Research - JULY 28, 2017

Asia: The next tech frontier

by Alex Frew McMillan

This current spate of technological innovation, called the Fourth Industrial Revolution, is very clear in the structure of the markets. In 2006, the largest six components of the S&P 500 by market capitalization were Exxon Mobil Corp., General Electric Corp., Microsoft Corp., Citigroup, BP and Royal Dutch Shell. Among them, only Microsoft was a “tech company” in the traditional sense.

The S&P 500’s six largest constituents now are Apple, Google’s parent Alphabet, Microsoft, Inc., Exxon Mobil and Facebook Inc. Only the oil company belongs to the traditional working world of factories and heavy industry.

Asia has had less of a tech explosion so far, at least at the top of its markets. But it has already veered well away from manufacturing, a seismic shock in a region typically seen as the “world’s factory.”

The world’s ATM is more like it. The largest companies in the region are mostly financial. The top 10, as of the end of first quarter 2017, are: Samsung Electronics Co., Toyota Motor Corp., Commonwealth Bank of Australia, Westpac Banking Corp., Mitsubishi UFJ Financial Group, AIA Group, the Australia and New Zealand Banking Group, National Australia Bank, SoftBank Group Corp., and BHP Billiton.

Only Japan’s SoftBank is an outright tech company, and it is increasingly active as a private-equity investor, much like Warren Buffett’s Berkshire Hathaway. On May 20, SoftBank’s Vision Fund held a first close on more than $93 billion to invest in tech start-ups across the world, with backing from sovereign wealth funds in both Saudi Arabia and Abu Dhabi, as well as U.S. tech companies such as Apple and Qualcomm Technologies.

One of Softbank’s focuses is India, and it is also a big backer of Didi Chuxing Co., the Chinese ride-sharing service. That suggests the tech industry will gradually become as influential in Asia as it already is in the United States.

In the real estate sector, only a few companies have adjusted to the “new normal,” believes Jonathan Hannam, co-founder and managing director of Sydney-based investment manager Taronga Group.


This excerpt is from an article in the July/August issue of Institutional Real Estate Asia Pacific. For more information on this magazine or to sign up for a trial subscription, click here.


Alex Frew McMillan is a freelance writer based in Hong Kong.

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