The growth in consumption from China's new generation of affluent middle class is boosting entertainment, travel and other lifestyle sectors, the firm noted.
Yuming Pan, portfolio manager at Allianz Global Investors, also pointed out that China is Hollywood's largest gross market. He said e-commerce, airports and a shortage of hospitals are other themes to target.
Outbound travel is going to be an important growth area, according to Sam Le Cornu and Britney Lam from Macquarie Investment Management, whose holdings include Airports Thailand. Le Cornu is a portfolio manager on Macquarie's Asia New Stars and Asian All Stars funds, while Lam is an investment strategist on the Asian-listed equities team.
Currently only 4% of Chinese people own a passport, they explained. Within the next ten years that figure will rise to 14%. “Imagine what that will mean for the scope of outbound tourism,” said Lam.
The consumer story is also supported by the low level of consumer debt in China, according to Pan. “75% of consumers in China have zero debt, no mortgages, so the consumer leverage is strong; which is very encouraging,” he said. Pan also said it is an interesting time to have a look at value stocks in the region.
Tying in to the consumer story is the growth in mobile and smartphone usage in Asia, explained Ewan Markson-Brown, investment manager in the emerging markets equity team at Baillie Gifford. "Smartphones give the Asian consumer information and power," he said.
His top five picks are Chinese investment holding company Tencent, web services company Baidu, Alibaba, Internet content service operator Naver and Taiwanese multinational electronics contract manufacturing company Hon Hai Precision.