Investment Insider: Where next for Asian growth?

Look to middle-class consumer spending for the next opportunities

The flight of capital from Asian markets in recent months would appear to suggest the eastern growth story may have run its course.

As soon as Ben Bernanke announced in May that the US Federal Reserve would start to consider winding back its money-easing activities, investors began withdrawing funds from Asian markets. That not only triggered sharp falls in some Asian currencies such as the Malaysian ringgit, the Indonesian rupiah and the Indian rupee, but also sparked a drop in Asian stock markets too.

It would seem, on the face of it at least, that the Asian growth story might have been built on the sands of cheap money created through quantitative easing in developed economies. So when the cost of money is likely to rise, it is perhaps understandable to assume that the decade-long Asian growth story might be drawing to a close too.

There is some tacit evidence to suggest that the market might be correct in its assumption. For instance, Thailand has slipped into recession and red flags have been raised over growth in India. The world's 10th-largest economy once boasted double-digit growth but that has slowed to just 4.5 per cent between April and June, less than most economists had predicted.

However, it is important to bear in mind that Asia is a vast continent that comprises 49 separate countries. Just as it would be wrong to tar the UK and Greece with the same economic brush, it would be just as inaccurate to put embattled Thailand and, say, successful Philippines into the same economic basket. The Philippines' second-quarter growth of 7.5 per cent was faster than expected. Additionally, China's growth is expected to exceed 7.5 per cent and Indonesia, which is the world's fourth-largest country by population, could grow around 6 per cent this year.

Indonesia, of course, has some economic problems to resolve. It is importing more than it exports; inflation jumped to almost 8 per cent in August; its current account is in the red and its currency has fallen sharply. That said, there are many developed economies that would gladly trade places with Indonesia right now.

Meanwhile, much has been made of China's economic slowdown. But let us not forget that China is the second-largest economy in the world. Consequently, a 7.5 per cent annual growth rate is hardly pedestrian.

In fact, recent data appears to suggest that China's objective to rebalance its economy from export-led to one that will be driven by consumers is showing early signs of success.

In the early days of Asia's growth, investors found opportunities in the commodities sector as China and other Asian economies consumed minerals and metals to develop their infrastructure. That is likely to continue but probably at a slower pace.

The next crop of opportunities is likely to come from growing demand by middle-class consumers. According to Ernst & Young, two-thirds of the world's middle class will reside in Asia-Pacific by 2030.

These are likely to want the same things consumers in developed economies have long enjoyed. So look at household names that have exposure to the East. These could include Swedish retailers such as Hennes & Mauritz, Spain's Inditex, which owns Zara and Bershka, and the UK's upmarket retailer Burberry, which now generates 40 per cent of revenues from Asia Pacific.

David Kuo is director of fool.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Suggested Topics
Arts and Entertainment
Books should be for everyone, says Els, 8. Publisher Scholastic now agrees
booksAn eight-year-old saw a pirate book was ‘for boys’ and took on the publishers
Life and Style
Mary Beard received abuse after speaking positively on 'Question Time' about immigrant workers: 'When people say ridiculous, untrue and hurtful things, then I think you should call them out'
tech
Life and Style
Most mail-order brides are thought to come from Thailand, the Philippines and Romania
life
News
i100
Life and Style
tech
Voices
Margaret Thatcher, with her director of publicity Sir Gordon Reece, who helped her and the Tory Party to victory in 1979
voicesThe subject is being celebrated by the V&A museum, triggering some happy memories for former PR man DJ Taylor
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Business Analyst - Financial Services - City, London

    £50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

    SThree: Trainee Recruitment Consultant

    £18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

    Recruitment Genius: Administrator - IFA Based

    £22000 - £24000 per annum: Recruitment Genius: This is an opportunity to join ...

    Day In a Page

    General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

    Chuka Umunna: A virus of racism runs through Ukip

    The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
    Yemen crisis: This exotic war will soon become Europe's problem

    Yemen's exotic war will soon affect Europe

    Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
    Marginal Streets project aims to document voters in the run-up to the General Election

    Marginal Streets project documents voters

    Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
    Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

    The real-life kingdom of Westeros

    Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
    How to survive a social-media mauling, by the tough women of Twitter

    How to survive a Twitter mauling

    Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
    Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

    At dawn, the young remember the young

    A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

    Follow the money as never before

    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
    Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

    Samuel West interview

    The actor and director on austerity, unionisation, and not mentioning his famous parents
    General Election 2015: Imagine if the leading political parties were fashion labels

    Imagine if the leading political parties were fashion labels

    Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
    Public relations as 'art'? Surely not

    Confessions of a former PR man

    The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
    Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

    Bill Granger's luxurious sweet treats

    Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
    London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

    The mother of all goodbyes

    Paula Radcliffe's farewell to the London Marathon will be a family affair
    Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

    Steven Naismith: 'We know we must do better'

    The Everton forward explains the reasons behind club's decline this season
    Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

    Michael Calvin's Last Word

    Praise to Wenger for having the courage of his convictions