Singapore - Five blooming sectors

Asia is rising but which are the growth sectors? In a new report, ‘Imagining Asia 2020’, a team of researchers and analysts from DBS Bank makes its predictions.

AMID the uncertain financial and economic outlook, analysts have been urging investors to take a long-term view of companies.

Asia presents growth opportunities that will remain solid despite short-term upheaval, they maintain.

“Asia, excluding Japan, with its sheer size, youthful population and financial resources, will be critical to any new balance in global economies and even politics,” said Lim Say Boon, chief investment officer of DBS Bank’s wealth management arm, in the bank’s report titled Imagining Asia 2020.

The report forecasts growth areas in the region from now till the year 2020.

Asia’s “yet higher” consumption growth will help solve the world’s problem of a lack of demand, said Lim, especially since the West “appears to have hit a peak in its capacity to leverage and spend”.

DBS reckons that over the coming decade, there will be opportunities in housing, energy, health care, agri-businesses and travel, as Asians loosen their purse strings and increase spending.

Housing

Population and economic growth, urbanisation and infrastructure development will raise the demand for housing. Meanwhile, rising affluence will lead buyers to seek better quality housing.

Asians spent US$695bil (RM2.19tril) on housing last year, and by 2020 the annual figure should rise to US$1.11tril (RM3.5tril), estimates DBS. This assumes the US dollar remains constant, and will represent a 4.8% growth every year.

The pace and pattern of this growth will vary according to developments and demographics in each country.

Volume growth will be the main driver in Indonesia and Malaysia in view of the fact that people under 25 years old make up almost half of the populations, said DBS.

In China, low ownership levels, urbanisation and the fact that many people are of home-owning age will ensure robust housing demand.

With the notable exception of Singapore, the provision of housing is left largely to the private sector in Asia, with listed developers controlling 50% to 65% of the market share.

“With regulators trying their best to ensure a stable market, this industry will be sustainable and resilient,” said property developer CapitaLand’s chief executive Liew Mun Leong.

“We want to continue to be a part of the Asia growth story ... In particular, urbanisation will trigger increased demand for housing in countries such as China and Vietnam.”

CapitaLand will build tens of thousands of homes in both countries over the next few years.

Energy

Demand for energy is expected to grow rapidly, across all segments of the value chain.

The upstream segment includes oil – expected to remain the dominant fuel source – as well as coal and gas, also mooted to play key roles for Asia.

The growth in oil demand is expected to be led by Indonesia, China, Thailand and India. Each of these countries is expected to consume at least 3% more oil every year up till 2020.

In this space, rig-builders such as Singapore’s Sembcorp Marine and Keppel Corp can stand to benefit. Both these firms sell rigs to companies that drill for oil.

Companies are also investing in downstream services, like electricity generation and distribution, in anticipation of rising demand.

Sembcorp Marine’s parent company Sembcorp Industries runs power plants, and Keppel Corp also has a power generation arm.

A Keppel spokesman told The Sunday Times that the firm is expanding its natural gas-fired co-generation plant on Jurong Island.

Keppel, which has 20 yards in regions including the Asia-Pacific, Gulf of Mexico, Caspian Sea, Middle East and the North Sea, is also building rigs and other support vessels for its customers, with demand going strong.

“Besides international oil and gas players, national oil companies in Asia are expanding their exploration and production expenditures to meet this demand (for oil),” said the Keppel spokesman.

Another player in the energy space is Malaysia-listed infrastructure group YTL Corp, which owns Singapore power generation firm PowerSeraya as well as power stations in Malaysia.

Tan Sri Francis Yeoh, managing director of YTL Corp, said emerging economies in the Asian region have continued their strong growth momentum, despite volatile global economic conditions. He is thus “cautiously positive” about the prospects for the Asian energy industry.

Health care

DBS expects medical expenditure per person in Asia to more than double between now and 2020 to almost equal levels with the United States.

The increased spending will come as Asians enjoy longer lifespans and deeper pockets.

“We are one of the beneficiaries of this increased demand,” said a spokesman from Raffles Medical Group.

“Aside from the traditional countries like Indonesia, we are seeing more patients from Vietnam, Russia, China, Bangladesh and even places like Papua New Guinea. Popular specialities are oncology, cardiology, women’s health, orthopaedics and health screening.”

Other than Singapore, Raffles Medical is in mainland China and Hong Kong.

Health Management International (HMI), also listed in Singapore, has two hospitals in Malaysia and plans to expand both to cater to the growing number of patients.

It also has 20 patient representative offices in Indonesia, Cambodia, Malaysia and Singapore to attract patients and medical tourists to its hospitals.

“We are confident about the growth prospects for the healthcare industry in Asia,” said Chin Wei Jia, group general manager at HMI. “In particular, we are excited about the Malaysian healthcare market.”

Agri-business

“There will be plenty of people looking for a good meal in Asia, or rather more people being able to afford to do so,” said the DBS report.

Demand for food from the region is expected to more than double by 2020 to nearly US$3tril (RM9.43tril) per year, said DBS.

But even as Asia – and the rest of the world – guzzle more food, supply has not been keeping up, leading to rising prices, which can potentially benefit companies.

Over the past year, the prices of agricultural commodities have already outperformed industrial metals and stock indexes such as the Dow Jones Industrial Average and Straits Times Index, though precious metals have fared better.

Companies that can benefit include those in palm oil and rubber, two commodities that rely on Asia to produce the vast majority of global supply.

Palm oil companies like Golden Agri-Resources, Wilmar International, Indofood Agri Resources, First Resources and Kencana Agri are listed in Singapore.

They run plantations, and many are also involved in related activities like processing. Sri Trang Agro-Industry, also listed here, deals in parts of the rubber value chain.

Olam International sells 20 agri-products, including cashew, coffee and cotton. It has expanded across the value chain, buying plantations and farms, as well as selectively expanding into mid-stream and downstream operations like manufacturing food ingredients and packaged foods.

Travel and tourism

The newly-wealthy people in Asia like to travel, and a lot of them travel domestically, such as within China, using railways and staying in motels or hotels, said DBS head of wealth management Tan Su Shan in the report.

She noted that businesses near the major connection points, like train stations and airports, are also benefiting.

While the emerging middle class is not spending on high-end luxury, it is “massive” and it is “high cash-flow generating”, she noted.

Travellers from other Asian countries, and from outside Asia, could also boost the region’s tourism sector.

According to the World Tourism Organisation, China is now the third most visited country in the world, behind France and the US. Malaysia is also popular, coming in at No. 9.

In terms of individual cities, Singapore, Kuala Lumpur and Hong Kong are popular destinations.

JONATHAN KWOK 

The Sunday Times Singapore 

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