The Asian consumer sector is set to deliver stronger returns over the next 10 years than it has in the past decade, representing an attractive buying opportunity for 2009, according to Mirae Asset Global Investments (HK), a unit of the Mirae Asset Financial Group based in Korea.
As the global economy continues to see weakness in 2009, the earnings outlook for Asia's consumer companies will demonstrate much greater resilience compared to other more export-oriented sectors, Mirae Asset says.
Mirae Asset believes that the discretionary consumer sector will perform more strongly in 2009 than it did in 2008, when many companies were aggressively sold off. Following the wave of new listings during the bull market, many consumer firms generated large cash reserves that have yet to be used.
Marco Giubin, senior manager for Mirae Asset's Asia-Pacific consumer equity portfolios, says many of these companies are priced to imply flat to declining earnings over several years.
"While we expect to see a slowdown, we're also seeing signs of growth. For example, some sportswear companies in China are still seeing double digit growth in forward orders covering the first half of 2009," he says.
On the policy front, Mirae Asset expects the Chinese government to announce another fiscal stimulus programme that will be more directed at the consumer.
Reflecting the lessons learnt from Asia's financial crisis 10 years ago, companies and consumers have very conservative gearing levels and household savings rates remain high, particularly in comparison to other regions.
"Asia is re-inventing itself from being the factory of the world to a consumer in its own right. Given where markets are today we believe that Asia's consumer sector may perform even better over the next 10 years than in the past decade when it delivered strong returns with low volatility," Giubin says.
"As Asian economies mature, consumer spending will become more significant, particularly against a backdrop of high household savings rates, favourable demographics, increasing urbanisation and higher than average economic growth," he adds.
Mirae Asset notes that over the past few years consumer firms have improved greatly in terms of corporate management, corporate governance and financial responsibility. As Asian consumer firms have begun to consolidate, the focus has moved away from growing market share at any cost to profitability and this has contributed to an upswing in return-on-equity in recent years.
The fund house also notes that Asia's regional indices are mostly dominated by the energy and resource sector as well as the financial sector so macro views on oil prices or the interest rate cycle can largely dictate the behaviour of these markets. In contrast, consumer stock performance is usually more related to company-specific issues.
"The fundamentals of domestic demand within the Asia-Pacific region remain strong and investing in a fund that provides exposure to a diversified, actively managed portfolio of consumer stocks could provide an attractive opportunity during 2009 and beyond," Giubin says.
Globally, the diversified businesses of Mirae Asset Financial Group have around $67 billion in assets under management.