Miss it, miss out The opportunity in Asian Private Equity

The region’s economies are undergoing a dramatic transformation, powered by technological prowess and the 4-Ms which characterise Asian consumers: millennial, middle-class, metropolitan and mobile-enabled. Nowhere else can match the region’s combination of scale and growth. Private equity has the keys to unlock this opportunity.

Private equity in Asia, driven by China and India, presents investors with an unparalleled investment opportunity. This is hinged on three tenets:

  1.   21st century Asian domination
  2. The 4-Ms of Asian consumers: millennial, middle-class, metropolitan, and mobile-enabled
  3. The advantage of tech-enabled disruption

In an environment of subdued global growth and lacklustre return expectations across most asset classes, private equity in Asia offers a rare glimmer of opportunity. The phrase “miss it, miss out” has never been more apt.

1. 21st century Asian domination

Statistics on the size and growth rates of emerging Asia, and China and India in particular, can be unfathomable compared with elsewhere. With populations of around 1.4 billion each, China and India are both over four times more populous than the US. Their combination represents 36% of all the people on earth.

They are also economic heavyweights. Both are forecast to be among the top five economies by nominal GDP in 2019, and in the top three by GDP in purchasing power parity terms
(Figure 1).

Not only is Asia large, it is also a significant engine of global growth. In 2018, the region was responsible for 41% of global growth, and it is forecast to contribute 44% of growth in 2019. China and India alone are expected to drive more than 30%.

It is also worth noting that, contrary to public perception, China’s economy has a much lower level of dependency on exports. As a percentage of GDP, this dependency has decreased from 36% in 2006 to about 20% of GDP currently. In addition, although the IMF has recently lowered China’s forecast growth rate for 2019 from 6.4% to 6.2%, in part due to recent trade war disputes, its economy is forecast to grow by as much in dollar terms this year as it did back in 2007, when GDP growth was 14% a year.

So despite trade war concerns, this combination of size and expected economic growth is unrivalled and stands in stark contrast to the sluggish growth expected in most of the developed markets.


2. The 4-Ms of Asian consumers: millennial, middle-class,

metropolitan, and mobile-enabled For investors, it is not just about the growth rate of the economy, but the composition of that growth that matters. Asia is set to be powered by the 4-Ms, being home to a large, millennial, increasingly middle-class, increasingly metropolitan, mobileenabled population. They are set to transform their economies. Whereas Asia was once the manufacturing workshop of the west, 21st century Asia is set to be powered by domestic consumption...