rise, while active engagement between asset managers and companies creates potential Opportunities for new forms of “sustainability-linked loans and bonds”.

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Bird, who took over Abrdn in September 2020 after 21 years at Citigroup’s Asia and Latin America operations, urged Asian governments to strengthen the credibility of their net-zero commitments and provide investors with better opportunities to allocate capital to the region. big guarantee.

“More countries should follow China’s lead and establish carbon pricing, which will bring certainty and encourage investment in low-carbon technologies and infrastructure. The revenue generated can be recycled to ensure the zero-carbon transition is just one time away,” he said.

“We will also encourage greater use of specialized climate-related instruments such as green bonds; this will help align the interests of capital market participants, while increased issuance will also encourage portfolio diversification.”

The continent’s political, trade and economic forums should be an opportunity to harmonize climate and sustainability standards, Bird said, showing that a common framework across the continent can enhance financial flows into Asia.

“This century is the century of Asia. It must also be the century of the alignment of economic goals with the SDGs,” Bird concluded. “The financial industry can and must play a key role in merging these two priorities, directing investment to support both outcomes.”