The rise and rise of tech is not just confined to the US – as has been seen in Asia with companies such as Tencent, Alibaba, Samsung and Taiwan Semiconductor impressing investors to the extent that around a third of the broad MSCI Asia ex Japan Index is now weighted to the information technology sector.
These stocks are well positioned to benefit from some of the structural shifts occurring in Asia.
There are two legs to the China story, according to Medha Samant, Fidelity investment director in Hong Kong, in a report: ‘One is the rising middle class stocking up on modern gadgets and appliances, which plays into the consumption and technology story. And the other is the upper middle class and affluent Chinese upgrading their lifestyle and spending more on travel and luxury items. [Utensils firm] Zhejiang Supor is part of the first trend, where we see strong demand in the cookware and small appliances sector.’
Apart from goods, the other big export from China is its tourists, with 145 mn overseas trips made in 2017.
‘This has helped boost the travel industry in Asia, enhancing the prospects of travel service provider China International Travel Service Corporation, which has gained from its duty-free business,’ says Samant. ‘The expanding army of Chinese travellers will also give a fillip to the airline industry, with carriers such as no-frills airline Cebu Pacific Air likely to benefit.’
China is the world’s biggest market for smartphones, with shipments of around 100 mn every quarter in the last few years. Chinese smartphone manufacturers now account for nearly a quarter of the global smartphone market and continue to grow rapidly.
‘Smartphone camera component maker Sunny Optical Technology, which recently reported a pick-up in handset-camera module shipments, reflects the considerable growth opportunities in China’s smartphone market,’ notes Samant.
The upmarket consumer trends are reflected by luxury brands such as beverage company Kweichow Moutai. ‘The company, which derives its name from Maotai, a small town in south-west China, is known for its fiery-flavored spirit. The distiller has created a distinct national brand, which plays very strongly into to the aspirational theme among the mass affluent,’ says Samant.
The dairy, nutrition and health sector is also showing robust growth, thanks to rising demand for flavored yoghurt and yoghurt-based drinks. ‘Sales in this sector have grown in recently years as health-conscious Asian consumers switch to low-fat dairy products. Dairy firm China Mengniu Dairy is one such company that is expected to continue to gain from this trend,’ she observes.
