SINGAPORE (June 22): Here are four key Asian demographic dynamics that could impact Asian equities in the coming years, according to a recent report by CIMB.
1. Different rates of urbanisation
Although Asia is known to be a generally urbanised region, there are some parts, specifically in East Asia, where the population is still non-urban. Indeed, the pace of urbanisation differs widely across the region. While China and Indonesia have been growing fast, India has been significantly slow; suggesting rural consumption remains important in India.
2. Changes in Dependency Ratios
This ratio measures the number of employed people in a household relative to the total size of the household. The key thing to focus on is the female labour participation rate, which differs widely across the region. India and Pakistan have a low dependency ratio, while the numbers are significantly higher in China.
Therefore, the potential for discretionary spending is much higher in China. This means the price point rises easily over time compared to India where the population have to be more frugal and price-sensitive.
This also affects the eagerness of consumers to try online shopping.
3. Ageing Societies
After the age of 40, spending and saving patterns change, especially for those whose children are already independent. This is a fast growing phenomenon in Asia and especially in China where the ranks of empty nesters are expanding.
Meanwhile, healthcare spending tends to start rising after 40. This is happening in relatively young populations at a fast past, especially in India.
4. New Trends in Marriages and Falling Fertility Rates
Asia has seen a decline in fertility rates as incomes rise and women start to marry later.
Thus, an increase in proportion of one- or two-person household can be observed, especially in Korea, Singapore, Japan, Taiwan and Hong Kong. In Korea, single-person households are growing at a faster rate than two-person households.
CIMB says these four demographic trends lead to five investment themes, some of which are unique to Asia:
- China empty nesters
This new demographic trend is Asia’s fastest-growing consumer market. The empty nesters are affluent, over 40 and free. They are typically clustered in the wealthy, aspirational cities and provinces of China and in terms of consumption patterns, they look to acquire experiences rather than possessions, such as better homes, healthier lifestyles and travelling experience. - ‘Young’ markets spending more on healthcare
The number of people turning 40 years old is rising fast. This is when the prevalence of diseases and healthcare spending accelerates. Thus, younger populations in India and Indonesia are expected to contribute to high healthcare growth. - Travelling to see the world
Asians are now travelling not just more often, but further, in smaller groups and to more interesting destinations. China is largest travel market, while India is the fastest growing. Fortunately for listed online travel agents, 40% of travel is now booked through a mobile device. - E-commerce platforms
Online shopping platforms are on the rise is India and Indonesia given rapid increases in internet usage, price-sensitive consumers and limited availability of high quality goods in physical stores. This is why China has entered these markets and are currently leading the way in e-commerce initiatives. -
Financial inclusion
To facilitate urbanisation, people should be able to access services that are not widely available in rural areas, such as financial services. The use of bank accounts in Asia are still rather low, considering more Asians now have better access to banking systems. Internet penetration has improved across the region, however mobile payments are still in its early stages and India is expected to have a high growth.