Why I'm Watching Southeast Asia "Microcap" Stocks

If you’ve been to China, Hong Kong, Taiwan or Vietnam before, you may have noticed something peculiar about their skyscrapers.

Their architects often design large holes, or ‘windows’, in them, particularly if they are built near the sea as many in Hong Kong are. These 'windows' seem to serve no apparent purpose other than taking up space.

Can you spot the window?


However, these holes do serve a purpose, though it’s not one that is economically—or indeed conventionally—rational.
They're called ‘dragon windows’, and they're a product of the Eastern philosophy of 'feng shui'.
The idea is that dragons need to flow with their energy from mountains to the sea in order to drink and bathe. If you build a building that obstructs that flow, the dragon will become agitated and use its supernatural powers to bring bad luck to the 'offending' building and all those inside it.
Now, this Asian obsession with windows also extends to another practice, one whose economic rationale is more apparent.
I'm referring to a practice called ‘window guidance’, effectively an informal mechanism by which the powerful governments and central banks of East Asia direct the banking sector to issue loans to specific sectors or companies in order to spur (or block) growth.
It's a practice I've described on Forbes in case you missed it.
At One Road Research, we understand the power of ‘window guidance’, particularly the the investment opportunities it presents.
It can turn small, embryonic industries into global titans in a matter of years, if there is enough government support for it.
Many of the companies we focus on would be considered to be small or 'microcap' in the West—with between roughly US$50 million to US$300 million in market capitalization.
But in Asia, companies that fall within this range have the potential to grow into something much bigger in a relatively short amount of time, as a result of 'window guidance'.
That’s why I was recently contacted by Shelly Kraft, the Founder and CEO of Stock News Now, a financial publication he deems "The Official MicroCap News Source", to offer my thoughts on Asian microcap stocks, and to provide some insight into the methods we use to track the debt 'elixir' that is flowing into them.
You can read my article Tracking Micro Cap Debt in Southeast Asia and the latest issue of Shelly's excellent MicroCap Review Magazine. You can read it in full, for free.
In my article, I tease three of our favorite microcap companies in Vietnam, and ten companies in Malaysia, based on this methodology.

And if you want to find out more about how we track debt flows in Asia, as well as seeing the resulting stock recommendations, take a look at our proprietary investment model, Asian Capital Development.

Peter Pham