Asia’s middle classes stoke a digital revolution
America is still an economic and military powerhouse. But when Donald Trump is inaugurated as America’s 45th president in January 2017, he could find it’s not so easy to win a trade war with Asia’s rising economies, and their growing middle classes.
Just to put it into perspective, the US has 4.3 per cent of the world’s population (320m of 7.4b), 21 per cent of the world’s gross domestic product (US$16t of US$75t), and nearly 40 per cent of the world’s military expenditure.
The degree to which the US continues playing the sheriff of the world, while China – the number two country economically – continues to greatly benefit from globalisation, transforming from a poor rural based economy to an industrial powerhouse in one generation, may be front of mind for Trump.
While Trump could be shaping for a “trade war” with the threat of 45 per cent tariffs on Chinese goods, it seems nothing will stop the e-commerce trajectory, particularly in Asia where we are seeing the development of an enormous middle-class across China, India and South East Asia.
For these emerging markets, mobile platforms are far and away the method of choice for internet access, and mobile and tablet usage has now surpassed desktops for the first time on a global basis.
South East Asia has a combined population of 600 million people, comprising relatively young social-media loving “mobile only” users. Apart from having different languages, consumer and cultural preferences and regulations, their “technology borders” are relatively porous.
When Alibaba (BABA.US) purchased a controlling interest in Singapore-based e-commerce company Lazada Group for US$1 billion in April 2016, it was a good indication of where Jack Ma thinks the future of e-commerce lies. Lazada Group operates sites in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
Although online shopping accounts for only one per cent of retail shopping today, this is expected to reach a double digit percentage, China style penetration, within the next five years. And while cash currently accounts for nearly 70 per cent of all the online shopping transactions in South-East Asia, Jack Ma has an eye on extending the Alipay digital payment ecosystem to this exciting market.
Montaka and the Montgomery Global Fund own shares in Alibaba.
Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
