Thought for the day

What Percent of Your Portfolio Should be Asian?
Which Asian countries can be regarded as reasonably safe havens for investors?


 
Last updated: 9 September 2024
 
As noted in our reviews of Asian Governance and GDP Data Quality, Asian GDP is bigger than that of Europe, the Americas and Africa combined. Asia accounts for well over half of global GDP. And Asian GDP growth has accounted for almost 70% of global growth over the past decade. So, one might assume Asia should comprise over half of a global investment portfolio, by value...

This Thought, (the third in our Asian Portfolio series) reviews which Asian countries remain as candidates for investment, after removing those with poor Governance and GDP Data Quality problems. The answer thrown up by this analysis is that Asia should probably occupy a much smaller percent of investment than the 50%+ suggested by size and growth alone. The problem with Asia is that this vast geographical space (however defined) includes many countries you probably wouldn't want to live or work in, and on whose data you cannot rely.

The table below shows those Asian countries with both reasonable GDP Data Quality and reasonable Governance. All Asian countries not meeting the World Economics thresholds for Governance and Data Quality have been removed. Only 43% of Asian countries remain in the list. And many of the larger Asian countries have been removed including China, Bangladesh, Pakistan, Philippines, Russia, and Vietnam.

Asian countries with believable GDP data and good Governance
What Percent of Your Portfolio Should be Asian? - Which Asian countries can be regarded as reasonably safe havens for investors?


Data source: World Economics

Note: World Economics measures GDP in GDP Purchasing Power Parity terms, with added estimates for the size of the Informal economy, and adjustments for outdated GDP base years


The Asian countries in this table with reasonable Data Quality and Governance add up to 21% of Global GDP, which probably represents a more reasonable percentage of a Global portfolio to devote to Asian securities. But even this estimate may be too high. The remaining countries in the table include Taiwan, just 100 miles from China, which claims ownership. Hong Kong which is now essentially an integral part of China. South Korea, contiguous with North Korea, and run by a dictator with nuclear weapons. Not to mention India and Indonesia, both only just over the D-E line in terms of Governance.

The answer is, Asia really is bigger and faster growing than any other continent, but also a much riskier place in which to invest. Caveat Emptor!

More for subscribers:  
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See full GDP Data Quality Ratings...
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