Recent Financial Industry Report Highlights the Future of the Consumer Business in Asia

While Chinese consumers, who spend freely and increasingly enjoy traveling, are expected to be growth drivers, Southeast Asian markets should not be overlooked.

HSBC revealed that it is closely monitoring Thailand’s home improvement market and Indonesia’s shopping mall sector as key consumer business segments in ASEAN.

The bank has prepared a report analyzing 21 consumer business stocks and forecasts that emerging markets in Asia will account for nearly 35% of the global economy by 2030, up from the current 26%.

“Research shows that small- and mid-sized cities in ASEAN will drive future economic growth,” said Nigel Keenan, a consumer business analyst. “In Indonesia, some relatively small cities are becoming high-growth hubs.”

“Gresik in East Java, Indonesia, is a case in point. The city has only 1.2 million residents, but nearly 60% of them are high-consumption consumers, spending about 12% more than the average Indonesian in urban areas.”

Keenan added, “Such development is key to generating profits for companies like Matahari Department Store, where nearly three-quarters of total sales in 2018 came from outside Jakarta, mostly from mid-sized cities.”

He also emphasized that companies operating retail centers for home-related products are attracting attention due to rising incomes and improved retail management systems.

“We believe that both of these long-term growth drivers will support medium-term growth for HomePro,” Keenan noted, adding that Thailand’s economy is directly influenced by Asian trade and Chinese tourists.

Southeast Asia may also benefit from well-known companies outside the region.

HSBC analysts highlighted the positive impact on Eclat, a Taiwanese clothing manufacturer producing for major sports brands such as Under Armour and Lululemon.

They noted in a new management plan to expand textile and apparel production that “Eclat is likely to benefit from orders shifting to Southeast Asia.”

They explained that the increased production capacity is expected to result from orders moving from China to Southeast Asia, capturing additional revenue from existing customers.

“Growth is coming from both directions. Due to escalating trade tensions between the U.S. and China in the second half of 2018, brand customers are seeking production bases outside China. Vietnam has emerged as one of the best destinations due to its infrastructure and complete textile supply chain,” Keenan said.

“Eclat closed all of its factories in China in 2016, and most production is now in Vietnam and Taiwan. In addition to U.S.-China trade tensions, rising labor costs in China remain a significant pressure for textile companies,” Keenan concluded.