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Consumption - the key beneficiaries in Asia
Rapid economic growth in Asia has been accompanied by strong growth in consumption in the region. But, in light of current economic uncertainties, which types of consumption in which countries are likely to benefit the most in the future? UBS's latest Asian Structural Themes Q Series research report examines six consumption themes, and asks how various social and economic characteristics influence countries' consumption of different types of goods and services. The report seeks to identify the countries which will be the primary beneficiaries of different types of consumption growth as well as the companies best placed to take advantage of these trends.
In Asia, the shift from predominantly subsistence, agricultural-based living to urban, income-earning lifestyles over recent years, has triggered strong growth in consumption. The report seeks to identify which types of consumption in which countries will be the major beneficiaries in the future as well as which companies in the region are best placed to take advantage of these trends.
"To do this, we focused on six consumption themes - the importance of domestic consumption to growth; stage of development; East versus West; extreme consumption; urban versus rural; and aged consumption. We then mapped various characteristics of countries across Asia and, along with UBS' GDP estimates, use our findings to forecast the nature of consumption in each country.
"Our aim was not to propose exposure to particular types of consumption in every country but rather to identify particular types of consumption in specific countries which, based on their structural, cultural and economic characteristics, we expect to benefit the most," said Simon SMILES, Product Manager in the Asian Equity Research department of UBS Investment Bank
"For example, we believe that the link between greater urbanization and an increased consumption of protein will prompt strong increases in demand for pork in China and dairy in India.
"Health and medical consumption is also likely to increase most strongly in countries with strong expected real economic growth, fast growing aged populations and relatively low government provision, such as China, India and the Philippines" added Smiles.
"Consumer finance also has significant potential over the medium to longer-term. The use of credit cards remains low in several markets. We recommend seeking longer term exposure to the credit card sector in China, India and Indonesia based on the strong correlation between consumption per capita and the average number of credit cards per consumer."
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