Most Asean fund managers avoiding new economy firms

Uncertainty over future returns, growth prospects among factors

- Angela Tan

Most Asean equity fund managers are cautious about putting money in new economy companies that have sprouted in South-east Asia from changing consumer behaviour as a result of digitalisation.

Portfolios today are still dominated by well-established, money-making old economy stocks of banks, industrial conglomerates and telecommunications providers instead of younger companies in ecommerce, digital entertainment and online ride-hailing.

A few fund managers have capitalised on early investments in such stocks like Sea, Grab and GoTo Gojek Tokopedia, but most have opted for a more conservative approach, avoiding these high-risk sectors altogether, said analyst Hunter Beaudoin at Morningstar Manager Research Services Asia.

These nascent firms offer much higher growth prospects and access to innovative technologies than their traditional rivals in the region, but their risks cannot be overlooked, the analyst said.

"Most of them are not yet profitable, or are companies that have just turned profitable. These types of companies' future shareholder returns can be uncertain as the long-term viability of their business models remains unproven," Mr Beaudoin told The Straits Times.

In the second quarter ended June 30, GoTo, Indonesia's biggest tech company, remained in the red with an underlying loss of 70 billion rupiah (S$5.8 million).

Mr Etta Putra, a Maybank analyst, said operating loss caused by high discounts and marketing expenses is a structural risk for GoTo.

Singapore-based Grab has also continued to bleed with a loss of US$53 million (S$69 million) in the quarter ended June 30.

Sea, another Singapore-headquartered firm, which owns e-commerce platform Shopee, beat its rivals to profitability after posting a net income of US$163 million in 2023, from a loss of US$1.66 billion in 2022.