COVID-19 has fast-tracked internet adoption in Southeast Asia, similar to how the SARS1 outbreak catalyzed digitalization in China more than 10 years ago. Conditions have been ripe for Southeast Asia’s e-transformation. Young and mobile-first populations, improving communication networks and affordable smartphones are among factors that have powered internet services in the region.
We see immense potential in Southeast Asia’s internet economy. Amid rapid innovation across the board, three areas stand out to us for the secular growth opportunities they offer.
- E-commerce: The industry remains underpenetrated despite soaring sales. The proliferation of different business models has created scope for even traditional small businesses to participate in digitalization.
- Financial technology (fintech): Underbanked and cash-reliant populations have reeled in an array of fintech companies. Many offer e-wallets as a gateway to access a wider suite of financial products.
- Gaming: Successful games have found a global audience. Games are also evolving into social forums integrating chat functions and more modes of entertainment to boost user engagement and monetization potential.
Upcoming listings of fast-growing companies in these fields are likely to revitalize Southeast Asia’s equity markets, whose old-economy focus has come under the shadow of North Asia’s new-economy tilt. These listings could also offer diversification from widely held Chinese internet names. We believe that active investors like us, who can blend insights from North Asia’s internet journey with perspectives from our Southeast Asian research teams to analyze distinct local trends, could gain an edge in identifying the best opportunities in the making.
Severe acute respiratory syndrome.