Investors should consider a thematic approach to the diverse population trajectory across Asia, as opportunities emerge in sectors such as consumer goods, technology platforms, renewable energy, sustainable infrastructure and fintech.
At roughly 4.3 billion today, the region accounts for 60% of the global population. Yet declining fertility rates in major economies like China, Japan and Thailand add weight to views that the overall population has peaked.
At the same time, Indonesia’s fertility rate is moving in line with economic activity, while India surpasses China as the world’s most populous country at 1.4 billion.
Such trends across Asia create opportunities, said Meera Patel, senior manager for sustainable and thematic investment at GAM Investments, “for increased productivity and improved financial inclusion”.
However, she also warned about resource constraints and waste generation challenges.
Key themes emerging
Among the various investment implications of Asia’s large and diverse population base is a shift in consumerism.
Patel is seeing this via the demand for basic goods like air conditioning units and toilets, as well as electric two-wheelers, luxury goods and travel services. Studies from McKinsey, for instance, suggest that Asia alone could contribute to a consumerism drive valued at $10trn over the next decade, she added.
Technology platforms are also gaining greater traction in Asia as more people rely on them for their purchasing needs.
“Seamless experiences and recurring purchase incentives offered by apps like TikTok, Zomato and Shopee are shaping consumer behaviour,” explained Patel.
The shift towards digitialisation is also leading to greater levels of financial inclusion, facilitated by governments and the rise of fintech players. “The use of digital payments is increasing in developing countries,” added Patel, “and fractionalisation is enabling access to financial services and alternative investments.”
From a sustainability perspective, the emerging-nation status of many countries in Asia gives them the advantage of leapfrogging development by incorporating sustainable features from the start.
This is particularly the case in the transition from fossil fuels to renewables, added Patel. “This is evident in the planning and construction of economic hubs and cities in countries like Indonesia and India.”
Meanwhile, government incentives are also becoming more commonplace. Countries like India, for example, are supporting the development of sustainable technologies and infrastructure, including solar module manufacturing, battery storage and green hydrogen.
In Patel’s view, the adoption of green hydrogen and electrolyser technology depends on global advancements and cost deflation.