Tiger Cub Economies

What Are Tiger Cub Economies?

Tiger Cub economies is the name given to five developing economies of Southeast Asia: Indonesia, Malaysia, the Philippines, Thailand, and Vietnam. The name is meant to imply that these economies follow the same growth model as those of the Four Asian Tigers—Hong Kong, Singapore, South Korea, and Taiwan.

Just like the four Tigers, the economic growth of the Cubs is driven by exports. Indonesia is the largest Tiger Cub, while Vietnam is the smallest. Investors who want to gain exposure to these markets may choose different investment vehicles, such as exchange-traded funds (ETFs).

Understanding Tiger Cub Economies

The term Tiger Cub was coined to reflect the hope that the economies of the dominant Southeast Asian nations would evolve in the same fashion as the Four Asian Tigers. The latter countries (Hong Kong, Singapore, South Korea, and Taiwan) experienced substantial economic growth between 1950 and 1990 due to a huge push by the government and corporate sectors to promote industrialization.

Indonesia, Malaysia, the Philippines, Thailand, and Vietnam all follow a similar path of growth and are considered to be the fastest-growing developing economies in this part of the world. These economies adopted an export-driven model that stresses the importance of technology to achieve similar results as their ancestors.

Growth in the Tiger Cub economies has been steady. Keep in mind that the COVID-19 pandemic affected the economic growth of the Tiger Cubs as well as those of other countries, including the Four Asian Tigers.

The five Tiger Cub economies vary, where some are larger and further along in the development process, whereas others are in the early stages of growth. For instance, Indonesia is among the world's top 20 countries based on gross domestic product (GDP), ranking in 16th place at $1.19 trillion. The nations in the group were listed as follows (all figures reflect GDP for 2021):

• Thailand: $505.98 billion
• Philippines: $394.09 billion
• Malaysia: $372.7 billion
• Vietnam: $362.64 billion

As noted above, exports are a big part of the Tiger Cubs' growth strategy. Here are some of the most important exports for each individual country:

• Indonesia: Palm oil, telephones, automotive parts and motor vehicles, computers, jewelry
• Malaysia: Palm oil, petroleum, wood, liquified natural gas (LNG)
• Philippines: Electronics, petroleum, semiconductors, coconut oil, transport equipment
• Thailand: Textiles, machinery, chemicals, electronics
• Vietnam: Clothing, rice, crude oil, coffee

Special Considerations

The Tiger Cub economies are an attractive destination for continued foreign direct investment (FDI) as they exhibit the qualities necessary for maximizing external investments. This includes large and growing domestic markets, infrastructure improvements, developing investment conditions, sound economic management, and available low-cost labor.

Investors who want to gain exposure to these growing economies can invest in country-based mutual funds. ETFs are also popular investment vehicles that allow investors to purchase individual shares just like stocks. The following are some of the most popular ETFs on the market today, offered by iShares:

• The iShares MSCI Indonesia ETF (EIDO)
• The iShares MSCI Malaysia ETF (EWM)
• The iShares MSCI Philippines ETF (EPHE)
• The iShares MSCI Thailand ETF (THD)

THD was the best performer, returning -0.3% over a five-year period. EPHE was the laggard, with a return of -5.75% during the same period. THD earned a five-star rating from Morningstar while EWM is considered a four-star fund. The company didn't rate the other two funds.