This article first appeared in The Edge Malaysia Weekly on February 3, 2025 - February 9, 2025

ASIA South is primed for greater investments and performance, says US-headquartered banking group Citi, which is investing aggressively in this region. The Asia South region refers to Asean countries as well as India, Sri Lanka and Bangladesh.

“They are one of, if not the brightest spots in the world today, and this will only increase in the coming years,” says Amol Gupte, Citi’s head of Asia South. He was speaking at a recent outlook briefing on the region.

Asia South accounts for about 7% of Citi’s global revenues. It is, interestingly, the fastest-growing geography for the banking group.

One of the reasons Citi is investing heavily in this region is its “remarkable resilience” amid global uncertainties, says Gupte. India, for example, is projected to achieve continued economic growth of over 6% this year, while that of most Asean countries is seen in the 5% to 6% range.

“The strong performance underscores the region’s potential for continued expansion in trade finance, driven by supply chain diversification efforts, the digital economy, and the rising prominence of sustainable and transition financing. [These] play into what we are good at,” he says.

Gupte notes that there are also new or emerging trade corridors in the region. “New corridors we see include Latin America and the Middle East investing in Asean, as well as the Middle East and the United Arab Emirates investing in India,” he says.

Cumulative foreign direct investment flows between Asia and the Middle East are expected to reach over US$270 billion (RM1.2 trillion) over the next 10 years, up from less than US$140 billion in the previous decade. “We expect goods traded between these two geographies to go beyond oil and energy, and into other areas,” says Gupte.

Asia South houses around 2.5 billion people — almost a third of the world’s population — with India alone accounting for more than half of that. It’s a relatively young population, which means that a large proportion of the consumer base is “digitally native”, says Gupte, pointing to the digital and e-commerce boom in the region.

“We are seeing huge innovation, growth and continued opportunities across a variety of sectors, including health, e-­commerce, online media, transport, food, travel and financial services. At the same time, globally, investment into digital and artificial intelligence (AI) infrastructure such as data centres, energy and semiconductors is a long-term structural force, and these geographies are benefiting.

“I visited Penang late last year and was able to see first-hand the massive investment global companies are making into both chips and data centres there.”

Asean should stand to benefit from new opportunities, says Gupte, despite trade tensions and a host of uncertainties, including on tariffs, under the Donald Trump administration in the US.

“We don’t know how it’s going to play out, whether it’s a negotiation [tool] or whether there’s going to be actual tariffs. What we know for sure is that there is going to be uncertainty,” he says, when asked about tariffs.

 On Jan 22, Trump said he was mulling over a 10% across-the-board tariff on all Chinese goods starting from as early as Feb 1. Last week, he said that he would impose tariffs on imports of computer chips, pharmaceuticals, steel, aluminium and copper. He also confirmed a 25% tariff on imports from Canada and Mexico which will take effect on Feb 1, but was uncertain as to whether crude oil would be included. 

A trade war won’t mean that the world will deglobalise; it just means that flows will shift, Gupte opines. He adds: “As things shift, there will be new opportunities. And in those new opportunities, as it pertains to Southeast Asia, Singapore plays a pivotal role [as] it is central to a lot of the financial activity that happens. So, Singapore serves as a place a lot of companies will use to raise capital, raise funding, reside their treasuries, their corporate head offices.”

Citi will have an important role to play as flows move in and out of Southeast Asia, he says. The group, which is present in over 95 markets globally and does business through 180, moves volumes of close to US$5 trillion daily for clients.

Meanwhile, Jan Metzger — Citi’s head of investment banking for Japan, Asia North and Australia as well as Asia South — expects last year’s steady mergers and acquisitions (M&A) momentum in Asia-Pacific to continue into 2025.

“In terms of sectors, activity in 2025 will continue to primarily be driven by the technology, media and telecom sectors, and within that, digital infrastructure like data centres and fibre will continue to grow. In the healthcare and consumer sectors, there is going to be a lot of activity and we are excited to see the growth of Asian consumer brands. Sponsor activity is expected to take off this year — we have built up a large pipeline,” he states.

As for Malaysia, he says: “I do think you’re going to see some kind of deals in terms of some unicorns being consolidated into larger firms. I also think that in Malaysia, you will see some consumer and TMT (technology, media and telecommunications) deals.” He did not elaborate.

Last year, the M&A deal volume in Asia-­Pacific was up by 7%, with Australia and South Korea accounting for the bulk of activity. In Asean, it was also up by 7%, according to Metzger. 

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