To boost consumer finance in Asia, UBS Investment Bank's Simon Smiles seeks longer-term exposure to the credit card sector in China, India and Indonesia.
Smiles, Product Manager in the Asian Equity Research department of UBS Investment Bank, noted a strong correlation between consumption per capita and the average number of credit cards per consumer. He based his recommendation on the UBS's latest Asian Structural Themes Q Series research report. The report seeks to identify which types of consumption in which countries will be the major beneficiaries in the future as well as which companies in the region are best placed to take advantage of these trends.
"Our aim was not to propose exposure to particular types of consumption in every country but rather to identify particular types of consumption in specific countries which, based on their structural, cultural and economic characteristics, we expect to benefit the most," Smiles explained.
The report focused on six consumption themes – the importance of domestic consumption to growth; stage of development; East versus West; extreme consumption; urban versus rural; and aged consumption. The company then mapped various characteristics of countries across Asia and, along with their GDP estimates, use their findings to forecast the nature of consumption in each country.
"For example, we believe that the link between greater urbanisation and an increased consumption of protein will prompt strong increases in demand for pork in China and dairy in India. Health and medical consumption is also likely to increase most strongly in countries with strong expected real economic growth, fast growing aged populations and relatively low government provision, such as China, India and the Philippines," added Smiles.
"Consumer finance also has significant potential over the medium to longer-term. The use of credit cards remains low in several markets," Smiles noted.
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