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Investing in Asia, will it lead global growth?

Soaring consumer spending and integration into global trade, capital, talent and innovation flows have transformed Asia from a mere participant in global growth to one of the leading players. Investment interest in Asia is therefore more appealing than ever.

Today Asia accounts for half of the world's Internet users (about 2.2 billion) and, in some technology fields, it is already the world's leading power. The sheer size of the region's digital population supports a thriving innovative technology sector. Asia currently has a sizeable volume of venture capital supporting technological innovation and entrepreneurship.

Thanks to this momentum, China is producing a stream of new companies seeking to meet the needs of today's consumer — more sophisticated and with a large tech component. As a result, the Asian giant has climbed the value chain from being the "world's factory", due to its cheap labour force, to a more prominent position, by leading the production of more complex goods and services, ceding its former primary role to other countries in the region. It is therefore becoming an increasingly consolidated emerging market.

Asian middle class spending on the rise

A few years ago, there were about 80 million middle class households in Asia. The Brookings Institution estimates that there will be 163 million upper middle class households by 2030.  Considering that the Asian middle class could soon reach three billion people, this augurs strong growth in demand for new services.

Growth in Asian consumer spending is supported by four mega trends: favourable demographics, rising disposable income, geopolitical stability, and digital tailwinds. In the next decade, ASEAN (Association of Southeast Asian Nations) will gain 140 million new consumers, representing 16% of the world's total, many of whom will make their first online purchase and buy their first luxury product. Income levels in Asia are rising faster than the global average, which means that the future of global consumer spending will be driven by the Asian consumer.

Here are some key trends in Asian consumer behaviour:

1.Luxury: spending on luxury goods and services, from fashion, jewellery and prestige cosmetics to works of art and high-end travel, is being driven by the rapid increase in the number of citizens with strong purchasing power, as well as the existence of a small group of billionaires with a taste for this type of goods.

2.E-learning: The coronavirus has given an unprecedented boost to Asian education companies. As hundreds of millions of students have been unable to attend school, the pent up demand for education is turning to distance solutions, resulting in explosive growth in digital enrolments; as a result, the online education sector has been experiencing an unprecedented boom.

3. Social commerce:Quite a few social networks make it easy to buy and sell products online. According to the Econsultancy report entitled The State of Social Commerce in Southeast Asia, 85% of shoppers in the region now find it "quick and easy" to buy products through social networks. The report states that the majority (84%) of respondents also said they will shop more via social media in the coming years.

At Santander Private Banking we see a great investment opportunity in those companies that are capitalising on consumer habits and demand growth in this continent and we channel this through investment vehicles that are widely recognised in the market to invest in Asia. All this is driven by our Future Wealth advisory framework, a global initiative that gives our clients access to upcoming investment trends.

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