Sungho Im (pictured), Head of the Global Portfolio Management Team at Mirae Asset Global Investments, believes that investors looking to capitalise on the rise of the Asian consumer should look beyond obvious sectors, such as consumer staples and discretionary, to areas such as the internet, healthcare, new financial services and education.
Much attention has recently been focused on the emergence of a new breed of consumer in Asia. The OECD forecasts that more than half the world’s ‘middle classes’ could be in Asia by 2020, and Asian consumers could account for over 40 per cent of global middle class consumption.
Asia is transforming itself from a manufacturer of cheap products for consumers in developed countries into a leading consumer force. The world is looking to Asia to pick up the slack left by consumers in Europe and the US, who are experiencing a period of austerity following the financial crisis.
We believe the rise of Asian consumerism is a major socio-economic trend that will bring enormous change to the regional economy as a whole and investors should consider the impact this will have on other non-consumer sectors.
The Chinese internet industry now has the most users in the world and is growing rapidly as increasing numbers of people are able to afford PCs or laptops and therefore, internet access. The online gaming and advertising industries are also growing quickly and offer attractive investment opportunities. In India, the infrastructure industry should benefit from the purchasing power growth of consumers. With the power deficit in India growing worse as more Indians can afford to buy electric appliances, increased government infrastructure spending should benefit relevant industries.
We also see education as a promising investment target. As Asian economies continue to grow, more parents will be able to spend larger sums of money on education. There is a general perception that higher education is a precursor to obtaining professional jobs and higher incomes, therefore the conclusion can be drawn that more parents will send their young children to private education institutes to ensure their children gain university entrance.
Investors need to bear in mind the important variations that exist between countries in Asia. For example, the internet penetration rate in India is still in the low single digits whereas in Korea it is 95%. Some Chinese manufacturers are relocating their production bases to other countries because of rising cost pressures, and Indonesia is a key beneficiary of increased foreign direct investment inflows.
While everyone agrees on continued economic growth in Asia, it is important to appreciate the differences between countries to find the best investment returns. We strongly believe the rise of the new Asian consumer will be a key focus for global investors.