The Asian Development Bank projects an average growth in emerging east Asia (the Association of South-east Asian Nations, China, Hong Kong, Taiwan, South Korea) of about 7.3% in 2011, following 8.8% growth in 2010. It notes that the weaker global economic outlook and a phasing out of fiscal and monetary stimulus within the region means economic expansion should moderate over the next 12 months.
As a regional macro variable, economic growth may only be a modest 7.3%. However, the Asia story is mixed since it is so heterogeneous. We need to look at individual micro variables on a sector or market level. The Asian bond market in 2011 is expected to post slower growth due to anti-overheating policies, austerity measures and a shakeout among risk assets, possibly a depreciation of Asian currencies and release of short US dollar positions.
In contrast, Asia capital market transaction volumes in 2011 are predicted to rise a further 15% on 2010 levels to reach $88bn. The Association of Asia Pacific Airlines (AAPA) forecasts a “very positive” 2011 for Asia-Pacific full-service airlines. In October 2010, AAPA members carried 15.9 million international passengers, an 11.8% year-on-year increase, with “robust” demand for business and leisure travel, supported by particularly strong demand on intra-regional routes. This marks the 12th consecutive month of traffic growth and the sixth consecutive month of double-digit growth.
China continues to post impressive growth and is expected to become the world's third largest prescription drug market in 2011. Sales of prescription drugs in the country will grow by $40bn through 2013. In the first 11 months of 2009, the medicine sector's combined net profit was $13.4bn, up 25.9% year on year. China’s petrochemical market grew 43% in first five months of 2010 alone. Its logistics outsourcing industry is expected to grow 33% each year through 2010, with 10 emerging inland logistics hotspots. The food-processing industry was minimally affected by the downturn, continuing its 30-year rapid expansion. In 2009, it achieved a new record high output of $662bn, up nearly 20% from 2008.
China’s food consumption in 2011 is forecast to grow 11.17% to $219bn. Automotive production increased from 5.6 million units in 2006 to 8 million units in 2010. Other forecasts predict the production of more than 10 million units a year by 2011.Concerns over capacity are likely to result in merger and acquisition activity and geographical consolidation. In 2011, the Food and Agriculture Organisation estimates Asia will account for 58.6% of the global consumption of fertiliser, although demand will increase by 10.4 million tonnes, growing at 2.1% annually for all fertilisers. In the information, communication and technology sector, 2011 is expected to experience built-up demand that will fuel a surge in industry spending.
Asia is expected to lead the upswing in the real estate market in 2011, with corporate occupiers expanding, relocating and upgrading offices, almost doubling 2009 levels of activity. The conclusion for Asian opportunities over the coming months is to look at the smaller but faster-bouncing, micro ping-pong balls, not just the bigger, slower, macro basketballs.
Lawrence Yeo is CEO and principal consultant of AsiaBIZ Strategy, a Singapore-based strategy and public sector consultancy providing Asia market research, market entry and expansion strategy and export/FDI promotion services. Email: email@example.com