Even during a period of slowing global growth elsewhere, the Asean economy – the Association of South-East Asian Nations – has averaged expansion of 4.6 per cent a year. Only China and India beat that.
Asean countries offer relative economic stability, a rising middle-aged population, urbanisation and increasing domestic financial participation. Trade is also being diverted there because of China-US tensions. But less recognised is the region’s rapid digital evolution.
Asean has its USD1 billion unicorns, but is also awash in start-ups. Southeast Asia’s internet economy is forecast by Google, Temasek and Bain to grow from USD32 billion in 2015 to USD300 billion by 2025.
E-commerce, ride-hailing, internet gaming, online travel and financial technology are growing quickly, thanks to high rates of mobile-phone penetration and improving mobile infrastructure. Asean’s transformation ranges from retail to transportation to financial services.
Financial technology there has focused on e-wallets and payments, but cash accounts for the vast majority of transactions in much of the region, and many people lack access to basic banking services.
Only a quarter of adults in Southeast Asia enjoy full banking services. Another quarter just have a bank account while half remain unbanked. But, in a digital era, payments, remittance, lending, investment and insurance could be transformed.
Digital wallets are already adding financial products and many fintech companies have ambitions to move beyond payments into other banking services.
Southeast Asia’s internet economy is substantially smaller than that of more-advanced markets, but it is catching up fast. Digital payments could exceed USD1 trillion by 2025, and account for most consumer transactions by value.
The heart of the digital economy is data. Rising internet availability, cheap smartphones and technological advances have fuelled data growth. The proportion of customers in the Philippines with 3G and 4G, for instance, has more than doubled to 85 per cent since 2014.
Although still low, Asean internet penetration is rising rapidly as mobile broadband connections surge. Southeast Asia has more than 400m internet users – 63 per cent of the population – but that still gives substantial scope for increase.
While Singapore has high average mobile internet connection speeds, other Asean countries lag far behind. Many still require investment in infrastructure and ecosystems to support growing data usage and the region’s average digital skills rank is only 26 in the World Economic Forum’s global competitiveness report – well below the midpoint of 71. The region lags in R&D; barring Singapore, it registers few patents and trademarks.
It isn’t surprising then that Singapore has emerged as a hub of innovation, with a thriving start-up scene and substantial government support. Several companies use it as a home base to access other markets in the region.
However, don’t count out the rest of Asean. Indeed, Indonesia is the largest internet economy by sales, followed by Thailand, then Singapore and Vietnam with Malaysia close behind, while the Philippines is smallest. Indonesia, Vietnam and the Philippines are likely to have the highest growth rates in the region.
Some of the most exciting technological and business-model innovation is taking place in the least developed economies. Financial technology in particular holds promise for the region’s large number of people who lack access to basic banking services.
Would you like to find out more? Click here to read the full report (you must be a subscriber to HSBC Global Research).
Disclosure and disclaimerMore, collapsed
The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s) whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the covering analyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) or issuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and any other views or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Colin Davis, CFA,
Equities: Stock ratings and basis for financial analysis
HSBC and its affiliates, including the issuer of this report (“HSBC”) believes an investor's decision to buy or sell a stock should depend on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations and that investors utilise various disciplines and investment horizons when making investment decisions. Ratings should not be used or relied on in isolation as investment advice. Different securities firms use a variety of ratings terms as well as different rating systems to describe their recommendations and therefore investors should carefully read the definitions of the ratings used in each research report. Further, investors should carefully read the entire research report and not infer its contents from the rating because research reports contain more complete information concerning the analysts' views and the basis for the rating.
From 23rd March 2015 HSBC has assigned ratings on the following basis:
The target price is based on the analyst’s assessment of the stock’s actual current value, although we expect it to take six to 12 months for the market price to reflect this. When the target price is more than 20 per cent above the current share price, the stock will be classified as a Buy; when it is between 5 per cent and 20 per cent above the current share price, the stock may be classified as a Buy or a Hold; when it is between 5 per cent below and 5 per cent above the current share price, the stock will be classified as a Hold; when it is between 5 per cent and 20 per cent below the current share price, the stock may be classified as a Hold or a Reduce; and when it is more than 20 per cent below the current share price, the stock will be classified as a Reduce.
Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation or resumption of coverage, change in target price or estimates).
Upside/Downside is the percentage difference between the target price and the share price.
Prior to this date, HSBC’s rating structure was applied on the following basis:
For each stock we set a required rate of return calculated from the cost of equity for that stock’s domestic or, as appropriate, regional market established by our strategy team. The target price for a stock represented the value the analyst expected the stock to reach over our performance horizon. The performance horizon was 12 months. For a stock to be classified as Overweight, the potential return, which equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated, had to exceed the required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock was expected to underperform its required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage points for a stock classified as Volatile*). Stocks between these bands were classified as Neutral.
*A stock was classified as volatile if its historical volatility had exceeded 40 per cent, if the stock had been listed for less than 12 months (unless it was in an industry or sector where volatility is low) or if the analyst expected significant volatility. However, stocks which we did not consider volatile may in fact also have behaved in such a way. Historical volatility was defined as the past month's average of the daily 365-day moving average volatilities. In order to avoid misleadingly frequent changes in rating, however, volatility had to move 2.5 percentage points past the 40 per cent benchmark in either direction for a stock's status to change.
Rating distribution for long-term investment opportunities
As of 24 October 2019, the distribution of all independent ratings published by HSBC is as follows:
Buy 52 per cent (31 per cent of these provided with Investment Banking Services)
Hold 39 per cent (32 per cent of these provided with Investment Banking Services)
Sell 9 per cent (20 per cent of these provided with Investment Banking Services)
For the purposes of the distribution above the following mapping structure is used during the transition from the previous to current rating models: under our previous model, Overweight = Buy, Neutral = Hold and Underweight = Sell; under our current model Buy = Buy, Hold = Hold and Reduce = Sell. For rating definitions under both models, please see “Stock ratings and basis for financial analysis” above.
For the distribution of non-independent ratings published by HSBC, please see the disclosure page available at http://www.hsbcnet.com/gbm/financial-regulation/investment-recommendations-disclosures.
To view a list of all the independent fundamental ratings disseminated by HSBC during the preceding 12-month period, please use the following links to access the disclosure page:
Clients of Global Research and Global Banking and Markets: www.research.hsbc.com/A/Disclosures
Clients of HSBC Private Banking: www.research.privatebank.hsbc.com/Disclosures
HSBC and its affiliates will from time to time sell to and buy from customers the securities/instruments, both equity and debt (including derivatives) of companies covered in HSBC Research on a principal or agency basis or act as a market maker or liquidity provider in the securities/instruments mentioned in this report.
Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment banking, sales & trading, and principal trading revenues.
Whether, or in what time frame, an update of this analysis will be published is not determined in advance.
Non-U.S. analysts may not be associated persons of HSBC Securities (USA) Inc, and therefore may not be subject to FINRA Rule 2241 or FINRA Rule 2242 restrictions on communications with the subject company, public appearances and trading securities held by the analysts. Economic sanctions imposed by the EU and OFAC prohibit transacting or dealing in new debt or equity of Russian SSI entities.
This report does not constitute advice in relation to any securities issued by Russian SSI entities on or after July 16 2014 and as such, this report should not be construed as an inducement to transact in any sanctioned securities.
For disclosures in respect of any company mentioned in this report, please see the most recently published report on that company available at www.hsbcnet.com/research. HSBC Private Banking clients should contact their Relationship Manager for queries regarding other research reports. In order to find out more about the proprietary models used to produce this report, please contact the authoring analyst.
- This report is dated as at 24 October 2019.
- All market data included in this report are dated as at close 22 October 2019, unless a different date and/or a specific time of day is indicated in the report.
- HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier procedures are in place between the Investment Banking, Principal Trading, and Research businesses to ensure that any confidential and/or price sensitive information is handled in an appropriate manner.
- You are not permitted to use, for reference, any data in this document for the purpose of (i) determining the interest payable, or other sums due, under loan agreements or under other financial contracts or instruments, (ii) determining the price at which a financial instrument may be bought or sold or traded or redeemed, or the value of a financial instrument, and/or (iii) measuring the performance of a financial instrument.
Production & distribution disclosures
- This report was produced and signed off by the author on 24 Oct 2019 08:06 GMT.
- In order to see when this report was first disseminated please see the disclosure page available at https://www.research.hsbc.com/R/34/WblmGjC
Legal entities as at 30 November 2017
‘UAE’ HSBC Bank Middle East Limited, Dubai; ‘HK’ The Hongkong and Shanghai Banking Corporation Limited, Hong Kong; ‘TW’ HSBC Securities (Taiwan) Corporation Limited; 'CA' HSBC Securities (Canada) Inc.; HSBC Bank, Paris Branch; HSBC France; ‘DE’ HSBC Trinkaus & Burkhardt AG, Düsseldorf; 000 HSBC Bank (RR), Moscow; ‘IN’ HSBC Securities and Capital Markets (India) Private Limited, Mumbai; ‘JP’ HSBC Securities (Japan) Limited, Tokyo; ‘EG’ HSBC Securities Egypt SAE, Cairo; ‘CN’ HSBC Investment Bank Asia Limited, Beijing Representative Office; The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Branch; HSBC Securities (South Africa) (Pty) Ltd, Johannesburg; HSBC Bank plc, London, Madrid, Milan, Stockholm, Tel Aviv; ‘US’ HSBC Securities (USA) Inc, New York; HSBC Yatirim Menkul Degerler AS, Istanbul; HSBC México, SA, Institución de Banca Múltiple, Grupo Financiero HSBC; HSBC Bank Australia Limited; HSBC Bank Argentina SA; HSBC Saudi Arabia Limited; The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch incorporated in Hong Kong SAR; The Hongkong and Shanghai Banking Corporation Limited, Bangkok Branch; PT Bank HSBC Indonesia; HSBC Qianhai Securities Limited
Issuer of report
The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch
21 Collyer Quay #03-01
This document has been issued by The Hongkong and Shanghai Banking Corporation Limited Singapore Branch (“HSBC”) for the information of its institutional customers or other persons specified in Sections 274 and 304 of the Securities and Futures Act (Chapter 289)(“SFA”) and accredited investors and other persons in accordance with the conditions specified in Sections 275 and 305 of the SFA. Only Economics or Currencies reports are intended for distribution to a person who is not an Accredited Investor, Expert Investor or Institutional Investor as defined in SFA. The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch accepts legal responsibility for the contents of reports pursuant to Regulation 32C(1)(d) of the Financial Advisers Regulations. The Hongkong and Shanghai Banking Corporation Limited Singapore Branch is regulated by the Monetary Authority of Singapore. Recipients in Singapore should contact a representative of “The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch” in respect of any matters arise from, or in connection with this report. Please refer to The Hongkong and Shanghai Banking Corporation Limited Singapore Branch’s website at www.business.hsbc.com.sg for contact details. The information and materials contained herein are provided “as is” without warranty of any kind, either express or implied. In particular, no warranty regarding the accuracy or fitness for a purpose is given in connection with such information and materials. This document does not have any regard to the specific investment objectives, financial situation and particular needs of any specific recipient. It is for information purposes only and is not intended to nor will it create or induce the creation of any binding legal relations. It does not constitute or form part of any offer or solicitation of any offer to buy or sell any securities. Independent advice should be sought before making any investments or entering into any transaction in relation to any securities mentioned herein. In no event will any member of the HSBC group be liable to the recipient for any direct or indirect or any other damages of any kind arising from or in connection with reliance on any information and materials herein. Members of the HSBC group and their associates, directors, officers and/or employees may have positions in, and may effect transactions in the securities or investment instruments covered herein, and may also perform or seek to perform broking, investment banking, corporate finance or other services for the issuers of the securities mentioned herein.
All enquiries by recipients in Hong Kong must be directed to your HSBC contact in Hong Kong. The Hongkong and Shanghai Banking Corporation Limited is regulated by the Hong Kong Monetary Authority. In Hong Kong it is for the information of its institutional and professional investor (as defined by Securities and Future Ordinance (Chapter 571)) customers only; it is not intended for and should not be distributed to retail customers in Hong Kong.
If it is received by a customer of an affiliate of HSBC, its provision to the recipient is subject to the terms of business in place between the recipient and such affiliate. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. HSBC has based this document on information obtained from sources it believes to be reliable but which it has not independently verified; HSBC makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness.
Expressions of opinion are those of the Research Division of HSBC only and are subject to change without notice. From time to time research analysts conduct site visits of covered issuers. HSBC policies prohibit research analysts from accepting payment or reimbursement for travel expenses from the issuer for such visits. HSBC and its affiliates and/or their officers, directors and employees may have positions in any securities mentioned in this document (or in any related investment) and may from time to time add to or dispose of any such securities (or investment). HSBC and its affiliates may act as market maker or have assumed an underwriting commitment in the securities of companies discussed in this document (or in related investments), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform investment banking or underwriting services for or relating to those companies. In Korea, this publication is distributed by either The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch (“HBAP SLS”) or The Hongkong and Shanghai Banking Corporation Limited, Seoul Branch (“HBAP SEL”) for the general information of professional investors specified in Article 9 of the Financial Investment Services and Capital Markets Act (“FSCMA”). This publication is not a prospectus as defined in the FSCMA. It may not be further distributed in whole or in part for any purpose. Both HBAP SLS and HBAP SEL are regulated by the Financial Services Commission and the Financial Supervisory Service of Korea.
HSBC Securities (USA) Inc. accepts responsibility for the content of this research report prepared by its non-US foreign affiliate. All US persons receiving and/or accessing this report and wishing to effect transactions in any security discussed herein should do so with HSBC Securities (USA) Inc. in the United States and not with its non-US foreign affiliate, the issuer of this report.
In the UK this report may only be distributed to persons of a kind described in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005. The protections afforded by the UK regulatory regime are available only to those dealing with a representative of HSBC Bank plc in the UK. In Australia, this publication has been distributed by The Hongkong and Shanghai Banking Corporation Limited (ABN 65 117 925 970, AFSL 301737) for the general information of its “wholesale” customers (as defined in the Corporations Act 2001). Where distributed to retail customers, this research is distributed by HSBC Bank Australia Limited (ABN 48 006 434 162, AFSL No. 232595). These respective entities make no representations that the products or services mentioned in this document are available to persons in Australia or are necessarily suitable for any particular person or appropriate in accordance with local law. No consideration has been given to the particular investment objectives, financial situation or particular needs of any recipient. This publication is distributed in New Zealand by The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch incorporated in Hong Kong SAR.
In Japan, this publication has been distributed by HSBC Securities (Japan) Limited. It may not be further distributed in whole or in part for any purpose.
In Canada, this document has been distributed by HSBC Securities (Canada) Inc. (member IIROC), and/or its affiliates. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offense.
If you are an HSBC Private Banking (“PB”) customer with approval for receipt of relevant research publications by an applicable HSBC legal entity, you are eligible to receive this publication. To be eligible to receive such publications, you must have agreed to the applicable HSBC entity’s terms and conditions (“KRC Terms”) for access to the KRC, and the terms and conditions of any other internet banking service offered by that HSBC entity through which you will access research publications using the KRC. Distribution of this publication is the sole responsibility of the HSBC entity with whom you have agreed the KRC Terms.
If you do not meet the aforementioned eligibility requirements please disregard this publication and, if you are a customer of PB, please notify your Relationship Manager. Receipt of research publications is strictly subject to the KRC Terms, which can be found at https://research.privatebank.hsbc.com/ – we draw your attention also to the provisions contained in the Important Notes section therein.
© Copyright 2019, The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch, ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of The Hongkong and Shanghai Banking Corporation Limited Singapore Branch. MCI (P) 065/01/2019, MCI (P) 008/02/2019