Conference sponsors were Dragon Capital; smartKYC; BB Bellevue Asset Management; ETF Securities; Lyxor, and Pulse.

A theme of the panel discussion was how an up-and-coming country such as Vietnam, once associated with geopolitical strife, has become an important economy in the ranks of “frontier” markets and requires close attention to detail from interested investors.

Dragon Capital’s Scriven spoke of how the Southeast Asia region is starting to see the kind of economic integration that is a market of progress, and he picked the example of air travel to make the point. 

“What I have noticed, for example, is the integration of air travel. It is now possible to fly from secondary to secondary cities in Europe and you can see this starting to happen in the ASEAN region,” Scriven said. 

As far as Vietnam is concerned, Scriven said attention to local cultural, legal and social factors is essential for investors to make money in the long term. In particular, he said due diligence checks takes a high priority and can never stop. Due diligence is “like painting a bridge…you finish it and the you have to go back and start all over again,” he said. “Diligence is about awareness of risk….in a way you have to embrace the risk and learn how to mitigate it. If we wanted to avoid risk we wouldn’t be there!”
 
Scriven, warming to his theme of attention to local factors, gave the example of the importance of women in economies such as Vietnam. He said there is an “extremely high role of women in business” and noted that there is a wide diversity of opinion going into business decision-making. 

To run portfolios of investments in countries such as Vietnam is a labour-intensive task, Scriven said: ““We run just over $1 billion of assets under management and have about 100 people; we need to do a lot of in-house work.”
 
In general, Scriven said that Vietnam had a difficult period in the global financial crisis but it is well positioned to accelerate, he said. “The Asian financial crisis do play games and they can make it very clear they are the dominant power in Asia,” Paris said.
 
“You can agree that Vietnam is the new Guangdong in Asia but its potential is not all about cheap labour,” Paris continued. 

Asked about risks of emerging/frontier markets losing steam, such as if China or another big economy suffers a chill, Paris was sanguine: “I am not worrying about frontier markets stalling…I am more concerned about some of the mature emerging markets.”
 

One issue that arose, the panel heard, is how countries beat the “middle income trap” of when, after a period of rapid growth, a country stalls and fails to create the kind of middle class and mass market necessary for further growth. 

Paris referred to the example of Singapore as having beaten the “middle income” trap by its focus on developing in areas such as financial services and value-add services. “Singapore is cleverly turning itself into the Switzerland of Asia,” he said. There is great potential in countries such as Indonesia, he said, but "what they don’t yet have is the infrastructure. If the new Indonesia government gets it right, then it is a very exciting opportunity.”

NS Partners’ Ian Beattie also spoke on this “trap” point: “All countries have to get through their `middle income’ trap.” He referred to how some countries, after a period of rapid growth, can hit a ceiling when they reach about $10,000-16,000 income per capita and will need better quality institutions and other reforms to move beyond. “Whilst some get stuck here (Argentina, Russia) many successfully navigate this phase,” he said, giving the cases of the UK, Germany and Singapore. “Singapore is a textbook case of how to do this started life as a small trade deal amongst a handful of small pacific countries (Chile, New Zealand, Brunei and Singapore). Now, it’s a massive network of deals forming a super-regional trade deal encompassing 40 per cent of world GDP – and that's before China gets in,” he said. Vietnam is by far the largest beneficiary of the TPP, he said.

“For most people and most countries the constraints on trade are a drag. It's vested interests that oppose freer trade. It became pacific wide by 2025,” he said.

 
DeAWM’s Beal was asked by the panel chairman as to how are Asian and other emerging markets performing. He said performance among emerging markets has been one of underperformance against global equities. “Within that, there has been significant divergence within regional markets,” he said.

“Regionally, Asia has outperformed Latin America and Eastern Europe. The story of performance has been essentially about that of Asia,” Beal said.
 
“We have seen underperformance in resources and commodities,” he said, referring to how weaker prices for commodities such as oil have affected exporter nations (such as Indonesia). 
 
“They slowdown has tended to point to is a fall-off in investment…the China story is a copy of what we have seen in other markets: high investment, property bubbles. ….only when there is a better quality of investment is that environment improving,” Beal said.
 
Asked what has changed since the 1997-98 financial crisis in Asia, Beal said the “significant difference is that, on the whole, Asia is a net creditor to the rest of the world and has huge foreign exchange reserves. There is a huge and growing domestic pool of savings. These markets are not reliant on our capital any more and that is a significant difference.”

Capital markets have become more sophisticated; there has been some disintermediation of the banking industry since 1997-98, Beal added.