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Equity Strategies to Position for China's Aging Population

29 June 2020Asia PacEmerging MarketsEquities
  • China's old age population share (aged 65+) may double from 12.6% to 26% in 2050, with the total population likely to peak in the late 2020s and then decline.
  • There are major economic implications from this: 1) growth may not be what it used to be; 2) industrial competitiveness is likely to come from labor quality instead of labor costs; 3) robotic automation is set to rise; 4) innovation may be more important than ever; 5) reforming the retirement system could be a challenge; 6) preparing for better health care and aged care offers opportunities; 7) a silver economy is a golden opportunity; 8) high savings and external surpluses are likely behind us; 9) industrial and property prices may lose some momentum; and 10) real interest rates / asset returns are likely to lower permanently.
  • From an equity strategy perspective, the aging population is likely to lead to more divergent performance among sectors. Sectors that may benefit include healthcare, information technology, consumer discretionary and insurance; while sectors that may face lower demand growth are materials, energy, real estate and auto.
  • Equity Strategies to Position for Chinas Aging Population

    Past performance is no guarantee of future results. Real results may vary.

  • Consumer: With senior consumers’ stronger health awareness and preference for products with good quality and superior brand names, a preference for more premium products in multiple consumer sectors may be accelerated as seniors pursue a high-quality elderly lifestyle. Dairy products, personal care lines, health supplements, performance-based sportswear and tourism may benefit.
  • Healthcare: An aging population and surge in chronic diseases, coupled with higher personal incomes mean greater demand for more and better healthcare. Citi analysts favor large pharmaceutical names with a proven track record, deep quality pipeline and strong product portfolio represented by oncology and chronic diseases drugs. Internet healthcare is also likely to play a key role in the next decade and enjoys tailwinds from policy reforms.

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