Asia’s extraordinary total addressable market can’t be ignored: Matthews

The total market demand for products and services in Asia, along with the growth and spending power of its consumer base, makes it the most attractive region for long-term stock investors, according to Matthews Asia.

In an investor note, Matthews Asia Head of Portfolio Strategy, David Dali, says the potential scope of wealth creation in Asia and its trajectory of discretionary spending “likely cannot be replicated anywhere in the world.”

“To put Asia’s total addressable market into perspective, let’s begin by visualizing ground zero: Asia’s population of approximately 3.5 billion versus the Eurozone of approximately 500 million,” he said.

“Secondly, visualize Asia ex Japan’s massive workforce growing its wages at an average of 7% per annum. Lastly, imagine those higher wages leading to consumer spending growth of over 5.5% per annum versus almost zero consumer spending growth in the largest EAFE countries in Europe.”

Dali called out healthcare, pharma, internet services companies, online entertainment, application software, electric vehicles, branded sportswear, cosmetics, and fintech as examples of industries where the investment manager is seeing the most innovation and secular growth.

“The impact of Asia’s growth in discretionary spending supported by almost inconceivable total addressable markets, higher wages and savings has led to strong tailwinds within many secular growth industries—with incumbent leaders and emerging leaders which investors can consider today.”

The top holding in the Matthews Asia Growth Fund (at August 20, 2021) is pharmaceutical development company Wuxi Biologics Cayman Inc (HK: 2269) with a 5.8% weighting.

Other key holdings include Sony Group, Bilibili Inc, Innovent Biologics Inc, and Xpeng Inc.

Matthews Asia is one of the best performing specialist Asian equities fund managers in the US.