Emerging growth opportunities when consumption goes ‘all about me’
We share our views on how increasing demand for personalised products and services presents growth opportunities.
Lately, the world has seen good progress on the vaccine front. Vaccinating the most vulnerable first could help ease pressure in the healthcare sector and make governments more comfortable with relaxing mobility restrictions, thus, enabling the resumption of economic activities.
Despite a more positive outlook, keeping a focus on companies with strong fundamentals remains key, alongside revisiting laggards of 2020 in portfolios.
Vaccine rollouts and Asia
Asian governments and corporates have generally demonstrated their ability to mitigate downside risks of the health crisis with decisive moves and flexible approaches.
Some economies in North Asia, for example, have been able to keep infections in check through effective testing, contact tracing and strict border controls. And these economies could afford to be more cautious in their vaccine rollouts.
In other parts of Asia, economies such as Singapore, Indonesia and India have kickstarted their vaccination programmes. Speedier vaccinations could help put economic recovery on a stronger footing.
A recovery from North Asia to ASEAN
Already, the health crisis has accelerated some structural trends in Asia, including further adoption of technology, lifestyle and consumption upgrades. Read more: Recovering Asia: seeking long-term sector opportunities
Although China, technology and healthcare are getting relatively more attention from an equity allocation perspective, the laggards of 2020, such as ASEAN could benefit from earnings upgrade when the recovery becomes more comprehensive.
Asia Pacific – ex Japan equities: earnings expectations by market and sector2
ASEAN is poised for recovery, off a low base2, in 2021 as vaccine prospects boost optimism for tourism-related sectors, such as hotels and airports. Already, ASEAN in November 2020 agreed to take steps towards establishing a travel corridor arrangement framework to facilitate essential business travels among its member states3. This could have knock-on effects on consumer and business confidence, leading to continuing normalisation in economic activities and improving corporate earnings.
Tourist arrival 4-year compound annual growth rate (CAGR)4 (%)
Even before the health crisis, ASEAN and Asia Pacific are among the fastest growing regions in the world for tourism4. Domestic travel in China has recovered quickly where hotel-occupancy rates and numbers of domestic flight passengers have bounced back to around 90% of 2019 levels by end-August 20205.
And although global passenger traffic is unlikely to return to pre-health crisis levels until 2024, the recovery in short haul travel is still expected to happen faster than for long-haul travel6. This could benefit travel and tourism within Asia.
In addition to a rebound in tourism activity, consumption is also expected to become a key driver of economic growth in Asia.
The health crisis is changing the eating habits of some Asian consumers as eating-at-home becomes commonplace, boosting demand for takeaways and deliveries.
In Thailand, for example, there has also been a shift in the shopping behaviour of Thai consumers when it comes to fast-moving-consumer-goods, with households preferring to make their purchases in a smaller shop more frequently, favouring convenience stores. Alongside food, beverages and household items, such stores also provide services such as bill payment facilities, car insurance and mobile top-ups7.
Additionally, most Asian economies are modernising their food safety systems to ensure the availability of safe and nutritious food for the population. Asia’s consumers are asking more of their food supply chains, seeking highly-nutritious, fresh and safe produce delivered conveniently and on demand. They will also pay a premium to businesses able to deliver on this. Such a demand could bode well for some quality fast food restaurant chains.
Agricultural and food investment in Asia for 2020-2030 is estimated to increase by about US$800 billion, of which US$550 billion is expected to be spent on satisfying demand for better-quality food while the remaining US$250 billion is targeted for increasing the quantity of food to feed Asia’s growing population8.
Vaccine development is becoming a game-changer and could provide further growth momentum to Asian consumer and corporate activities. This development could provide a boost to laggards of 2020, such as ASEAN as they come under some investors’ radar1.