Asia’s Demographic Transition Creates Challenges And Opportunities – Invesco

Sally Ling

23 November 2012

Asia’s changing age profile is emerging as an increasingly important theme for anybody looking to invest in the region, according to the latest Invesco Risk & Reward report.

“The ageing population trend in Asia suggests that the positive contribution to growth that came from demographic structures will be drawing to a close in many of the region’s economies,” Annabel Betz, client portfolio director, Invesco Asia-Pacific, said in a statement. “On the positive side, the changing age profile of the region could offer a number of interesting investment opportunities as well.”

Betz suggests that the rapidly ageing societies - China, Korea, Taiwan, Singapore and Hong Kong - could benefit from a “second demographic dividend”. By encouraging the accumulation of assets during working years, boosting productivity or delaying retirement, these countries could lay the groundwork for sustaining high standards of growth even when age structures are no longer favourable. “Countries with a higher share of working population have a greater capacity to save – and as a consequence, they invest more,” said Betz,

On a sector level, Betz anticipates growing investment opportunities in age-related sectors such as insurance and healthcare. In addition, educational services, leisure and recreational services may see greater growth going forward as families spend more on the education of a smaller number of children and growing numbers of Asian retirees travel abroad or seek recreational outlets at home.

Countries with larger youth cohorts are expected to increased investor attention in the coming years. As well as the Philippines and the larger ASEAN markets, this group could include Bangladesh, Cambodia and Myanmar which are profiting from the relocation of low-end manufacturing out of China. However, these relatively “young” countries, India and Pakistan in particular, will have to earn their demographic dividends by enhancing worker productivity, basic education standards and economic infrastructure.