Asia’s Rising Wealth: Identifying Stocks That May Benefit This Wealth Trends

In Fred Neumann, HSBC Global Research’s Chief Asia Economist recently released a report, he forecasts that the number of adults with wealth of at least USD250,000 in China, ASEAN, and India will more than double by the end of the decade and the number of millionaires in Asia will jump from 30m to over 76m. Looking beyond the short-term economic headwinds facing Asia, we build on this by identifying sectors and stocks that may benefit from these structural, long-term wealth trends.

As China gets richer, it is clear to us that individuals will need more advanced wealth management products and services. This relatively underdeveloped business represents a large opportunity for banks and brokers to gain a competitive advantage and boost their revenues and profits.

Property has long accounted for the majority of household assets in China, yet asset allocation has changed over the past decade, falling from 52% in 2000 to 40% in 2019. Clearly, the industry outlook remains challenging – we believe the sector will shrink 26% over 2021-30e – but we are convinced that the handful of developers surviving the debt crisis will dominate the sector. In the long run, growing wealth leaves room for an increase in demand for housing upgrades.

In Singapore, Assets under management (AUM) are growing rapidly and an increasing amount of wealth is being consolidated through the establishment of family offices. Singapore banks are well-positioned to seize these opportunities. There has also been an inflow of talent into the wealth management industry, adding to the demand for real estate, both residential and commercial. “It’s a landlords’ market”.

For India, in FY2012-22, the combined AUM of mutual funds and other wealth management services has grown at a CAGR of 19% (in INR terms). The wealth management industry is poised to benefit further from two demographic dividends: 1) the UN estimates that by 2035 the population in the working age cohort of 20-60 years will increase by 2.1ppt; and 2) the population in the 60-year and above cohort will rise by 4ppt. This will drive growth in the demand for private banking and wealth management services.

As Asia ages, its pension requirements increase, driving the growth of the region’s asset management industry. Meanwhile, in China, some demographers see the country’s “empty nesters” as the largest, fastest-growing consumer market in the world.

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