Daiwa tips Asia consumer plays as less exposed to global trade war

Mall on Singapore’s Orchard RoadMall on Singapore’s Orchard Road

Daiwa says it now is a “particularly good time” to focus on Asia’s consumer stocks, pointing to not only the “emerging and flourishing” middle class in the world’s two most populous nations, India and China, but also to the sector’s relative defensiveness in the face of a more belligerent U.S. trade policy.

“The global economy is facing the prospect of a global trade war and consumer themes should be less correlated to global trade should hostilities persist, in our opinion,” Daiwa said. “A growing population with rising spending power underlines the rise of Asian consumption.”

It also pointed to “pro-consumption policies” in the region, some driven by upcoming elections, which should provide short-term momentum to selected discretionary and staple consumer sectors.

China and Hong Kong

China’s policymakers are trying to increase the share of consumption in gross domestic product and even the recent economic slowdown and tighter property market rules won’t upend the overall consumption uptrend, Daiwa said.

“A new generation of prime middle-class consumers, born after the mid-1980s, is at the center of China’s consumption story. These consumers’ aspirations for premium goods and services will reshape the consumption landscape for the next few decades, in our view,” Daiwa said.

“Meanwhile, policymakers have announced several supportive policies recently, including an increase in the personal income tax threshold, relaxation of the one-child policy, and the possible lifting of the household size limit,” it added.

Daiwa noted that Hong Kong consumption growth is usually affected by Chinese tourism, domestic demand dynamics and government policy.

As thematic picks, Daiwa pointed to “premiumisation” in China’s consumer brands, tipping Anta Sports in the sportswear sector for the “fitness bug” and “athleisure” trends, as well as Shenzhou International, which supplies international brands such as Nike, Puma, Adidas and Uniqlo.

To play the relaxation of the one-child policy, Daiwa tipped Health and Happiness International on the growth of the infant milk formula market in China, and snack maker Want Want.

For the upgrade in Chinese tourism patterns, Daiwa tipped hotel plays Huazhu Group and Shangri-La Asia, as well as broader tourism plays such as Ctrip and Travelsky Technology.

Southeast Asia

Within Southeast Asia, the middle class was 25 percent of the population in 2015, with that figure expected to rise to 55 percent by 2020, Daiwa noted.

“The rise of middle class consumers, together with brand consciousness, should boost demand for modern retail channels, including modern chain hyper/supermarkets, shopping malls, convenience stores and online shopping platforms,” Daiwa said. Even with challenges from e-commerce players, modern physical retail stores are still the dominant grocery retail channels in Southeast Asia, it noted.

To play this trend, it tipped Singapore-listed Dairy Farm international as a pan-Asian retailer and Sheng Siong as one of the largest grocery retailers in Singapore.


In Indonesia, Daiwa pointed to stimulus measures ahead of the 2019 elections as well as young demographics and low household debt.

“We expect accelerating poverty eradication in rural areas through government projects such as its ‘village funds’ program, which could in turn boost low-income family FMCG consumption,” it said. FMCG stands for fast-moving consumer goods.

It tipped Indofood CBP Sukses for its strong instant noodle performance and increasing market share.


Malaysian consumption was likely to benefit from a young population and solid economic fundamentals, while pro-consumer policies post-election may also spur demand, particularly after the removal of the GST, Daiwa said.

It tipped Hai-O Enterprise and general merchandise store operator Aeon as well as Genting Malaysia, to play on increasing inbound tourism.


Rising inbound tourism, especially from China, as well as a young population and an election slated to be held by February 2019 should support consumption in Thailand, Daiwa said.

“The constraint on consumption growth has mainly come from Thailand’s high debt levels, which were due partly to previous policies that incentivised credit growth, such as the first car loan program. These policies have been discontinued, and the Bank of Thailand has also imposed limits on personal loans and credit card debt,” Daiwa said.

“As a result, household debt has declined as debts have been paid off,” it said, but added that debt would need to fall to a “reasonable level” before it would bolster consumption.

However, Thailand’s tourism industry remains healthy, with growth from multiple regions, bolstering hotel accommodation, it said.

Daiwa said it was bullish on Thailand’s hotel sector and tipped The Erawan Group as its top segment pick, while adding it also likes hospitality and leisure player Minor International.


Within Japan, consumption is “very constrained” by the demographics of an aging population with a high predisposition toward saving and by unfunded pension liabilities, Daiwa said.

But it noted that the current government has introduced a new visa policy allowing more foreigners to work in understaffed sectors, which should help increase consumption demand. At the same time, Japan is benefiting from a growing number of inbound tourists, with arrivals set to spike during the 2020 Tokyo Olympics, it said.

Shopping was 1.64 trillion yen, or 37.1 percent of total spending by foreign tourists in 2017, followed by 1.25 trillion yen, or 28.2 percent, for accommodation, Daiwa noted.

“We believe retailers, where there are relatively few market players, stand to benefit the most from booming inbound tourism,” Daiwa said.

It also highlighted two thematic tourism picks: Japan Airport Terminal and department store operator J. Front Retailing.

Daiwa pointed to Japan niche China consumer brands, such as Unicharm, a maker of sanitary products and disposable diapers, and Fast Retailing, the owner of Uniqlo, which is one of the most popular fashion brands on the mainland for both men and women.


Daiwa pointed to India’s youthful demographics and growing urbanization, in addition to government policy support for rural incomes ahead of the elections next year, as benefiting consumption there.

To play the rural policy support, Daiwa tipped Hindustan Unilever, the largest fast-moving consumer goods (FMCG) company in India, and to play premiumisation, it tipped Britannia Industries, one of the country’s leading food companies. It also flagged Crompton Greaves and Havells India as leading electrical appliance players in India.

Get Shenton Wire headlines in your inbox