Here’s Some Timely Investing Wisdom From Southeast Asia’s Online Market

Southeast Asia’s internet economy used to be on fire, churning reliably red-hot growth. But this year, this steamy subsector has become distinctly lukewarm. With high inflation and higher interest rates, researchers now say it’ll see its slowest growth ever this year. Online spending is still set to grow by 11%, mind you, but that’s a steep cooldown from last year’s 20% pace. The region’s overall internet economy is now projected to reach $295 billion by 2025, down from an initial forecast of $330 billion.

The slowdown in growth isn’t entirely surprising, even if the severity has caught people off-guard. This is what happens when inflation and interest rates shoot higher: consumers pinch pennies and competition intensifies, with global giants squaring off against regional players for a slice of the action. In the past, when interest rates were low and money was easy to come by, companies could easily raise funds to prioritize growth over profits in a bid to capture market share. But those days are gone. Internet companies are now finding it tougher to attract customers in less accessible regions, and chasing growth is becoming more expensive. And it’s happening all over the world, not just in Southeast Asia.

Slower growth isn’t the worst news for investors, but it does mean you have to be more selective. If you have relied on thematic investing, where you bet on a whole industry’s growth, it might be time to sharpen your stock-picking skills. When money is scarce and growth is sluggish, investing in an entire industry generally doesn’t cut it. Some of those stocks might be winners, but others will be losers. Instead, try to identify companies with a competitive edge that allows them to grab a bigger share of the market: they’re the ones that’ll come out on top in the long run.

This is the perfect environment for hedge funds, actually. They thrive in volatile markets and profit by strategically balancing their market exposure – going long (buying) strong companies and shorting (selling) companies that are likely to struggle in the face of slowing growth. Thankfully, there are ETFs that mimic hedge fund strategies, such as the First Trust Long/Short Equity ETF (ticker: FTLS; expense ratio: 1.36%), the AGF U.S. Market Neutral Anti-Beta Fund (BTAL; 1.54%), or the Proshares Large Cap Core Plus ETF (CSM; 0.45%).