New 'magnets' help Asia attract investment.

In early October, following a tour of several Asian countries including Singapore, China, and Japan, Henry H. McVey, Chief Investment Officer of KKR, stated that Asia's current investment attraction advantage is no longer cheap labor, but rather industrial services including logistics, waste management, and data centers.

Employees at a warehouse of Cainiao, Alibaba's logistics unit, in Jiangsu, China.

According to a KKR report, approximately 20% of the company's investments have been in Asia over the past two years. KKR believes that investment efforts in infrastructure and logistics in Asia could accelerate, and even increase significantly in key markets such as India, China, Indonesia, the Philippines, Vietnam, and Japan.

Japan

After several decades of slow growth, Japan has recently become a hot spot attracting international investors, especially in the context of foreign investment shifting away from the Chinese market.

In early 2022, Japan witnessed a major investment deal when KKR acquired a Mitsubishi-backed real estate management company for $2 billion. In March, KKR announced the completion of its acquisition of Hitachi Transport System, a logistics company primarily serving supply chains, now renamed Logisteed. Around the same time, KKR launched its first hotel investment in Japan by acquiring the luxury Hyatt Regency Tokyo hotel from Odakyu Electric Railway Company, as part of a deal with leading real estate private equity firm Gaw Capital Partners.

Last April, American billionaire Warren Buffett visited Japan to announce additional investments in major companies in the country.

In an interview with CNBC on October 5th, Henry H. McVey stated that the Japanese market is witnessing significant investments in automation and industrialization. This was clearly demonstrated in Japanese Prime Minister Fumio Kishida's speech in New York in September, where he mentioned that Japan's domestic investment would break records, exceeding 100 trillion yen (US$673.58 billion) in 2023. McVey expects this increased investment to help Japan escape deflation.

In addition, another trend that is also growing in Japan is corporate reform to promote shareholder returns.

Robots work alongside humans on a production line in Japan.

India

KKR’s report suggests that India will also be a major investment destination in Asia. In just the last four years, public investment disbursements in India have increased by 200% and exports have increased significantly.

Infrastructure investments in India have helped boost productivity, while also supporting reduced inflation and economic growth. Furthermore, in emerging markets, opportunities for the private sector to benefit from rising GDP per capita are often more readily accessible than for capital markets.

China

According to a KKR report, China's economy is undergoing changes amid a shrinking real estate sector and economic growth appearing to be "bottoming out." However, KKR maintains its forecast for China's GDP growth in 2024 at 4.5% and inflation at 1.9%. In July, KKR announced it had invested approximately $6 billion in China.

McVey stated that a transformation is underway in China, where the country's digital economy and decarbonization efforts may only account for 20% of GDP currently, but are growing at nearly 40% annually. Furthermore, future investment opportunities and trends, such as those in the automation sector, will also take time to materialize.

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