This article first appeared in The Edge Financial Daily on March 28, 2018 - April 3, 2018

KUALA LUMPUR: Maybank Kim Eng said the rise of China and new technology will be key forces driving the biggest change in Asean in the next decade.

The Maybank investment banking arm said between 2006 and 2016, China’s outward investments into Asean had risen a compounded annual growth rate (CAGR) of 45% from US$1.8 billion (RM7 billion) to US$71.6 billion.

This makes it the third-largest foreign direct investment contributor to Asean, Maybank Kim Eng said in a statement issued in conjunction with the bank’s Invest Asean conference in Singapore.

“Last year, China strengthened its commitment to the One Belt, One Road Initiative (BRI) by pledging an additional US$124 billion. Given China’s high savings rate and its push to strengthen regional connectivity via the BRI, the capital flows to Asean will continue increasing and accelerating in the next few years,” it said.

Maybank Kim Eng added that Asean accounts for the largest share of Chinese investments in mergers and acquisitions (M&As), making up about 30% of the total M&A investment in Belt and Road countries for 2005 to 2016.

The bank also said new and disruptive technology impacts almost every industry, propelling the growth of technology start-ups in Asean.

Maybank Kim Eng chief executive officer Datuk John Chong (pic)  said he believes the technology environment in Asean is still at an early phase of growth despite the disruption in the marketplace.

“The majority of Asean’s technology deals in recent past are still at the seed-stage, and while e-commerce is growing rapidly in Asean, the penetration rate remains relatively low at between 2% and 5% compared with more established markets like China (19%), South Korea (20%) and the US (10%).

“E-commerce transactions will likely grow exponentially in Asean, driven by innovations in e-payments and technology platforms,” Chong said.

In addition, the bank has observed the technology sector is also increasingly attracting more China M&A investments in recent years, reflecting the rapid offshore expansion of China’s emerging technology titans.

“Based on Maybank Kim Eng’s research, the IT (information technology) communications sector attracted the largest share of China’s M&A investments in BRI countries in 2016,” it said.

Chong said for Maybank Kim Eng, the dual rise of China and technology presents new opportunities. “For instance, we are looking into how we are able to provide access and open up channels for our clients to participate in this growth. We are also keen to capture the financing opportunities, particularly for infrastructure projects,” he said.