New 'magnets' help Asia attract investment

In early October, after a tour of several countries in Asia including Singapore, China and Japan, Mr. Henry H. McVey, Chief Investment Officer of KKR, said that the current investment attraction advantage of the Asia region is no longer cheap labor but industrial services including logistics, waste management and data centers.

Employees at a warehouse of Cainiao, Alibaba's logistics unit, in Jiangsu, China.

According to KKR's report, in the past two years, about 20% of the company's investments were in the Asian region. KKR believes that investment efforts in infrastructure and logistics in the Asian region can accelerate, even increase significantly in key markets such as India, China, Indonesia, the Philippines, Vietnam and Japan.

Japan

After decades of slow growth, Japan has recently become a hot spot for international investors, especially as foreign investment shifts away from the Chinese market.

Japan saw a high-profile investment deal in early 2022 when KKR acquired a Mitsubishi-backed real estate management company for $2 billion. In March, KKR announced that it had completed the acquisition of Hitachi Transport System, a logistics company focused on supply chains and now renamed Logisteed. Meanwhile, KKR made its first hotel investment in Japan by acquiring the luxury Hyatt Regency Tokyo from Odakyu Electric Railway Company as part of a deal with leading real estate private equity firm Gaw Capital Partners.

Last April, American billionaire Warren Buffett visited Japan to announce additional investments in major companies in the country.

In an interview with CNBC on October 5, Mr. Henry H. McVey said that the Japanese market is witnessing large investments in the fields of automation and industrialization. This was clearly shown in the speech in September by Japanese Prime Minister Fumio Kishida in New York (USA) when he mentioned that Japan's domestic investment will break a record of more than 100 trillion yen (673.58 billion USD) in 2023. Mr. McVey expects the increased investment capital to help Japan escape deflation.

In addition, another trend that is also growing in Japan is corporate reform to promote shareholder returns.

Robots work alongside humans on a production line in Japan.

India

KKR’s report suggests that India will also be a major investment destination in Asia. In just the last four years, India’s public investment disbursements have increased by 200% and exports have increased significantly.

Infrastructure investments in India have helped boost productivity, while supporting lower inflation and economic growth. Moreover, in emerging markets, opportunities for the private sector to benefit from rising GDP per capita growth trends are often more accessible than in capital markets.

China

China’s economy is changing amid a shrinking real estate sector and what appears to be “bottoming out” economic growth, KKR said in a report. However, KKR maintained its forecast for China’s GDP growth in 2024 at 4.5% and inflation at 1.9%. KKR said in July it had invested about $6 billion in China.

A transition is underway in China, where the country’s digital economy and decarbonization efforts may only account for 20% of GDP today, but are growing at nearly 40% a year, McVey said. Furthermore, future investment opportunities and trends such as those in automation will take time to materialize.

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