HONG KONG Fidelity International has had its eye on Taiwan Semiconductor Mfg. (TSMC), the world's largest contract chip manufacturer, for a long time.
According to U.S. research company S&P Capital IQ, Fidelity began boosting its holdings in TSMC in 2006 and now owns just under 1% of the company's outstanding shares. It is a move that mirrors Fidelity's -- and the larger investing world's -- growing excitement over opportunities in Asia.
Another sign of how much Asia's status with investors has risen over the past decade: Fidelity now has 50 analysts tracking non-Japanese Asian companies, up from 22 in 2006.
GROWING PRESENCE With the financial and business worlds increasingly turning their attention eastward, the Nikkei Asian Review is proud to announce the start of its Asia300 coverage, offering in-depth, comprehensive coverage of Asia's most promising companies. Asia300 brings our ASEAN100 and India40 services under one umbrella and adds to its businesses in China, Hong Kong, Taiwan and South Korea.
Back in 2007, when Citigroup was betting heavily on emerging markets, Microsoft and other U.S. corporations dominated global market capitalization rankings. But even then, Asian players were starting to gain ground. In the financial services sector, Industrial and Commercial Bank of China (ICBC) ranked second, while South Korea's Samsung Electronics placed second in the semiconductor industry.
The trend has gained momentum since the 2008 financial crisis. According to market cap rankings compiled by QUICK-FactSet for 20 industries, only 34 companies now on the Asia300 list were in the top 30 at the end of 2005. By October this year, that number had doubled to 68. And three areas -- durable consumer goods, energy and resources, and financial services -- each had seven Asia300 names among their top 30.
Corporate Asia as a whole has made a significant leap in the last decade. As of the end of October, 377 companies with market caps of $10 billion or more -- 31% of the world's total -- were from Asia, including Japan, and Oceania. And while that figure is still behind the U.S., which is home to 35% of such corporate giants, it is ahead of Europe, with 24%. Ten years ago, Asia's share was just 20%, lagging behind both the U.S., at 38%, and Europe, at 31%.
Over the last decade, Asia's growth in this area has been coming from outside Japan. The proportion of Japanese companies above the $10 billion threshold dropped to 9% from 11%, while those from the rest of Asia, mainly China, jumped to 22% from 9%. Asia300 focuses precisely on this part of Asia.
Asian companies are already global leaders in terms of initial public offerings. The four biggest IPOs ever were all by Asian companies, according to Thomson Reuters. Topping that list is Alibaba Group Holding, which raised more than $25 billion when it went public last year.
While they owe much of their success to the growth of their home economies, an increasing number of Asian companies are now tackling the global market.
South Korea's LG Chem, whose strength lies in its technical expertise, is negotiating to supply lithium-ion batteries to U.S. electric vehicle maker Tesla Motors. If the deal goes through, LG Chem will pose a serious challenge to Japan's Panasonic, which has been the sole battery supplier to Tesla.
CK Hutchison Holdings, led by Hong Kong tycoon Li Ka-shing, agreed this year to buy O2, the No. 2 British cellphone brand, via group company Three, the No. 4 mobile carrier in Britain. The $15 billion deal, aimed at expanding the company's market share in Europe, is awaiting regulatory approval.
But while Li has his core companies -- CK Hutchison Holdings and Cheung Kong Property Holdings -- listed on the stock market, not all of the region's family-controlled conglomerates allow the heart of their empire to go public.
Take, for instance, Charoen Pokphand Group, the largest business group in Thailand, led by Chinese-Thai tycoon Dhanin Chearavanont. A number of its units, including local 7-Eleven franchise operator CP All, food processor Charoen Pokphand Foods, and telecom carrier True Corp., are listed on the Bangkok market, but the flagship company remains private.
Leading Thai retailer Central Group, headed by Tos Chirathivat, No. 1 Indonesian conglomerate Salim Group, led by Anthoni Salim, and many others are organized in a similar fashion.
Being privately held, these groups do not show up on market cap rankings like this one. Their influence in regional dealings, however, and the value of the connections they maintain are immense, making them indispensable players in Asian business.
CHALLENGES AND OBSTACLES But competition is a two-way street. As Asian companies seek global prominence, American businesses are expanding their presence in Asia.
According to U.S. credit rating agency Standard & Poor's, 500 leading U.S. companies saw their sales in Asia climb to 7.8% of their total in 2014, up from 6.4% in 2008. The percentage of their European sales was lower, at 7.5%.
Asia Inc. also has to grapple with the issue of corporate governance. Many Asia300 companies are either state-owned or controlled by founding families. In less wealthy nations, there is often little choice but to rely on the government or owners for strong leadership.
But once companies raise funds from the stock market, their operations come under outside scrutiny, and many Asian enterprises have found it difficult to interact with investors. In a speech delivered in the U.S. in June, Jack Ma Yun, founder of China's Alibaba Group, said that if he could do things over again, he would not take his company public.
Despite its strength, South Korea's Samsung group is also facing serious challenges. The group began expanding in the 1960s with generous government support and is now the most prominent conglomerate in the country by a wide margin. From the 1990s, Samsung Electronics dominated global markets for semiconductors and mobile phones. Today, however, the company faces fierce competition in the smartphone business from Apple and Xiaomi, a Chinese manufacturer. Samsung is also under pressure from U.S. investors to reorganize its management.
Whether Asian companies can find global success depends on their ability to attract employees and executives with a range of skills and experience.
"Asia's largest companies are not leaders in the globalization of leadership," stressed Pankaj Ghemawat, a professor at Spain's IESE Business School.
A study by Ghemawat in 2013 showed that only 3% of leading Asian companies had a foreign national as top manager, and only 4% of their executives were foreigners. The world average is 13% and 15%, respectively. These findings suggest that Asian companies might be missing out on precious business opportunities in global markets.
Many are trying to overcome such shortcomings. Major Chinese Internet service company Tencent Holdings has recruited top officials from Goldman Sachs, while TSMC in June appointed Michael Splinter, former chairman and chief executive of Applied Materials, as its independent board director.
Investors are taking note of such moves. UBS Global Asset Management increased its Chinese stockholdings after the country's stock market plunged over the summer. "There are good companies with decent management available for not too expensive a price," said Geoffrey Wong, head of Asia-Pacific equities.
Asian businesses are facing headwinds from the slowing Chinese economy. But by building up their war chests and recruiting talented employees, they have the potential to become household names around the world. These are the companies Asia300 will follow.
Nikkei deputy editor Kenji Kawase in Bangkok and staff writer Cheng Ting-fang in Taipei contributed to this story.