Infrastructure investments in China will begin to fall away, with further investment best placed in the emerging markets of south-east Asia, according to PM Capital Emerging Asia Fund portfolio manager Kevin Bertoli.
He said Australian investors had benefited from the increased demand for commodities in China but this had begun to fall away.
“Fixed asset investments such as infrastructure in China are reaching the end of the road, but domestic consumption in other markets is taking off while consumer products and new media are picked up by younger generations in those markets,” he said.
Bertoli said these latter markets, which include the Philippines, Malaysia and Indonesia, are still in growth phase as they have an emerging consumer class among a growing younger population compared with China and Japan, which have large ageing populations.
“South-east Asia has growing economies with increasing levels of education, consumption and household savings compared with China, Hong Kong and Taiwan, which have ageing populations that are still relatively poor,” Bertoli said.
According to Bertoli these latter countries have experienced a net economic migration, with growth-creating resources moving out of the economy while their populations aged compared with south-east Asia, where the reverse is happening.
“The average age in China is over 40 but they are not able to generate personal wealth fast enough to match the ageing population, while in emerging Asian markets the average age is 25-30,” Bertoli said.
“The recent focus on Asia from Australia has resulted in people seeing decreasing value, but that’s because they are looking at China and Japan while small cap equities in south-east Asia fly under the radar.
“There are sectors in Asia that are looking like the US 20 years ago and while commodities have gone up and down with Asian economies, consumer-driven stocks have grown consistently despite other market conditions.”
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