Thought for the day

What Percent of Your Portfolio Should be Asian?
A review of Asian Governance Ratings


 
Last updated: 6 September 2024
 
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, shouldn't Asia comprise 50%+ of your investments by value?

Probably not. The problem with Asia is that this vast geographical space (however defined) includes many countries you probably wouldn't want to live in, and on whose data, you cannot rely, This Thought reviews the role of Governance in deciding which parts of Asia are relatively safe places in which to invest. World Economics defines Governance using 4 Indexes: Rule of Law; Press Freedom; Political Rights; and Corruption.

Asian Country Governance Ratings
Ranked by governance rating group and country name. A= Very good, E= Very poor
What Percent of Your Portfolio Should be Asian? - A review of Asian Governance Ratings


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in GDP Purchasing Power Parity terms, with added estimates for the size of the Informal economy, and adjustments for outdated GDP base years


Unfortunately, 59% of countries feature in the D and E columns. Any country with E rated Governance is likely to be an unreliable place in which to invest, and a D Rating should give serious pause for thought (for more on this subject see Places for Investors to Avoid).

Tomorrow's Thought adds further insight on Asian countries to avoid, by analysing Asian GDP Data Quality Ratings. On the third day of this series, we bring both Governance and Data Quality Ratings Indexes together to review which Asian countries remain as candidates for serious investment, after removing those with poor Governance and Data Quality problems.

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