Grab and Sea rebound in 2024. How to invest in ASEAN tech giants?

This post was created in partnership with CSOP Asset Management Pte. Ltd. All views and opinions expressed in this article are Beansprout's objective and professional opinions.

What happened?

When Grab first listed on the NASDAQ via a SPAC merger in December 2021, it attracted an initial wave of exuberance and excitement before stock prices began to decline due to investor concerns over profitability. 

In the following years, losses began racking up as it began aggressively expanding its ecosystem across Southeast Asia.

Sea Limited, on the other hand, found itself in similar yet different kinds of trouble waters. In 2022, amidst increasing competition and regulatory pressures, it shut down Shopee operations in India and France in order to cut costs. 

Yet somehow, both these companies managed to deliver impressive rallies in 2024. 

As of 10 December 2024, Grab’s year-to-date (YTD) stock price return stands at 61.13%, while Sea Ltd has surged even higher with a 176.67% YTD return. 

Further, the CSOP iEdge Southeast Asia+ TECH Index ETF (SQQ), in which Grab and Sea are the constituents of, has been the top performing ETF in 2024 with a return of 31% in SGD terms as of November 2024—an exceptional performance largely attributed to Grab and Sea. 

Unsurprisingly, these stock price rallies have sparked renewed interest among investors. For instance, the CSOP iEdge Southeast Asia+ TECH Index ETF had the highest inflows of funds among Singapore ETFs this year. 

So, what exactly has been fueling the performance of these ASEAN tech giants, allowing them to make such impressive turnarounds? In this article, I’ll explore the key drivers behind their share price increase. 

I’ll also introduce a convenient way to gain exposure to both these household names as well as Southeast Asia’s thriving tech sector through the CSOP iEdge Southeast Asia+ TECH Index ETF.

What’s driving Grab and Sea’s stock price increase?

#1 – Better-than-expected earnings

One key factor driving the stock price of Grab and SEA this year has been their better-than-expected revenue growth and improved profitability. 

In 2024, Grab shifted its focus from growth at all costs to profitability. Part of this meant cutting unnecessary spending and pursuing operational efficiency. 

The result? Grab posted an EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) of $90 million, outperforming analysts’ expectations of $66.2 million. 

The company also raised its adjusted full-year EBITDA forecast to between $308 million and $313 million, a significant increase from the earlier projection of $270 million.

Revenue grew by 17% year-on-year (YoY) to reach $716 million in Q3 2024. Thanks in part to the mentioned cost-cutting, Grab reported its second-ever net income. 

Similarly, Sea Ltd, the parent company of Shopee, saw Q3 2024 revenue grow by 30.8% YoY, reaching $4.3 billion. Like Grab, it managed to streamline its costs and operations. 

The company achieved a net income of $153.3 million in Q3 this year, a turnaround from a net loss of $144 million in the third quarter last year. 

With both companies demonstrating revenue growth and improved profitability this year, this could have restored investor confidence, driving up their share prices. 

#2 - Growth in digital financial services verticals

Both Grab and SEA also strategically expanded into digital financial services, diversifying their offerings beyond their core businesses – ride-hailing and food delivery for Grab, and online gaming and e-commerce for Sea Ltd. 

This diversification has helped bolster revenue and shore up profits for both companies. 

You may be familiar with GXS Bank and MariBank, two of the MAS-licensed digital banks set up by Grab and Sea Ltd respectively. 

Growth was fueled by GrabFin’s lending activities, contributions from its GXS digital bank, and the optimization of its payment incentives.

Consequently, Grab’s financial services revenue grew by 34% YoY in Q3 2024, reaching $64 million. 

Meanwhile, SEA recorded a 38% YoY growth in financial services revenue, climbing to $615.7 million in the third quarter – an increase primarily driven by strong performance in its consumer and SME credit businesses.

By leveraging their ecosystems to offer financial solutions, both companies have unlocked new revenue streams and positioned themselves as key players in Southeast Asia’s evolving fintech space.

Long-term opportunities for ASEAN tech stocks

At the same time, we’re also taking a deeper interest in the broader, long-term structural factors that could potentially propel long-term growth for ASEAN companies. 

Here’s why: 

#1 – Demographic dividend

Southeast Asia and India together boast a working-age population of 1.4 billion (comparable to China), and account for 27.4% of the global total¹. 

This young, dynamic workforce provides a competitive advantage with low labor costs, fostering innovation and entrepreneurship, and positioning the region for further growth. 

#2 – Rising middle class

By 2030, ASEAN will add 140 million new consumers, representing one-sixth of the world’s new consumer class, with the middle class comprising 67% of the region’s population². 

This affluence, coupled with a vast demographic base, could drive significant demand for e-commerce, digital financial services, and tech-enabled conveniences.

#3 – Fast-growing Internet sector

From 2019 to 2022³, Southeast Asia’s digital economy grew at a compound annual growth rate (CAGR) of 24%. 

Yet despite rapid growth, internet penetration remains relatively low, leaving significant room for expansion. 

#4 – A hub for re-export trades amid FDI inflow

The value of ASEAN exports surged from US$474 billion in 2003 to US$1,713 billion in 2021, with high-tech sectors playing a critical role⁴. 

Growing FDI inflows have enhanced infrastructure, supporting tech company expansions. 

Regional trade agreements have also strengthened ASEAN’s position as a vital hub for cross-border commerce.

#5 – Supply chain shifts to ASEAN

Due to competitive labor costs, a young workforce, and government incentives, global supply chains are also increasingly shifting to ASEAN, providing an alternative to China. 

How to get diversified exposure to ASEAN tech through an ETF

If you’re an investor looking to tap into the long-term opportunities presented by ASEAN’s burgeoning tech sector, the CSOP iEdge Southeast Asia+ TECH Index ETF offers a convenient and diversified approach. 

This ETF provides diversified exposure to ASEAN’s rapidly expanding digital economy, enabling investors to benefit from the growth of prominent tech companies in the region like Grab and Sea Ltd. 

It tracks the iEdge Southeast Asia+ TECH Index, which includes leading names across various tech verticals, from e-commerce and fintech to IT services and electronics manufacturing.

What are the top 10 holdings of the iEdge Southeast Asia+ TECH Index?

The iEdge Southeast Asia+ TECH Index has a maximum of 30 companies included. 

The index’s constituents include a blend of familiar and influential tech companies across the ASEAN region and beyond. 

As mentioned, Sea Ltd, the parent company of Shopee and Garena, and Grab Holdings are two household names in the index. 

The index also features tech hardware players like Thailand’s Delta Electronics and Singapore’s Venture Corp. 

To add diversification beyond ASEAN tech, the index incorporates Infosys and Wipro, leading Indian IT services companies listed in the US.

This diversification ensures investors are positioned to benefit from the region’s dynamic tech ecosystem without the risks associated with investing in individual stocks.

With 32.14% exposure to technology and 33.12% exposure to consumer discretionary, the ETF captures the dynamic breadth of the region’s tech ecosystem.

What is the performance of the CSOP iEdge Southeast Asia+ TECH Index ETF?

As of 27 November 2024, the CSOP iEdge Southeast Asia+ TECH Index ETF achieved a 1-year USD NAV return of 38.47% and a return of 22.97% since inception.

The Southeast Asia tech sector has also kept pace with the US tech sector in 2024. 

When compared to the Nasdaq 100 Index, the CSOP iEdge Southeast Asia+ TECH Index ETF has outperformed in 2024. As of 19 December 2024, the fund posted a YTD price total return of 29.88% in SGD terms, compared to NASDAQ 100’s 25.46% in USD terms.

Notably, the CSOP ETF was the best-performing ETF in Singapore as of November 2024, with a YTD return of 31%.

What are some risks to consider when investing in ASEAN tech stocks?

#1 - Global economic uncertainty

Macroeconomic challenges such as inflation and still elevated interest rates can negatively impact consumer spending and corporate funding, posing risks to companies reliant on discretionary consumption. 

Reduced consumer demand amid these challenging conditions may weigh on revenue growth for tech giants like Grab and SEA. 

Additionally, trade tensions between the US and China or a potential “Trump Trade War 2.0" could disrupt the region’s exports and re-export trades, further impacting businesses with international exposure.

#2 - Increased competition

Competition remains a headwind for ASEAN tech companies. 

Grab faces strong rivalry from the GoTo Group in key areas like ride-hailing and food delivery, while Sea Ltd is grappling with increasing competition in e-commerce from platforms like Lazada and TikTok Shop and in gaming from both regional and global players. 

Such intense competitive pressures could erode market share and profitability, requiring these companies to continuously innovate and invest in growth.

What would Beansprout do?

Grab and Sea’s share price rally in 2024 demonstrates how these ASEAN tech companies can improve their profitability by capitalising on the region’s dynamic digital economy and evolving consumer landscape. 

In addition, the long-term growth potential for ASEAN companies remains strong, driven by the region’s increasing internet adoption, a rising middle class, and the expanding digital economy. 

The CSOP iEdge Southeast Asia+ TECH Index ETF offers a convenient and diversified way to capture ASEAN’s tech growth without having to spend time analysing stocks. 

By providing exposure to leading tech companies across the region, this ETF offers a balanced approach to benefiting from the sector’s opportunities while mitigating the risks of individual stock investments.

You can learn more about the CSOP iEdge Southeast Asia+ TECH Index ETF here. 

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