Asian Equity Update – Domestic demand back on track in the region

The reopening of Asian economies since last year has led to a strong rebound in domestic spending and tourism industry, giving a much-needed boost to economic activities. China’s reopening last month further cheers investors in the region.
These developments, coupled with the young population and large middle-class, are driving the consumption story back on track in the region, e.g. ASEAN countries and India.
Another key driver for consumption is the high saving rate as a result of the pandemic.
For example, Chinese households accumulated more excess savings, reaching 5.4% of nominal GDP.1 In India, household saving, which made up of only 2/3 of the gross saving in the past, has surged to 78% of the gross saving.2
China – Sportwear becoming a bright spot
- Thanks to the faster-than-expected China reopening, domestic traffic and tourism in January rebounded to 89% and 73% compared to pre-pandemic level respectively. 3
- Domestic spending recorded a 30% yoy growth.4 We expect consumer discretionary sector to be key beneficiary from the reopening.
- Sportswear is one of the bright spots.
- Large scale multisport events including Summer World University Games and Asian Games will take place in 2023.
- We expect that these world-class events to bring sportswear to the focus of Chinese citizens, who are increasingly adopting a healthy lifestyle.

Source: NBS, JP Morgan, January 2023
India – Auto sector befitting from booming demand
- In India, we expect rising middle-income class and huge youth population to contribute a strong domestic consumer demand.
- India has nearly half population in young generation aged below 25.5 Besides, the share of middle-income class in India is also fast growing, with expectation to grow to 63% in 2047.6
- Sectorwise, the auto market is now on the rise. The India passenger car market is expected to grow from US$32.7 billion in 2021 to US$54.8 billion by 2027.7
- India has become the third largest automobile market in 2022 with strong underlying demand.8

Source: SIAM, Morgan Stanley Research, January 2023
ASEAN - household spending becoming a driver for GDP growth
- In ASEAN, it is expected that overall consumer expenditure to grow by around 5% in 2023.9
- In particular, household spending in the Philippines is projected to expand 5.5% this year, the highest in decades.
- We anticipate higher demand in consumer staples and convenience food product, such as instant noodles.
- We expect consumption to be the key driver of 2023 GDP growth.

Source: Morgan Stanley, January 2023
Reference:
-
1
Source: HSBC, 5 January 2023
-
2
Source: The Times of India, 15 December 2022
-
3
Source: Goldman Sachs Global Investment Research, 31 January 2023
-
4
Source: Goldman Sachs Global Investment Research, 31 January 2023
-
5
Source: Times, 20 January 2023
-
6
Source: Times of India, 2 November 2022
-
7
Source: IBEF, November 2022.
-
8
Source: argus, January 2023
-
9
Source: McKinsey, December 2022