Consumer Staples and Financial Services Will Boost Investor Interest in Asean | Asset owners


The spread of Covid-19 and low vaccination rates will continue to be a challenge in Southeast Asia, but sectors such as consumer staples and financial services provide opportunities for investors, experts from Eastspring Investments.

Companies capable of adapting to digitalization are of particular interest to the company, which functions as the asset management business of Prudential PLC and is supposed to manage part of the assets of the insurer.

Ari Pitoyo

“Companies need to be more nimble and able to dramatically reduce product offerings as product cycles get shorter,” Ari Pitoyo, Head of Eastspring Investments Indonesia, said at a webinar Wednesday July 28.

“From concept to manufacturing and sending the right messages through the right channels, these are important elements. So for us, in terms of investment, we are looking at companies that will be able to adapt to this process faster, ”he added.

In Vietnam, a young and large population, rapidly growing income levels and a rising middle class present potential in the consumer market, said Tran Thap Kieu Quan, head of fixed income for Eastspring Vietnam at the conference. webinar.

“Younger consumers and high income consumers tend to buy more and they tend to use modern commerce rather than traditional commerce. And we are seeing strong growth in modern trade in Vietnam, ”she said.

Tran Thap Kieu Quan

“Covid-19 has also accelerated the trend of online shopping. The potential growth of modern trade in everyday consumer goods is therefore strong in Vietnam, ”she added.

During the event, 45% of attendees voted consumer staples as the sector with the most opportunity over the next six months. Financials came next, with 34% of them believing they were the most promising.

“In the region, you are playing on very favorable demographics and dependency ratios and rising income levels,” said John Tsai, head of core actions for Singapore.

However, he warns that Covid-19, especially the Delta variant, is causing lower consumer spending and wiping out wealth in ASEAN countries.

“This has led to a lack of short-term pricing power of consumer staples, FMCG (fast moving consumer goods) companies, and we are already seeing lower prices among consumers in the region. “, did he declare.

But he thinks this phenomenon will be short-lived.

“We’ve always seen emerging markets, consumers trading and pricing power for very strong companies. But it’s a trend – it’s a challenge we need to be aware of in the short term, ”he said.

John Tsai

Southeast Asia has seen a resurgence in Covid cases, with Malaysia and Thailand recording more than 10,000 cases and Indonesia reporting 45,000 cases on Tuesday, July 27, according to the Center for Strategic and International Studies.

Vietnam, Myanmar and the Philippines have recorded more than 4,000 cases, Cambodia 685 and Singapore and Laos more than 100 cases.

“In Vietnam, economic growth remains difficult in the short term, but the long term is very positive. Today Vietnam is still in a growth cycle supported by strong fundamentals by the potential domestic consumer market and continued growth of manufacturing sectors, ”Quan said.

“However, with effective policies and a government response, we believe Vietnam’s growth is still at moderate levels this year as the government tries to complete vaccination of around 60-70% of the population by now. this year or early next year, “he added. she said.

Financially, Covid and digitization will impact the industry, but there are opportunities in markets such as the Philippines, which have a large unbanked population, Pitoyo said.

The Philippines had 5.2 million or 71% of its population without a bank account in 2019, according to the country’s central bank.

“In Singapore, within finance, not only is digitization [important], but also the massive influx of wealth and assets to Singapore [because of] encouragement from the private banking sector; and government regulatory policy to attract, for example, hedge funds and private equity funds to come and settle here. It had a huge impact on the economy here too, ”Tsai said.

Assets under management in Singapore grew 17% to $ 3.5 trillion and the city-state’s financial and fintech sectors are expected to create 6500 jobs in 2021, especially in technology, management, wealth, corporate banking and insurance, the Monetary Authority of Singapore said in June. .

However, there are challenges to watch out for, especially from Covid.

“The impact on the financial distress of the population is quite significant. So we’re probably going to see an increase in NPLs (non-performing loans) and bad debts down the road, as a lot of these loans are now sort of being pushed back and defaults go unrecognized, ”Tsai said.

“Now, but eventually when they do appear it will affect the cost of credit or, if it’s not NPL, it will manifest itself in the form of lower margins. So this is something to be aware of.

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