Mr & Mrs - CLSA [PDF]

Autumn 2007

Amar Gill, CFA Head of Thematic Research

Asia

Mr & Mrs

Asia’s middle class revealed

Mr & Mrs Asia

Contents Foreword............................................................................................ 3 Executive summary ............................................................................ 4 Rising income, falling fertility ............................................................ 6 Income, wealth, properties .............................................................. 13 Where does it all go?........................................................................ 20 Home, children and government ...................................................... 27 Investment implications................................................................... 32 Country profiles China....................................43

Malaysia .............................. 171

Hong Kong ............................65

Philippines ........................... 189

India.....................................83

Singapore ............................ 211

Indonesia ............................ 107

Taiwan................................. 227

Japan.................................. 125

Thailand .............................. 243

Korea.................................. 149 All prices quoted herein are as at close of business 14 September 2007, unless otherwise stated

The Mr & Mrs Asia survey After our China Reality Research team’s initial project undertaken in May 2007, we rolled out our Mr & Mrs questionnaire to households in all 11 countries in our universe. It covers China, Hong Kong, Taiwan, Japan, Korea, Thailand, Malaysia, Singapore, Indonesia, the Philippines and India. Our objective was not to be straight-jacketed by preconceptions of cut-off income levels, where discretionary expenditure take-offs would vary from country to country. The aim was to get a representation of mainly urban households across these countries and was conducted by market research companies as well as individuals CLSA contracted. In each country, we surveyed at least 1,000 people to obtain a statistically significant sample size but often went beyond this. In China, the survey covered 1,235 middle-income families across 57 cities. In India, we surveyed 1,616 households in 16 state capitals. Indonesia had the largest sample size of 21,000 across 20 cities, which we believe is the largest survey conducted in the country. The Mr & Mrs Asia series represents one of the most comprehensive surveys of Asia’s middle class ever undertaken, covering 35,200 households across the region. The data is aggregated for each country to provide unique insights on Asia’s middle class.

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Autumn 2007

Mr & Mrs Asia

Foreword Asia’s middle class is the sweet spot of the region’s Billion Boomers and understanding who they are and what they think is at the core of the region’s investment future. Investors often speak about Asian markets and economies as proxies on global growth and trade flows. A growing middle class must now be incorporated into the mix. This core demographic will drive shifts in spending, home ownership as well social and economic participation that will accompany any decoupling from the world economy. Till now, there has been no comprehensive study of what is likely the world’s largest concentration of entrepreneurs, professionals, white-collar and highly skilled workers. Over the past few months, we have surveyed the populations in the 11 markets in our universe to understand the dynamics and growth of Asia’s middle-class: their saving and spending habits as well as their aspirations. The results show a surprisingly large and growing class of producers and consumers that is rapidly changing the face of home ownership, domestic consumption patterns, credit use and demand for services from education to travel. Old measures such as per-capita and household income are no longer the best yardsticks to understand economic behaviour. In many economies, home ownership is high and debt low, rising asset prices mean that consumer spending patterns are far in advance of what would be expected simply looking at income. Access to education and advances in communication have propelled the region’s populations into a middle-class workforce where national boundaries are less relevant to lifestyle and choice than they have been in the past. Middle-class expectations in Cincinnati, Frankfurt, Shanghai or Mumbai are rapidly converging and access to the means necessary to buy a home, drive a car, educate the kids, travel abroad and save enough money to retire comfortably are within reach. While the shift of global manufacturing into Asia is widely acknowledged, this transformation, accompanied by advances in technology, has seen the emergence of a global managerial and professional class where skill sets are the dominant driver of salaries. Asia has been the prime beneficiary as these well-educated workers not only earn above-average wages but their lifestyle choices, spending and travel patterns often mirror US and European peers. This is a young, large and growing demographic entering into the picture. Asians are having fewer kids, have more discretionary income, and are more international in their consumer choices. As the region’s middle class expands and lifestyle expectations increasingly drive spending patterns, local economic choices are key factors in driving regional economies. The degree and speed of this transformation can be seen in many of the conclusions in our Mr & Mrs Asia series. Hard evidence of consumer-spending shifts and the impact of credit growth is also found in work China Reality Research has done in Charging China. This is a good companion piece to Mr & Mrs Asia to understand economic behaviour at the micro level - how the trends we see in income and consumer attitudes translate into action on the ground. Mr & Mrs Asia is the story that will dominate the next decade as the region shifts from being an economy led by secular developments in the global economy to domestically driven shifts in consumption, investment and government policy. Long term, we will see a vastly different landscape for investors in the Asian story. Jonathan Slone Head of Broking

Autumn 2007

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Executive summary

Mr & Mrs Asia

Mr & Mrs Asia

4

Rising income, falling fertility

Household incomes for Mr & Mrs Asia are rising but at quite different rates depending on where they live. Real per-capita income has more than doubled in China, and in India has risen 55% over the past 10 years. But household income is up barely 10% in Japan, Indonesia and Thailand. Across the region, Mr & Mrs Asia are having fewer children. Fertility has fallen, now below the replacement rate in most countries. As a result, Japan’s labour force is shrinking: For the rest of Asia, in the period 2005-20, labour growth rates will fall by 45% from the previous 15 years, impacting economic growth. Nonetheless, greater urgency to focus on productivity will raise per-capita income for Mr & Mrs Asia.

Income, wealth, properties

Malaysia, China, Hong Kong and India have the most households reporting a rise in incomes over the past 12 months; but in Japan and Thailand, more households report a decline in income rather than an increase. Savings ratios are highest in China, Malaysia and Singapore. Mr & Mrs Asia keep the bulk of their wealth in property, except households in Hong Kong and Japan where more than 60% of savings is in cash. Overall, households are generally cash rich, with an average above 30% of net wealth in cash and deposits. Excluding Singapore, other countries only average 21% of households having a mortgage.

Where does it all go?

Groceries and housing costs account for close to half of total expenditure. The cost of housing is lower in India and the Philippines partly owing to extended families living under one roof. Children’s education presents significant expenditure for Mr & Mrs Asia, while healthcare spending is also rising. Mobile phone and computer ownership is high yet less than half of households in most markets have a car or credit card. Of brands, Nokia dominates mobile phones, Sony electronic goods, and Toyota cars, while LG is making inroads for white goods.

Home, children and government

Average household size is about 1,000sf in most countries surveyed but a typical apartment in Hong Kong is only half the regional average. Household numbers are falling with the drop in fertility and fewer parents living in. Respondents are generally negative on governance: in Japan, the Philippines and Taiwan, 65-70% says government has deteriorated over the past 10 years. Government’s top priorities according to most respondents should be the economy, followed by education and income inequality. In Indonesia, India and Thailand, tackling corruption is cited as a high priority. The environment is generally a low priority across the region.

Investment implications

Some 40% in China and Malaysia - and 26% in Hong Kong - are looking to buy properties in the next 18 months; the sector should see structural support across the region. Demand for autos is ratcheting up in Malaysia and Thailand where per-capita income is just over US$3,000, allowing for higher discretionary spending. Support financing will provide opportunities for the banks in practically all markets. The momentum for consumer spending will remain with China and India, likely followed by Malaysia, the Philippines, Indonesia and Thailand. We also see further upside for mobile subscribers.

Positive for Asian equity valuations

Mr & Mrs Asia place a high priority on educating their children, and a number of countries now have publicly listed companies providing exposure to this sector. Healthcare business will see momentum build as the population ages in Japan, likely to be followed by Hong Kong, Singapore and Taiwan. The bulge in the working population getting past 40 will lead to additional savings for retirement and help drive up equity valuations, particularly China, Indonesia, Japan, Thailand, South Korea and soon India as well. The demographic dynamic of Mr & Mrs Asia is generally positive for equity markets in the region over the medium term. amar.gill@clsa.com

Autumn 2007

Mr & Mrs Asia

Executive summary

Our survey findings support key sectors and stocks Properties

Mr & Mrs Asia findings

Key picks

China

40% indicate interest in buying properties

Agile, NWCL, COLI

HK

26% looking to buy properties next 18 months; 42% of these are upgraders

Sino Land, Midland

Malaysia

42% intend to buy a property next 18 months; 87% have seen salary increases past 12 months

SP Setia, Sunway City, WCT Land

Singapore

Population growth via immigration for growth of approx 50% over next 10-15 years

CapitaLand, City Dev, Keppel Land, Allgreen

Thailand

19% looking to buy in Thailand over next year and half

Land & Houses

Taiwan

18% looking to buy in Taiwan over next 18 months

Huaku, Hung Poo, Taiwan Fertilizer

China

17% planning to buy a car over three years large against total household size

Great Wall, Cherry

India

21% of households have plans to buy a vehicle; of which 58% intend to buy cars

Maruti, Tata Motors, Mahindra & Mahindra

Japan

24% of respondents planning to buy a car in next 24 mths

Toyota, Honda, Nissan

Malaysia

22% plan to buy a car next 18 months

UMW, Oriental

Philippines

38% intend to buy a car next three years

Ayala Corp, House of Investments

Autos

Consumer/retail China

Per capita nominal income rising at 12% pa, with 57% of households seeing income increases, pushing up spending patterns

Ports Design, Parkson, China Mengniu, Synear

HK

12% of total expenditure on clothing, the highest in the region, giving upside as incomes also rising

Esprit

India

Low penetration of consumer durables which will rise with per capita income

Shoppers Stop

Indonesia

Consumption is basic; 80% visit traditional warungs

Unilever Indonesia, Indofood

S Korea

Per capital income rising x% pa will drive consumption

Shinsegae, Lotte Shopping, KT&G

Malaysia

Malaysians spend 9% of total expenditure on clothing; Padini one of the recognised brands

Padini

Philippines

‘Malling’ and dining out preferred activities

Jollibee, SM Prime, Robinson’s Land, Ayala Land

Singapore

37% want to buy AV equipment; 21% to buy computers; 13% other household appliances

Courts, Challenger, Isetan, CK Tang

China

Only 30% have a credit card; only 17% have a mortgage while 42% looking to buy properties - upside for both consumer credit and mortgage growth

CMB, CCB, ICBC

HK

Upside to mortgages as interest in properties go up; currently only 29% of households have mortgages

HSB, BoC-HK

India

84% of households currently do not have a loan; consumer credit rising at Cagr of 33% between FY02-07

HDFC, ICICI Bank, Max India

Indonesia

Financial penetration extremely low; 50% intend to open a bank account

BCA, Bank Mandiri, Bank Rakyat

Japan

67% are debt free but many feel ill-prepared for the future

Mizuho, MUFG, SMFG

Korea

Wealth management opportunities: 42% intend to increase exposure to equities over next 12 months against current 6% of assets

KIH

Malaysia

Mortgage growth likely as 42% of respondents are looking to buy a property

Bumi-Commrce, Maybank, AMMB, Public Bk, Eon Capital

Philippines

Upside for consumer credit with only 27% owning cards

BPI, BDO, Metrobank

Singapore

Upside for consumer credit with only 63% owning cards; also wealth management opportunities

DBS, UOB, OCBC

Thailand

Only 28% have credit cards, good LT upside for consumer credit

SCB, Bank of Ayudhya

India

91% penetration and 1.4 mobile phones per household has catching up still against China (99% penetration, 1.8 phones per household)

Bharti Tel

Indonesia

Only 33% of urban Indonesians have a mobile phone

Telkom Indonesia, Indosat

Malaysia

70% penetration for mobile and rising

DIGI

Thailand

91% have a mobile phone but this is still a top spending item and signs of high turnover favouring stronger operators

TAC

Banks

Telco

Source: CLSA Asia-Pacific Markets

Autumn 2007

amar.gill@clsa.com

5

Mr & Mrs Asia

Section 1: Rising income, falling fertility

Rising income, falling fertility Per capita growth rates of China and India way above rest of the region

Household incomes for Mr & Mrs Asia have risen but vary significantly, depending on where they live. Real per-capita income has more than doubled in China, and in India has risen 55% over the past 10 years. But household income is up barely 10% in Japan, Indonesia and Thailand. The varying macro-economic backdrop impacts on consumption patterns, with momentum in China and India generally ahead of other countries.

A large drop in fertility rates across countries surveyed

Across the region, Mr & Mrs Asia are having fewer children. The fertility rate has fallen below the replacement rate in most of the countries we surveyed. Japan’s labour force is already starting to shrink; while other countries’ labour growth rates in the period 2005-20 will fall by 45% from the previous 15 years. This will impact overall economic growth but per capita income for Mr & Mrs Asia should pick up, resulting from a greater urgency to raise productivity. Figure 1

Higher per-capita income associated with lower fertility

Asian fertility rates and per-capita income 4.0

(Births per woman)

3.5 3.0 2.5 2.0 1.5 1.0 0.5

Per capita income (US$)

0.0 0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Source: United Nations, Hokenson & Company, CLSA Asia-Pacific Markets

The improvement in per-capita income for most of Asia is well known. Less well understood are the demographic forces in play pushing fertility down. This very personal side of Mr & Mrs Asia is a key dynamic changing household circumstances.

Demographic backdrop Fertility rates more than halved between 1975 to 2005

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Fertility rates have fallen dramatically across the region. In the 11 countries surveyed for Mr & Mrs Asia, fecundity has more than halved from an average of 4.2 children per woman in 1975 to 1.9 in 2005. The decline in fertility has been sharpest in South Korea; down from an average 4.3 children per woman in 1975 to 1.2 by 2005, lower than the 1.3 ratio for Japan. The lowest fertility rate is in Hong Kong where on average each woman is having 0.9 of a child. In South Korea, Hong Kong, China, Taiwan and Thailand, the fertility ratio has fallen by 65% or more over the past 30 years.

amar.gill@clsa.com

Autumn 2007

Mr & Mrs Asia


Figure 2

South Korea’s fertility rate has fallen the most, now below Japan’s

Fertility rates – China, India, Japan, South Korea, Thailand 7

(Births per woman)

6

China

India

Japan

Thailand

South Korea

5 4 3 2 1 0 1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

Figure 3

Fertility rates are below replacement ratios for Thailand, China, S Korea, Taiwan, Hong Kong, Singapore and Japan

Fertility rates: 1975 - 2005 Philippines India Indonesia Malaysia Thailand China South Korea Taiwan HK Singapore (Per woman)

Japan 0

1

2

3

4

5

6

7

Source: United Nations, Hokenson & Company, CLSA Asia-Pacific Markets

As Figure 3 shows, fertility rates have fallen below the replacement rate of 2.1 per woman in most countries. The Philippines currently has the highest fertility rate of 3.5 children per woman of the countries in our survey (which is down from 6 in 1975). Only three other countries have fertility ratios above the replacement rate, they are: India (3.1 children on average per woman), Malaysia (2.9) and Indonesia (2.4). Falling fecundity can be explained by a mix of economies shifting away from agriculture to manufacturing, urbanisation, higher incomes, improved healthcare and child mortality as well as education. Greater economic freedom for women results in delayed marriages, while higher divorces also appear to be a factor. The result, as we discover in our country analysis is that average household sizes in Asia are smaller than might be expected.

Autumn 2007

amar.gill@clsa.com

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Mr & Mrs Asia

Did you know? On

average each woman in China had 6.2 children in 1955, which has fallen to 1.7 in 2005.

Hong

Kong has the lowest fertility in the region at just 0.9 child average per woman.

China’s labour force grew by 18% in the period

1990 to 2005 but is projected to increase to just under 5% over the next 15 years. Labour force growth in the period 2005-20 is

projected to slow to a third or less of what it was in the previous 15 years for Hong Kong, China, Taiwan and Singapore.

In Hong Kong, Taiwan, South Korea, Japan,

Singapore, China and Thailand, fertility has now fallen below the replacement level (2.1 children per woman) and hence the population will shrink.

Real per-capita GDP rose 124% between 1996

and 2006 for China and 56% for India, 16.5x faster than average per-capital GDP growth in Indonesia and Thailand over the same period.

The highest fertility in the region is the Philippines

where on average each woman has 3.5 children followed by India at 3.1 children per woman.

China’s private sector savings is estimated at

51% of GDP. Malaysia and Singapore also have private-sector savings of about 50% of GDP.

There are currently 10% more females than

males in Hong Kong, which is projected to rise to 41% more females by 2036. In China in 1990, there were approximately 12

marriages per 1,000 persons aged 15 years and over; by 2003 this had fallen to eight per thousand.

In the period 1996 to 2006, total

loan growth adjusted for inflation was 311% in India, ahead of 237% growth in China. For Hong Kong, Thailand, Indonesia, Japan and the

Philippines, outstanding loans at 31 Dec 2006 was lower than in 1996 adjusted for inflation.

In Hong Kong and Singapore,

the number of marriages per 1,000 persons aged 15 years and over has fallen from just over 10 to six since 1990.

Japan

is the fastest-ageing society: 20% of the population are already over 65, which will rise to more than one-third by 2050.

South Korea has the highest divorce rate in the

region: 55 for every 100 marriages currently. Divorce rates are 30 per hundred of marriages or higher also in Taiwan, Hong Kong and Singapore.

65% of India’s population is below 35 year of

age, of which half are below 25. Indonesia has 60 million households, growing by

Between 1990 and 2005, the Philippines labour

1.5 million a year; 85% of Indonesians marry before they are 25.

force grew by 58% and Malaysia’s 55% - the two countries with the highest labour-force growth seen in the region.

110 million Indonesians live in cities, a tenfold

Japan’s labour force grew by 4% in the past 15

increase since 1950; by 2030, the number of urban Indonesians will double.

years, in the period 2005-20 it is projected to fall in absolute terms by an estimated 11%.

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Mr & Mrs Asia


The crude marriage rate (the number of marriages per 1,000 persons aged 15 years and over) has also fallen. In Hong Kong and Singapore, it is down about 40% since 1990 to just six marriages per thousand. In South Korea and China, the rate has fallen to eight per 1,000, a drop of 30-37% from 1990. In the Philippines, a predominantly Roman Catholic country, the marriage rate has stayed sticky at 14 per thousand. Figure 4

Less people getting married in most countries, but holding steady in the Philippines

Crude marriage rates: Philippines, China, Korea, Singapore and Hong Kong 18

(No.)

16

China

HK

Philippines

Singapore

Korea

14 12 10 8 6 4 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: World Bank, Hokenson & Co, CLSA Asia-Pacific Markets

Divorce rates meanwhile have shot through the roof. Uptrends are evident for all countries where data is available, although in Hong Kong it has petered off. In South Korea, the divorce rate has risen sevenfold from 6 to 55 per 100 marriages and is now the highest in the region followed by Taiwan where it has risen almost four times to 48 per 100 marriages. In Singapore, the rate has risen more than three times to 30 divorces per 100 marriages while in China it has risen 3.3x to 19 per 100 marriages. Figure 5

Divorce rates trending up sharply, highest now in S Korea followed by Taiwan

Divorce rates per 100 marriages 60

(No.)

China

HK

Japan

Korea

Singapore

Taiwan

50 40 30 20 10 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Source: World Bank, Hokenson & Co, CLSA Asia-Pacific Markets

Autumn 2007

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Mr & Mrs Asia


Fewer and later marriages combined with more divorces bring down the birth rate in a region where having children outside wedlock is still pretty much taboo. The sharp fall in fertility already seen will lead to an equally dramatic decline in labour force growth. Figure 6

Labour growth rates will fall

Labour force growth Philippines Malaysia Singapore Indonesia India 1990-2005

Hong Kong

2005-2020

South Korea Taiwan China Thailand

Labour force growth (%)

Japan (20)

(10)

0

10

20

30

40

50

60

70

Source: ILO, United Nations, Hokenson & Co, CLSA Asia-Pacific Markets

Over the next 15 years, Japan’s labour force set to decline by 10.6%; ex-Japan labour force growth projected to decline 45%

In Japan, the labour force grew by 4.4% in total over the 15 years to 2005. For the following 15 years to 2020, its labour force is projected to fall by 10.6%. Ex-Japan, between 1990 and 2005, the labour force increased at an average Cagr of 2% across the other 10 economies surveyed; for the next 15 years the labour force Cagr is set to fall 45% to 1.2%. China’s labour force which grew by 18% in total over the 15 years to 2005 is set to rise just 5% over the next 15 years. Hong Kong, Taiwan and Singapore’s labour force growth will also slow to just one-third for the next fifteen years compared to the 1990 to 2005.

Labour getting scarce, greater focus on productivity required

With the slowing growth in the labour force, economic expansion will have to come more from productivity improvement which should be positive for per capita income of Mr & Mrs Asia. Barring a doubling in overall productivity, economic growth however is likely to slow over the medium-term. The changing demographic profile of Mr & Mrs Asia will also have implications for savings and potential flows into equities, which we survey in the final section of this report on investment implications.

Macro-economic backdrop Wide range of per capita income in the region

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Asia has an extremely wide range of income levels. Per-capita annual household income ranges from US$34,000 for Japan, close to US$30,000 for Singapore and Hong Kong to about US$1,000 for India and the Philippines. Across this range of income levels, household expenditure patterns and discretionary expenditure will vary. At the top end, households have greater income to spend on BMWs, Gucci and iPods; at the lower end, the marginal level of discretionary expenditure is spent on indulgences like cigarettes – Indonesia for instance is one of the largest markets for cigarettes with per capita 1,000 sticks smoked per year.

amar.gill@clsa.com

Autumn 2007

Mr & Mrs Asia


Figure 7

Savings ratio stays high even at higher levels of household incomes

Per capita income and private sectors savings (US$)

40,000

(%)

35,000

60 50

30,000

40

25,000

30

20,000 15,000

20

10,000

10

5,000 India

Philippines

Indonesia

China

Thailand

Malaysia

Taiwan

S. Korea

HK

Singapore

0 Japan

0

Source: CEIC, CLSA Asia-Pacific Markets

Highest savings in China, Singapore and Malaysia

From the macro-economic data we can derive private sector savings, ie, the national savings ratio netting off the government’s fiscal deficit. This shows around 50% of GDP saved by the private sector (households combined with the corporate sector) in China, Singapore and Malaysia. The Philippines has the lowest private sector savings at 20% of GDP; most other countries are around 30%. Although an imperfect measure for household savings, it would indicate a poor relationship between household income levels and the savings/expenditure mix.

Per capita GDP risen 124% over last ten years in China

How positive individuals feel and their expenditure patterns would appear as much a function of progress made in raising incomes rather than just on absolute income level. Real per capita GDP over the last ten years has risen fastest in China (124% over 10 years) followed by India (55%) and approximately 40% higher in South Korea, Taiwan, Hong Kong and Singapore. The laggards with regard to per-capita real income growth other than Japan (up 10% in total over 10 years), is Indonesia where it has risen just 15% from 1996 to 2006 and 18% in Thailand. Total growth in per-capita GDP over 10 years was only just above 20% in Malaysia and the Philippines. Figure 8

Per capita has risen fastest in China and India but lagged in Japan, Indonesia and Thailand

Change in real per-capita GDP 1996-2006 China India S. Korea Taiwan HK Singapore Malaysia Philippines Thai Indonesia

(%)

Japan 0

20

40

60

80

100

120

140


Autumn 2007

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Mr & Mrs Asia


Total loans adjusted for inflation in 2006 are lower than 10 years back in Hong Kong, Thailand, Indonesia, Japan and the Philippines

Per-capita incomes however are misleading as they do not account for changing income disparities. As a measure of the positive sentiment from rising median income levels, total credit growth is an alternative indicator. Adjusted for inflation, total credit over the past 10 years has grown the fastest in India, China and South Korea, more moderately in Taiwan, Singapore and Malaysia, while shrinking in Hong Kong, Thailand, Indonesia, Japan and the Philippines. Figure 9

Adjusted for inflation, India’s loan growth in the past 10 years is 311% ahead of China’s

Total credit growth 1996 – 2006 adjusted for inflation India China S. Korea Taiwan Singapore Malaysia Philippines Japan Indonesia Thai (%)

HK (100)

(50)

0

50

100

150

200

250

300

350


Varying growth rates in real per-capita GDP and strong contrasting credit growth show quite different rates of improvement in the economic well-being of households and economies in the region; and this is reflected in our findings on saving and spending patterns of households.

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Autumn 2007

Section 2: Income, wealth, properties

Mr & Mrs Asia

Income, wealth, properties Bulk of wealth is generally in properties

Malaysia, China, Hong Kong and India have the most households reporting a rise in incomes over the past 12 months. In Thailand and Japan, more households said their income has fallen compared to those who report their incomes having risen over the past 12 months. Savings ratios are high particularly in China as well as Malaysia and Singapore. Mr & Mrs Asia keep the bulk of their wealth in properties, the exception being households in Hong Kong and Japan where less than 20% of net worth on average is in properties but instead over 60% of household savings is in cash. Other households are also generally cash rich, with on average over 30% of net wealth in cash and deposits. Other than Singapore, less than half the households have a mortgage. Ownership is below 50% in Japan, India and Hong Kong stripping out homes provided for grown children by parents; in most other markets as well, there is substantial upside from the present ownership levels.

Income and savings Averages often hide as much as they reveal. Across our sample of eleven countries, the average household income is US$1,755 per month, according to official estimates. However this ranges from over US$4,000 for Japan and Singapore to below US$200 per month in Indonesia and India. For most countries, the median income estimate from the respondents is close to the official figures. However our sample gave a larger estimate than official income data for Hong Kong, Malaysia and Thailand. This raises the question whether in some countries official income data might fail to capture dividends, profits from businesses, trading gains – and whether there could also be under-reporting to the tax man. Figure 10

Income in the region ranges from over US$4,000 for Japan and Singapore, to below US$200 pm in Indonesia and India

Average household income Japan Singapore S. Korea Taiwan HK Malaysia Philippines Thailand China India (US$/mth)

Indonesia 0

500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000


Malaysia followed by China, HK and India have most households having incomes risen in the last 12 months

Autumn 2007

Over the past 12 months, Malaysia has the highest percentage, ie, 87% of respondents who have seen household income rise over the past 12 months, partly driven by the impact of the increase announced for the public sector. In China, Hong Kong and India where on average just over 50% of the respondents report a rise in household income over the past 12 months.

amar.gill@clsa.com

13


Mr & Mrs Asia

Did you know? Households

in Malaysia have the broadest increase in salaries: 87% of survey respondents in Malaysia say household incomes have risen over the last 12 months.

Hong

1.6m

64% of Hong Kong households

households in India estimated to earn over US$100,000 pa and about 100,000 have more than US$1m in assets.

37% of Filipino families have an overseas foreign

worker.

Kong and Japan households have the smallest share of net worth in properties at less than 20% by our sample with over 60% of wealth in cash and deposits instead.

that have bought equities over the past 12 months, the highest ratio in the region. Next highest is Taiwan at 45%. Home-ownership is below 50% in Japan, Hong

Kong and India (stripping out homes that belong to parents).

Filipinos are among the most optimistic: while

27% Filipino households report family income having risen over the last 12 months, 44% expect it to rise over the next 12 months; and 77% expect to be better off in five years. In the past 10 years, Hong

Kong households earning more than HK$60,000 per month increased by 43% but households earning less than HK$6,000 per month rose 64%.

About

25% of Indians, mainland Chinese, Taiwanese and Malaysians live in homes provided to them by their parents; similarly around 15% for Japanese and Filipinos, and 6% for Koreans and Singaporeans.

Over

33 million Indonesian households have no access to any sewerage facilities.

In Japan and Thailand more households have

seen household income fall rather than rise over the past 12 months, while in Taiwan the ratio is about equal. Japanese

are more negative about income prospects: while 25% of households said they had a decline in income over the past 12 months, 66% expect their income to decline in the coming 12 months.

60% of middle-class in China own their home; of

those that do not, 85% plan to buy in the near future. Approximately 40% of households in China are

looking to buy a property, and similarly for Malaysia. Only 1% of households in Indonesia have a

mortgage, 3% in the Philippines and 9% in India. The main concern for 46% of Japanese is lack of

savings for the future.

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Autumn 2007

Mr & Mrs Asia


Japan and Thailand have fewest households with incomes having gone up and more with incomes going down

Japan has the least number of households reporting household incomes rising in the past year at 14% while only 16% of households in Thailand have seen income rise in the past year. Interestingly, in Thailand and Japan, more households said their income has fallen compared to those who said their income had risen over the past 12 months, while in Taiwan an equal number reported household incomes going up as going down. Figure 11

Income change of households over last 12 months (%) Malaysia HK China India Singapore

Up

Down

Taiwan S. Korea Philippines Thailand (%)

Japan (40)

(20)

0

20

40

60

80

100

Figure 12

In Japan more expect income to go down rather than up

Expectations of household incomes to rise next 12 months (%) India China HK Singapore Philippines

Up

Down

S. Korea Thailand Taiwan Japan (80)

(%) (60)

(40)

(20)

0

20

40

60

80

100


Expectations for more income increases over the next 12 months in India and the Philippines

Autumn 2007

In general, there is greater optimism about the future, in particular in India where 63% of respondents expect incomes to rise over the next 12 months (compared to 50% who have seen it go up in the preceding year) as well as the Philippines where 44% expect their incomes to rise but only 27% saw it go up in the past year. There is greatest caution however in Taiwan where 29% of the households report an increase in income over the past 12 months, but only 18% project incomes going up over the coming year.

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Mr & Mrs Asia


Savings – Higher in the aggregate Estimate on average household savings from the survey below official data as not weighted for higher savings of those with bigger incomes

Our findings are generally below official estimates with regard to household savings. We derive from our survey households saving at between 15% to 20% of income in most countries while national statistics are generally closer to 30% and as high as 50% for some of the countries in our sample. The simple average result from a survey of this sort would however tend to under-estimate as the aggregate national average will be pulled up by higher savings of those with higher income (just as aggregate market PE is pushed up by high PE large caps, relative to the median PE of stocks in a market).

Discrepancies in national savings ratio and household savings

The aggregate economic data is a better indicator of total savings relative to income of the various economies; nevertheless the survey result gives an idea what the typical household saves. However, the national savings ratio includes net savings of corporations and the public sector and hence is an imperfect indicator for household savings. We stripped out the public sector in the national savings to derive savings of the private sector. This still leaves net savings of the corporate sector in the figure. If corporations have positive cashflow after capex, then households savings would be a few percentagepoints lower than the private savings ratio indicated in the chart below. Figure 13

Private sector savings highest in Malaysia, China and Singapore; lowest in the Philippines

Private sector savings Malaysia China Singapore India Thailand S. Korea Indonesia Japan HK Taiwan (%)

Philippines 0

10

20

30

40

50

60


Most countries have private sector savings almost exactly 30%

From the official data, private sector savings is highest at around 50% of GDP in Malaysia, China and Singapore – the relative order of these could be different once corporate sector savings is adjusted for. China’s high savings is attributable to the lack of social security and public healthcare, while Malaysia and Singapore have high compulsory savings through the national pension programmes. Curiously, practically all the other countries in our sample have private sector savings almost exactly 30%. The lowest savings ratio in the Philippines at 21% could partly be explained by the finding that Mr & Mrs Philippines are the most positive that future income growth will be better than in the recent past.

Wealth in properties and cash Bias towards properties as a store of wealth

16

There is a general bias in Asia towards keeping wealth in properties. Their homes account on average for around 50% of net wealth of households in India, South Korea, Malaysia, Singapore and the Philippines. For most other countries, properties would account for about 40% of net wealth of

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Mr & Mrs Asia


households. In Japan and Hong Kong, however, it is lower at just 12-15% on average of the wealth of households for our sample. This can be explained by the severe property deflation that both markets have experienced with a resulting wariness in investing in properties. This has kept home ownership relatively low at only around 60% for both Japan and Hong Kong. Figure 14

More than half household wealth in properties in the Philippines, Malaysia, Korea and India, but less than 20% for households in Japan and HK

Percentage of net wealth in properties Philippines Malaysia S. Korea India Singapore Taiwan Indonesia HK (%)

Japan 0

10

20

30

40

50

60

Figure 15

HK and Japan have 60% or more of household wealth in cash; but only a small percentage of wealth in cash in Singapore and Indonesia

Percentage of net wealth in cash & fixed deposits HK Thailand Japan Philippines S. Korea Taiwan Malaysia India Indonesia (%)

Singapore 0

10

20

30

40

50

60

70

80


In Japan and Hong Kong less of wealth in properties but more in cash

Autumn 2007

Given their low exposure to properties, these households also have the highest portion of wealth stored just in cash. From our survey results, 69% of net wealth for Hong Kong households is in cash and in Japan it is 60%. In practically all the other countries, 30-40% of the sample households average wealth is in cash and deposits.

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Mr & Mrs Asia


Figure 16

HK and Taiwan have the most households investing in stocks in the past 12 months

Households that have bought stocks and shares last 12 months (%) HK Taiwan S. Korea Singapore China Japan Thailand Malaysia India Philippines (%)

Indonesia 0

10

20

30

40

50

60

70

80


64% of households in HK have bought stocks in the past 12 months – the highest ratio in the region

Stocks and shares generally account for just 5-10% of household wealth across the countries surveyed. 64% of Hong Kong households have invested directly in equities over the last 12 months, the highest proportion among our country samples, and contrasts with the other city-state Singapore where only 24% of the households have bought equities in the last year. This is probably a result of the lure of IPOs in Hong Kong over the last year that provided quick and apparently sure gains that lured the punters in. Taiwan has the next highest participation rate in the stockmarket with 45% of respondents stating they have bought equities in the last 12 months – much of which we believe has been equities outside Taiwan - followed by South Korea where 35% of respondents state they have bought equities in the last year. 20% of our sample for China has bought equities in the last twelve months which is about double the 11% ratio for India. The lowest participation rates in the equity markets are Indonesia and the Philippines at 1% and 3% respectively of our survey respondents.

Home ownership and mortgages Home ownership over 80% in Singapore and Indonesia . . .

18

Home ownership averages 60% across the countries surveyed. It is close to 90% of our sample in Singapore and around 80% in Indonesia. However, stripping out homes where parents provide the homes for grown children (usually a “first home” for a young family), it is below 50% in Japan, Hong Kong, and India.

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Mr & Mrs Asia


Figure 17

. . . but below 50% in Japan, HK and India (stripping out houses provided by parents)

Home ownership Singapore Indonesia Philippines Taiwan China Thailand Malaysia S. Korea HK India (%)

Japan 0

20

40

60

80

100

Figure 18

Other than Singapore, in other countries less than half of households have a mortgage and below 10% in Indonesia, the Philippines and India

Households with a mortgage Singapore Malaysia Japan Taiwan HK S. Korea Thailand China India Philippines

(%)

Indonesia 0

10

20

30

40

50

60

70


Around 70% of homeowners in Malaysia and Singapore have a mortgage to service but less than half in other countries

Against relatively high ownership, the number of households with a mortgage is relatively low. More than half of homeowners have either paid off their mortgage, or their property was bequeathed or purchased using cash. Only about 10% of homeowners in Indonesia, the Philippines and India have a current mortgage to service with the ratio at 30-40% for China, Thailand and Taiwan. In Singapore and Malaysia, however, around 70% of homeowners have a mortgage to service. Indeed, we found that less than 10% of our overall sample had a mortgage in Indonesia, Philippines and India, while in China, Thailand, South Korea, Hong Kong, only 15-30% of households surveyed have a mortgage. With low levels of mortgages and the trend to owning properties, we found a high proportion inclined to purchase properties in China, Malaysia and Hong Kong.

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19

Mr & Mrs Asia

Section 3: Where does it all go?

Where does it all go? Education expenditure is a significant item for Mr & Mrs Asia

Groceries and housing generally account for close to 50% of total expenditure for Mr & Mrs Asia. Housing costs are lower, on average, in India and the Philippines, partly because extended families often live under one roof. Spending on children’s education is significant, while healthcare expenditure is also rising. Ownership of mobile phones and computers is generally high, but less than 50% of the households in half the markets have a car. We see scope for credit-card ownership to increase in China, India, Indonesia, the Philippines and Thailand, while average spending per card is relatively low across the region. Nokia dominates among brands for mobile phones; Sony tops the list for electronic goods; Toyota is the leading brand for cars; and LG is making inroads in some of the markets for white goods.

Bulk of expenditure on groceries and housing Groceries and housing form bulk of expenditure

Groceries account for 20-30% of average household expenditure across the countries surveyed. Generally, the amount spent on housing - either rent or mortgage payments - comes fairly close to the total spent on groceries, although it is a much lower share of expenditure for households in the Philippines and India, where extended-family living arrangements are common, or where parents provide housing for their grown children.

More spent on children’s education than housing in China and Korea

In Korea, housing accounts for 13% of expenditure compared to 22% spent on children’s education. Likewise in China, housing accounts for 10% of household expenditure on average versus 15% spent on children’s education. In Taiwan and Thailand the amount that households spend on children’s education is very close to their expenditure for housing at about 15% of the total.

Some 10-15% spent on transport; health care becoming significant

The next largest item of expenditure is generally transport, accounting for 1015% of the total. Spending on other items is more varied across the countries. Healthcare spending averages 12% of household expenditure in Singapore and Taiwan, and was also significant in Malaysia and the Philippines where the public is increasingly turning to private care. Figure 19

Groceries and housing close to 50% of most household’s expenditure

Household expenditure on rent and housing cost HK Indonesia Taiwan Singapore Japan

Groceries

Malaysia

Rent/mortgage

S. Korea Thailand China India

(%)

Philippines 0

10

20

30

40

50

60


20

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Mr & Mrs Asia

Did you know? In Korea, a typical household

Toyota is the top car brand in

spends 13% of total expenditure on housing but 22% on children’s education. Similarly in China, more is spent on education than housing.

Asia other than India, South Korea and Malaysia (but the top foreign brand in Malaysia).

A typical Indian household devotes 8% of total

expenditure to entertainment. Only 17% of households in India have computers

compared to 65% in China.

Only 8% of Chinese households

have a car, of which 30% were bought in the past 12 months; 59% of those who buy cars in the mainland pay by cash. Some 80% of Korean households own a car, but

only 1% have an import.

Some 5% of Indonesians and

8% of Chinese own cars. An increase to 80% over time, in line with richer Asian countries, would equate to demand for 42m cars in Indonesia and 290m in China.

Nike is regarded as one of the top apparel brands

in Hong Kong, Korea, Malaysia and Taiwan. Only 1% of Koreans travelled

overseas in the past 12 months for a holiday. Around

Only one in five households in Hong Kong owns a

two-thirds of cars in India are Marutis.

car. The average family in India dines out together In China, 30% of middle-class households have a

just 10 times a year.

credit card, compared to only 20% in India. Most Filipino families (90%) dine out almost Nokia is the top mobile phone brand in eight of

every week.

the ten markets surveyed. The majority of households in India (84%) have The iPod is the top MP3 player in

three of the markets (Japan, Taiwan, Hong Kong), but Sony MP3 players lead in most other markets. Sony is one of the top three brands for digital

cameras in all markets other than Japan. Lenovo is the top brand for computers in China

and ranks third in Hong Kong, but does not register among the top three in other Asian markets. LG is the top washing machine

brand in Singapore, India and Thailand, and the top airconditioner as well as computer brand in India.

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never taken a loan. Three out of four Indonesians do not have a bank

account. Indonesians on average smoke 1,000 cigarettes a year. Only

1% of Indonesian households have a credit card; just half of the credit cards were used in the previous month.

Between 2001 and 2006, the number of Indian

mobile phone subscribers has increased by a factor of 20, while the number in Indonesia has increased eightfold. Over the same five-year period, the number of mobile subscribers in China has increased by 208%, but Thailand and the Philippines’ subscriber growth was also higher than China’s in the past five years.

21

Mr & Mrs Asia


Communications around 10% of expenditure in Korea and India

Utilities are another significant item, accounting for more than 10% of household expenditure in Thailand and the Philippines. Communications also accounts for about 10% of expenditure in South Korea and close to that in India, where households also devote 8% of household expenditure to entertainment, keeping Bollywood rolling. In Indonesia, 18% of total expenditure is on tobacco and beverages. Hong Kong residents allocate 12% of total expenditure to clothing, the highest proportion among countries in this survey - Japanese, for example, direct 7% of spending to clothing. Looking at big-ticket purchases in the past 12 months, we find that 10-15% of households in Japan, South Korea and Thailand and 20% in Malaysia have bought a car. Next in line were mobile phones, with households in all countries more likely to own a mobile than a computer. On average, TVs took third place among big-ticket expenditure items. Figure 20

High mobile penetration rates, except Indonesia

Ownership of mobile phones Singapore HK S. Korea Japan Philippines China Taiwan Thailand India Malaysia (%)

Indonesia 0

20

40

60

80

100

120

Figure 21

Fewer computers in Indian, Thai households

Ownership of computers Japan S. Korea HK Taiwan Singapore China Philippines Malaysia Thailand (%)

India 0

20

40

60

80

100

120


22

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Mr & Mrs Asia


Three mobiles/household in Japan, S Korea, HK, Singapore and Taiwan

Practically all respondents had mobile phones, though only 33% of our Indonesian respondents had one. In Japan, South Korea, Hong Kong, Singapore and Taiwan, households have three mobile phones each; in China, Malaysia and the Philippines households average two mobile phones each.

Most have computers, but less than half in Thailand, India, Indonesia

Ownership of computers is also high in Hong Kong, Japan, Korea and Taiwan, although somewhat lower at 81% in Singapore. However, only 43% of households in Thailand and 17% in India have computers, based on our survey, and the ownership rate in Indonesia is likely to be even lower. Figure 22

Car ownership highest in Japan, South Korea and Taiwan . . .

Ownership of cars S. Korea Japan Taiwan Malaysia Philippines Thailand Singapore HK India China (%)

Indonesia 0

10

20

30

40

50

60

70

80

90


. . . lowest in Indonesia, China, India and HK

Practically all homes in our survey have TVs, although curiously the ratio is lowest in Malaysia where we found 11% of respondents did not have a TV. There was greater variance in car ownership patterns, ranging from around 80% in Japan, South Korea and Taiwan, to just over 60% in Malaysia and the Philippines, and a low of 5% in Indonesia, 8% in China and 19% for India. Among the relatively richer Hong Kong residents, only one in five of our respondents have a car because of good public transport and exorbitant fuel and parking charges.

Spending it - Credit cards Ownership of cards ranges from 90% in Korea and Hong Kong, and close to 80% in Japan, to approximately 30% for China, Thailand and the Philippines. Only 20% of Indian households we surveyed had cards, while credit-card ownership barely registers in Indonesia. Local banks tend to sew up clients with cards

In most of the markets, the larger domestic institutions account for a greater percentage of the cards issued. For Japan, 38% of our respondents had a JCB card, in India 35% hold a card issued by ICICI, while in China 27% of respondents had an ICBC card. Of the foreign banks, Citibank has made stronger inroads in Singapore and the Philippines, where 26% of cards held by our respondents were issued by the bank. In Malaysia 19% of card holders we spoke to had a Citibank card.

High card spenders in Singapore

Despite the wide divergence in incomes we found that in most of markets the typical spending per month on cards was around US$300 in Japan, Hong Kong, Thailand, India. Card spending was highest in Korea at US$800 per month, and lowest in Indonesia at just US$100.

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Mr & Mrs Asia


Figure 23

Low penetration in Indonesia, India, Philippines, Thailand and China

Ownership of credit cards HK S. Korea Japan Malaysia Taiwan Singapore China Thailand Philippines India (%)

Indonesia 0

20

40

60

80

100


Brands – Nokia, Sony, Toyota are way ahead Certain brands have made a strong showing in Asia, with very high acceptance levels. This is particularly so for mobile phones where Nokia is the top brand in eight of the 10 markets surveyed (low penetration rate overall and thus no data on mobile phone brands for Indonesia). Over 90% of the mobile phones owned by our Philippine and Thai respondents are a Nokia, versus 73% of mobile phones in India and 55% in Malaysia. Sony the brand for TVs, MP3 players and digital cameras

Sony is the brand of choice for TVs in more of the markets than any other, accounting for 49% of TV sales in the Philippines and close to 30% in Singapore and Malaysia. It is also emerging as one of the top-two TV brands in half of the markets covered. Sony was also one of the top-three MP3 player brands, emerging as the top brand in Thailand, Philippines, India and Malaysia. Sony is also a leader in digital cameras, although interestingly it is not among the top-three in Japan. Canon accounted for 31% of digital cameras owned by our respondents in Japan; across the region Canon is a close competitor to Sony in this space. The Apple iPod is the top MP3 player brand in Hong Kong (accounting for 46% of MP3s owned by our respondents), as well as Japan (33%) and Taiwan (22%). Samsung is the top-selling MP3 player in Korea and is also one of the top-three brands in Hong Kong, India and Thailand.

24

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Mr & Mrs Asia


Figure 24

Top brands in Asia Nokia the top handset brand in eight of the ten markets surveyed

Sony is the top brand for TVs followed by Panasonic and Sharp

Sony is the top MP3 player brand in more markets vs Apple’s iPod, which however dominates in Japan, Taiwan and HK

Sony leads Canon for digital camera sales in the region

HP is the strongest of the computer brands

Mobile phones China HK India Japan S. Korea Malaysia Philippines Singapore Taiwan Thailand Television China HK India Japan S. Korea Malaysia Philippines Singapore Taiwan Thailand MP3 HK India Japan S. Korea Malaysia Philippines Taiwan Thailand Digital camera HK India Japan S. Korea Malaysia Philippines Taiwan Thailand Computers China HK India Japan S. Korea Malaysia Philippines Taiwan Thailand

Top Nokia Nokia Nokia Sharp Samsung Nokia Nokia Nokia Nokia Nokia

Second Motorola Sony-Ericsson LG Panasonic LG Sony-Ericsson Motorola Sony-Ericsson Motorola Sony-Ericsson

Third Samsung Motorola Motorola NEC Motorola Motorola Sony-Ericsson Samsung Sony-Ericsson I-Mobile

Hanghong Toshiba LG Sharp Samsung Sony Sony Sony Panasonic Sony

Konka Sony Oniba Sony LG Panasonic Sharp Toshiba Sony Panasonic

TCL National BPL Panasonic Anam Toshiba Panasonic Panasonic Sampo Samsung

Apple iPod Sony Apple iPod Samsung Sony Sony Apple iPod Sony

Samsung Samsung Sony i-River Apple iPod Panasonic Sony Apple iPod

Sony Philips i-River Sony Other Apple iPod Panasonic Samsung

Canon Sony Canon Samsung Canon Sony Sony Sony

Sony Canon Fujifilm Sony Sony Canon Canon Canon

Nikon Kodak Olympus Canon Olympus N/A Nikon Nikon

Lenovo HP LG NEC Samsung Dell IBM ASUS Acer

Founder Dell Samsung Fujitsu Sambo HP HP Acer Samsung

Dell Lenovo HP Sony LG Acer Apple IBM HP


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Mr & Mrs Asia


Figure 25

Top brands in Asia Toyota clearly the top auto brand in Asia

Hitachi and Mitsubishi the top brands for AC

LG the top brand for washing machines

Cars HK India Indonesia Japan S. Korea Malaysia Philippines Singapore Taiwan Thailand Air-conditioners China HK India Japan S. Korea Malaysia Philippines Taiwan Thailand Washing machines HK India Japan Malaysia Philippines Singapore Taiwan Thailand

Top Toyota Maruti Toyota Toyota Hyundai Proton Toyota Toyota Toyota Toyota

Second Mercedes Hyundai Mitsubishi Honda Kia Perodua Mitsubishi Honda Ford Honda

Third Honda Tata Suzuki Nissan Daewoo Toyota Honda Nissan Nissan Isuzu

Gree Hitachi LG Mitsubishi Samsung Panasonic Condura Hitachi Mitsubishi

Haier Philco Samsung National LG National National TECO Panasonic

Midea Midea Kenstar Toshiba Winia N/A Carrier Panasonic Daikin

Whirlpool LG Hitachi Samsung Sharp LG Panasonic LG

Hitachi Videocon Sanyo Panasonic National Samsung Sanyo Samsung

Rasonic Samsung Toshiba N/A LG Toshiba TECO Hitachi


26

LG making inroads through washing machines

Of the other rising electronics brands from the region, we see LG making inroads, particularly with washing machines, for which it is the top brand in India and Thailand, based on our survey. The brand also ranks among the top three in Singapore and the Philippines.

Toyota way ahead of other car brands

The top brand for cars in the region, by a wide margin, is Toyota. It is the top brand owned by our respondents in Japan (29%), as well as in Thailand (53%), Indonesia (40%), Hong Kong, Taiwan, Singapore and the Philippines, as well as the top-selling foreign brand in Malaysia. The next most popular is Honda followed by Nissan. In India, 65% of car owners have a Maruti, but the top-selling foreign brand is Hyundai.

Nike top apparel brand in most countries

The data for apparel brands are somewhat incomplete as in a number of markets clothing brands are not important. However, in four of the five markets with available data, Nike emerges as one of the top-three brands, ie, in Hong Kong, South Korea, Malaysia and Taiwan.

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Mr & Mrs Asia

Section 4: Home, children and government

Home, children and government Households shrinking; most feel government has deteriorated in past decade

The average home is about 1,000 square feet in most countries. Thai homes are larger while the typical apartment in Hong Kong is only half the regional average. Philippine and Malaysian households contain five persons typically, but in other countries this figure has declined to just three as fewer parents live together with adult children and fertility rates have fallen. Most parents want their children to go to university, although curiously more Japanese respondents are taking a liberal view of their children’s education. With the exception of Singapore and Malaysia, respondents generally felt governance has deteriorated over the past decade; this was particularly so in Japan, the Philippines and Taiwan. Respondents named the economy as the top priority for the government, followed by education and income inequality; in Indonesia, India and Thailand tackling corruption is cited as a high priority.

Households shrinking Homes are not large, typically 1,000sf

Across most of the countries, the average home is 1,000sf. Thai respondents have the largest homes (1,400sf on average), while those living in Hong Kong have the smallest, with a median size of 500sf, largely due to the high cost of land. Within this relatively small space, most households surveyed contained three to four members. The largest households are in the Philippines (five members on average per household) followed by Malaysia (4.8) and India (4.3). In China, Hong Kong and Japan, a typical household has just three persons. Figure 26

Larger average home sizes in Thailand, smaller in HK and Japan

Average apartment size Thailand Taiwan Singapore Philippines Indonesia China India Malaysia S. Korea Japan (sf)

HK 0

200

400

600

800

1,000

1,200

1,400


Malaysians are most likely to have parents living with them, based on our survey (61% of respondents); while close to half of respondents in Indonesia and Hong Kong also lived with their parents. However, this extended-family living arrangement was uncommon in China, Japan and South Korea.

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27


Mr & Mrs Asia

Did you know? The median apartment size in

In Singapore, 84% state that the

Hong Kong is 500sf, half the size of the typical home for the rest of the region. Only 12% of the population in Hong Kong live in apartments larger than 1,000sf.

republic is now better governed compared to the mid-nineties. Most of respondents in Indonesia

(81%) felt that tackling corruption should be the top priority of government.

Malaysians are most likely to have parents living

with them, based on our survey (61% of respondents); while close to half of respondents in Indonesia and Hong Kong also had parents living with them. In India, more parents (34%) now prefer their

children to study medicine (27%).

engineering

rather

Some 70% of parents in Korea expect their

children to work overseas, of which more than half expect their children to work in the US. In India, 43% of parents want their

than

children to get a Master’s degree, while 29% want them to get a PhD.

Being a government official was the top preferred

About half of Malaysian households

profession for their children cited by parents in Taiwan and Thailand.

expect to send their children abroad to study. Some

More than two-thirds of parents in Taiwan and

55% in China send their children for extra lessons in English. In Japan, the top extra-curricular activity is sports (32% of our respondents). In India, extracurricular activities consisted of

24% of Singaporeans are considering migrating for better prospects; 42% of these are considering migrating to Australia.

Around half of Thai respondents believe the

current military government is Thaksin’s; 16% think it is better.

worse

than

academic coaching for 95% of the households.

Only 3% of Taiwanese mentioned handling of

Nearly two-thirds of respondents

cross-straits issues as the government’s top priority.

in Hong Kong consider the risk of unemployment their top concern. For 10% of households in India, a

major concern is marrying off their daughters. Roughly a third of Indians say a major reason for saving is for their children’s marriage.

Some 46% of respondents in Hong

Kong believe governance has deteriorated in the past 10 years versus 18% who think it has improved; 88% are in favour of “one-person, one-vote” for Chief Executive elections by 2012.

Some 70% of respondents in the

Around a third of Japanese rate the environment

Philippines felt that governance now is worse than ten years ago.

as one of the top-three priorities for the government; for the rest of Asia, only in Hong Kong and Indonesia does the environment rate as one of the top-three priorities for the government.

In Taiwan and Hong Kong, 65-

66% feel governance has deteriorated over the past 10 years.

28

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Mr & Mrs Asia


Figure 27

Typically more people in a household in the Philippines and Malaysia than in India

Average number of occupants per household Philippines Malaysia India Thailand Taiwan Singapore Indonesia S. Korea HK Japan (No.)

China 0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5


Decline in academic pressure on children in Japan?

While households are having fewer children (see Section 1), parents’ aspirations seem to be rising. Almost without exception, parents we spoke to would like their children to go to university. Somewhat surprisingly, the ratio is lower in Japan where only 78% of respondents said they wanted their children to go to university. In the land of the rising sun, it appears there is a growing view that it might be best for children to pursue careers that need not involve tertiary education.

In most countries, doctor was a top profession preferred for children

In most countries, being a doctor was one of the top-three occupations that parents would prefer for their children. In India, however, 34% preferred their children to pursue an engineering career. In Japan, the top career choice for children is scientist (19% of respondents), but coming in second was athlete (17%), reflecting a view that children should have the liberty to pursue their interests. Being a government official was the top profession picked for children among our respondents in Thailand and Taiwan, and one of the topthree occupations preferred for children in China. Figure 28

English is a priority for most families in Taiwan and China

Respondents who send children for extra English classes Taiwan China Thailand HK Malaysia S. Korea Japan

(%) 0

10

20

30

40

50

60

70

80


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29


Maths, music and, in Japan, sports for children

Mr & Mrs Asia

Apart from the Philippines, English classes were the most popular extracurricular activity for children in all the countries we surveyed, with 67% of respondents in Taiwan and 55% in China sending their children for extra classes in English. Maths and music classes were also common. In Japan, the top extracurricular activity for children was sports (32% of respondents), which ties in with the surprisingly high percentage of respondents wishing their children might have a career in athletics.

Concerns of Mr & Mrs Asia Unemployment is a major concern across the region

The top concern for households in the region is unemployment, cited by 61% of our respondents in Hong Kong. It was also a top worry in China and the Philippines, and mentioned as a major concern in most other countries as well.

Widespread concern on housing prices could spur property purchases

Housing cost, ie, property prices, was the next most common concern we encountered in our survey. This is likely to motivate people to buy properties over the medium-term where it is mentioned as a major issue, ie, China, Hong Kong, South Korea, Malaysia, the Philippines, Singapore and Thailand. Figure 29

Unemployment, education and housing costs are key concerns of Mr & Mrs Asia

Key concerns of respondents China Hong Kong India Indonesia Japan S. Korea Malaysia Philippines Singapore Taiwan Thailand

Top concern Unemployment Unemployment Inflation Corruption Lack of savings Education Education Unemployment Housing prices/rents Inflation Groceries

Other concerns Healthcare Housing prices/rents Education Unemployment Healthcare Housing prices/rents Housing prices/rents Education Healthcare Economic recessions Emergency

Pensions Medical costs Education Environment General cost of living Unemployment Unemployment Medical costs Education Unemployment Education


The cost of education was cited as a major concern in practically all the countries we covered. Medical costs and/or pensions also came up everywhere except Indonesia and Taiwan. In Indonesia, the top concern was corruption, while in Taiwan the top concerns were inflation and economic recession. More specific worries include the lack of savings in Japan, and marrying off daughters in India.

Disaffection with government Singaporeans most positive about governance

30

A surprising number of respondents are dissatisfied with their governments. In the Philippines, Japan and Taiwan 65-70% of our respondents felt governance had deteriorated over the past ten years. Also, in South Korea, Hong Kong, India and Thailand, more respondents felt governance had deteriorated compared to those who thought it had improved. In Singapore, however, 84% of respondents believe the government now is better compared to ten years ago. In Malaysia, 46% felt governance now is better against 13% who thought it was worse; however a significant 15% did not want to comment, which in itself was interesting.

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Mr & Mrs Asia


Figure 30

Governance generally seen to have deteriorated in past 10 years

View on whether governance has improved/deteriorated in past 10 years Singapore Malaysia India Philippines

Worse

Thailand

Better

S. Korea HK Taiwan Japan (80)

(%) (60)

(40)

(20)

0

20

40

60

80

100


Top priority for govt: Economy, corruption, education, and income inequality

The top priority for government should be the economy according to our respondents in practically all the countries we covered. However, in Indonesia addressing corruption is given higher priority. Corruption is also seen as an issue for the government to address in India and Thailand. Education and income inequality were among the top-three priorities mentioned as areas that needed attention in practically all the countries we covered. The pension deficit was one of the top priorities stated for the government in Japan. The country presentations at the end of this report provide further detail for each of the countries, but in the next section we draw out investment implications of our findings.

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31

Section 5: Investment implications

Mr & Mrs Asia

Investment implications Rising household income pushing up demand for autos, houses and credit

Despite the stop-start action in Japan’s economy, the common theme for the rest of Asia is rising per-capita income. This is driving up affordability of bigticket items and propelling consumption spending. Based on our surveys, we see strong short-term interest in property in China, Hong Kong and Malaysia, as well as positive longer-term structural support for the sector across most of the region. Demand for autos should be strong in countries where incomes are crossing the inflection point for discretionary spending, with strongest demand at this point in Malaysia and Thailand. Supporting financing will provide opportunities for the banks, as will low levels of credit-card penetration, which suggests substantial upside for consumer credit in China, India, Indonesia, the Philippines and Thailand.

Consumption spending momentum

Spending patterns will vary with income levels; we expect the fastest growth in consumption expenditure in China and India, followed by Malaysia, the Philippines, Indonesia and Thailand, where per-capita incomes are set to rise more rapidly over the medium term from a lower base. While mobile-phone penetration has increased over the past ten years, we still see upside for subscriber-base growth in India, Malaysia and Indonesia. Often ignored is the priority placed on education for children by Mr & Mrs Asia, but now a number of countries have publicly listed companies providing investment exposure to this sector. Given the ageing population in a number of countries, especially Japan, the importance of the healthcare sector is set to increase. Other countries where healthcare will become more important, in line with higher per-capita incomes and ageing populations include Hong Kong, Singapore and Taiwan.

Age profile allows for more savings to go into equities

The gradually ageing populations in most of the countries we surveyed should boost savings in financial instruments for retirement. Some of these additional savings will flow into investments in equities and push up valuations. This is very likely in China, Indonesia, Japan, Thailand and South Korea, as well as India.

Getting the home Home ownership below official stats, stripping out those living in homes provided by parents

Home-ownership rates vary across the markets. The calculation is complicated by whether to include properties owned by parents and provided to grown children, which is common in most of the countries we surveyed. Our figure for homeownership excludes these households. Often, these are “starter” homes for a young couple when they are first married; once their incomes rise and as they have children they will look to purchase their own property, which may well be larger. Home ownership is especially low in Hong Kong and Japan - which have experienced severe property deflation, apparently leaving many still wary of owning property. Stripping out homes provided for grown children by parents, ownership rates stand at less than 60% in India, South Korea, Malaysia and Thailand – suggesting there is scope to increase. Only in Singapore is home ownership near 90%, but while close to saturation for the domestic population the success it is achieving in attracting migrants has led to a boom in property prices in the island republic, which may yet have momentum.

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Mr & Mrs Asia


Figure 31

Strong desire to purchase properties in Malaysia, China, HK . . .

Respondents planning to purchase a property Malaysia China HK Thailand Taiwan S. Korea India Philippines Singapore Japan

(%)

Indonesia 0

5

10

15

20

25

30

35

40

45


. . . around 20% looking to buy in Thailand and Taiwan

Excluding Singapore, on average only 21% of responding households have a mortgage. Home ownership in most markets certainly has upward potential given the bias in the region towards keeping wealth in properties. The desire to buy is quite strong, particularly in China and Malaysia, where just over 40% of respondents are looking to buy a property in the next 18 months. In Hong Kong, 26% of our respondents were interested in purchasing a property in the short term, while around 20% were looking to buy a property in the next 18 months in Thailand and Taiwan.

Least inclination to purchase properties in Indonesia and Singapore

The desire to buy a home is weakest in Indonesia, where we found home ownership is already around 80%, followed by Singapore, which also has a high home ownership rate while apartment prices have escalated sharply over the past 12 months. In India and South Korea as well, only about 10% of respondents were planning to buy a property. Figure 32

Key picks where desire to buy seems strongest

Property picks China Hong Kong Malaysia Singapore Thailand Taiwan

Mr & Mrs Asia findings 40% interested in buying property 26% intend to buy property in next 18 months; 42% of these are upgraders 42% intend to buy property in next 18 months; 87% have seen salary increases in last 12 months Inbound migrants driving population growth around 50% next 10-15 years will push property demand 19% intend to buy property in next year to 18 months 18% intend to buy property in next 18 months

Key picks Agile, NWCL, COLI Sinoland, Midland SP Setia, Sunway City, WCT Land Capitaland, City Dev, Keppel Land, Allgreen Land & Houses Huaku, Hung Poo, Taiwan Fertilizer


Rising prices a concern in other markets

Autumn 2007

Other countries show latent property demand. In South Korea, the Philippines, Singapore and Thailand, respondents indicate that rising housing prices is one of their major concerns, suggesting that households are likely to eventually purchase housing and younger couples/families will be inclined to buy to reduce the risk of prices escalating out of reach.

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33

Mr & Mrs Asia


The desire to drive Car ownership rates were divergent across countries. As illustrated in Figure 33, countries with lower per-capita income, ie, India, Indonesia and China, have only about 10 cars per hundred households (by our survey). In other markets where per-capita incomes are higher, ownership rates stand at 75% or higher. Car ownership appears to take off in Asia once per-capita GDP reaches around US$3,000; similar to where Thailand is now. China has car ownership at 8 per household and per capita income of US$2,000. With per capita income rising close to 20% pa for the middle class, China’s car ownership will ratchet up within about three years and Indonesia (current per capita income of US$1,600) will follow. Figure 33

In lower-income countries car ownership only 10%, but over 75% for the richer countries

Per-capita income and car ownership (US$)

40,000

(%)

90

35,000

80

30,000

70 60

25,000

50

20,000

40

15,000

30

10,000

20

5,000

10 India

Philippines

Indonesia

China

Thailand

Malaysia

Taiwan

S. Korea

HK

Singapore

0 Japan

0

Figure 34

One in five looking to buy car in the next 12 months in Malaysia and Thailand

Planning to purchase a car in the next 12 months Malaysia Thailand Philippines Japan HK S. Korea India China (%)

Taiwan 0

5

10

15

20

25


Philippines an outlier with relatively high car ownership for incomes

34

The Philippines is an outlier among countries with low per-capita income for its relatively high car ownership. This is partly due to the local Jeeps, which are a convenient and affordable means of transport. Among the richer nations surveyed, Hong Kong has a very low car ownership (20% by our sample) owing to the high cost of fuel and parking and good public transport. In

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Autumn 2007

Mr & Mrs Asia


Singapore good public transport and electronic road pricing has held car ownership to 49%. As shown in Figure 34, Malaysian and Thai respondents were most likely to be planning to purchase a car, with approximately 20% looking to buy one in the next 12 months. With per-capita incomes of just over US$3,000, these two countries are in a sweet spot for auto demand. In the Philippines and Japan just over 10% are looking to buy a car in the next 12 months. Figure 35

Top picks for countries with short and longerterm demand for autos

Auto picks China India Japan Malaysia Philippines Thailand

Mr & Mrs Asia findings 17% plan to buy a car in next three years; large against total number of households 21% plan to by vehicle; of which 58% intend to by a car 24% plan to buy a car in next two years 22% plan to buy a car in the next 18 months 38% plan to buy a car in the next three years 20% plan to buy a car in the next 18 months

Key picks Great Wall, Cherry Maruti, Tata Motors, Mahindra & Mahindra Toyota, Honda, Nissan UMW, Oriental Ayala Corp, House of Investments Bank of Ayudhya for car financing


Spending urge Rising income levels combined with increasing confidence about the future are likely to propel an increase in spending by households. We noted in Section 1 that there is a poor correlation between rising household incomes and savings ratios – ie, of the countries in this survey, savings ratios are high even for countries at higher income levels. Still, the evidence over the past ten years indicates that consumption growth has been phenomenal in those countries with the highest GDP growth rates coming off lower income levels. Over the past ten years, adjusted for inflation, consumption spending has surged 136% in China, way ahead of the other countries. India follows with real consumption expansion of 65%, while for Malaysia, Singapore and the Philippines, consumption in real terms has increased by close to 60% over 1996 to 2006. Figure 36

Strong growth in consumption spending in China

Growth in real consumption expenditure (1996-2006) China India Malaysia Singapore Philippines Taiwan Indonesia Korea Thailand Hong Kong (%)

Japan 0

20

40

60

80

100

120

140

160


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Mr & Mrs Asia

With just 9% growth in consumption spending (adjusted for inflation over ten years), Japan has lagged, as has Hong Kong with 21% growth. Likewise, the 30% rise in consumption spending over the 10-year period in Thailand, Korea and Indonesia was relatively weak. India’s income growth could catch up with China

Respondents in most countries other than Thailand, Japan and Taiwan are positive about income growth over the next year and beyond. We expect income growth to pick up with a deceleration in labour supply necessitating a greater focus on productivity in most countries. China and India will continue to lead growth here, and there is a reasonable chance that India will catch up with China based on the evidence from our survey of more widespread income growth there of late. Malaysia, the Philippines and Indonesia should also realise strong expansion in income levels coming off a lower base. Figure 37

Picks where consumers are positive about income growth

Consumer/retail picks Mr & Mrs Asia findings 57% of households enjoying increases, pushing up spending patterns

Key picks Ports Design, Parkson, China Mengnui, Aynear

Hong Kong

12% of total expenditure on clothing, the highest in the region, suggesting upside as incomes also rising

Esprit

India

Low penetration of consumer durables, which will rise with per-capita income Consumption is basic; 80% visit traditional warungs

Shoppers Stop

China

Indonesia South Korea Malaysia Philippines Singapore

66% increase in households earning in the top decile will drive consumption growth Malaysians spend 9% of total expenditure on clothing ‘Malling’ and dining out preferred activities 37% want to buy AV equipment; 21% to buy computers; 13% other household appliances

Unilever Indonesia, Indofood Shinsegae, Lotte Shopping KT&G Padini Jollibee, SM Prime, Robinson’s, Ayala Land Courts, Challenger, Isetan, CK Tang


Favourable macro policy in Malaysia

The pace of household-spending growth will depend largely on the application of appropriate macro-economic policies and equitable distribution of overall GDP expansion across the population. Malaysia’s quite widespread salary increases, as indicated in our survey (87% have had a salary increase over the past 12 months), appears to be the consequence of generous salary increases for public sector employees - providing an example of a measure that should help consumption growth.

Banking support Last 5 years, India’s real lown growth of 127% exceeded China’s 83%

Loan growth will be driven by a pick-up in mortgages and consumer credit, as well as by commercial credit as businesses expand in this environment. The ten-year data is distorted by the severity of the Asian Crisis in some of the countries between 1997-2000, but over 2001-06, adjusted for inflation, loans expanded 127% in India outpacing China’s 83%. Indonesia and South Korea recorded approximately 65% real loan growth over the five-year period. In the same period, loans contracted by 10% in Japan and by 5% in the Philippines in real terms, while real loan growth has been lacklustre in Thailand, Hong Kong and Singapore at less than 15%. As Figure 40 illustrates, our surveys suggest good support for the financial sector in practically all the countries we covered. We see upside for mortgage expansion in China, Hong Kong and Malaysia. Consumer credit will have scope to grow signalled by low card penetration in China, India, Indonesia, the Philippines and Thailand. Wealth-management opportunities will be a growth driver for Japan, South Korea, and Singapore. Based on our survey, Taiwan appears to be lacking momentum in the financial sector.

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Mr & Mrs Asia


Figure 38

Adjusted for inflation, loan growth in India has more than doubled

Loan growth adjusted for inflation (2001-06) 230

(Rebased)

India

210

China Indonesia

190

S. Korea

170

Malaysia Taiwan

150

Singapore

130

HK

110

Thai Philippines

90

Japan

70 2001

2002

2003

2004

2005

2006

Figure 39

Upside for credit cards, particularly in Indonesia, India, Philippines, Thailand and China

Credit-card penetration HK S. Korea Japan

Also below 70% penetration in Malaysia, Taiwan and Singapore

Malaysia Taiwan Singapore China Thailand Philippines India (%)

Indonesia 0

20

40

60

80

100

Figure 40

Banking sector momentum in most markets

Banking sector picks Mr & Mrs Asia findings

Key picks

China

Only 30% have a credit card; only 17% have a mortgage, while 42% are looking to buy properties – upside for both consumer credit and mortgage growth

CMB, CCB, ICBC

Hong Kong

Upside to mortgages as interest in properties rises; currently HSB, Boc HK only 29% of households have mortgages

India

84% of households currently do not have a loan; consumer credit realised 33% Cagr over 2002-07 Indonesia Financial penetration extremely low; 50% intend to open bank account Japan 67% are debt free, but many feel ill-prepared for the future South Korea Wealth management opportunities: 42% seek to increase equities exposure next 12 months from current 6% of assets Malaysia Mortgage growth likely as 42% looking to buy property Philippines Singapore Thailand

HDFC, ICICI Bank, Max India BCA, Bank Mandiri, Bank Rakyat Mizuho, MUFG, SMFG KIH

Bumi-Commerce, Maybank, AMMB, Public Bank, Eon Cap Upside for consumer credit with only 27% owning cards BPI, BDO, Metrobank Upside for consumer credit with only 63% owning cards; also DBS, UOB, OCBC wealth management opportunities Only 28% have credit cards, good long-term upside for SCB, Bank of Ayudhya consumer credit


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Mr & Mrs Asia


Getting a line Between 2001-06, 20x mobile subs growth in India vs 2x for China

Over the past ten years, the growth in mobile subscriber numbers from nascent beginnings has been astounding. China had seven million subscribers in 1996, and by 2006 had become the largest mobile-phone market with 447m subscribers. India is the next largest market with 139m subscribers. Over 2001-06, the number of subscribers has risen by a factor of 20 in India. Overall subscriber growth in Indonesia (8.6x), Thailand (2.9x), and the Philippines (2.8x) has also been higher than China, where the subscriber base has roughly doubled over the period (2.1x). Figure 41

Subs growth in Indonesia, Thailand and Philippines faster than China

Growth in mobile subscribers (2001 = 100) 2,500

(Rebased) India

2,000

Indonesia Philippines Thailand

1,500

China 1,000 500 0 2001

2002

2003

2004

2005

2006

Figure 42

Mobile operator picks in markets with momentum for subscriber growth

Mobile operator picks India

Indonesia Malaysia Thailand

Mr & Mrs Asia findings 91% penetration and 1.4 mobile phones per household; catching up still vs China (99% penetration, 1.8 phones per household) Only 33% of urban Indonesians have mobile phone 70% penetration for mobile phones and rising 91% have a mobile phone, but this is still a top spending item and signs of high turnover favour stronger operators

Key picks Bharti

Telkom Indonesia, Indosat DIGI TAC


Based on our survey we see evidence of strong subscriber growth from relatively low penetration levels and scope to increase the number of phones per household in India, Malaysia, Indonesia and Thailand as well.

Education and healthcare Mr & Mrs Asia place particular emphasis on their offspring. Practically all want their children to achieve a tertiary education and expectations on academic achievement are high. A high proportion of household budgets also go toward education. Although these are not usually large-cap names, investors are now able to get some exposure to the sector in some of the markets we cover here.

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Mr & Mrs Asia


Figure 43

Education and healthcare picks

Education and healthcare picks Education India Japan Korea Singapore

Mr & Mrs Asia findings

Key picks

43% want children to get a Masters; 29% want kids to get a doctorate 22% anticipate their largest expense over next few years will be children’s education Education for children is 22% of household expenditure and expectations for children remain high 52% of children below 16; 100% of parents want children to be able to pursue tertiary education

Educomp

Healthcare Japan Over one-fifth of the population already over 65, with this proportion rising to more than one third by 2050

Benesse Megastudy Raffles Education, Oriental Century, Hartford, Info Sawai Pharma, Towa Pharma, Takeda Pharma


Another growing sector of importance is healthcare. Again, for most markets, the listed exposure is small but in Japan, which is aging more rapidly than any other country in the world, this is clearly a growth sector within a slowgrowth environment and is likely to become more important in other markets as well.

Ageing populations and equity valuations Where population is bulging at the 40-49 age group, positive for equities valuations

Our Head of Hong Kong Research, Chris Lobello, has researched the empirical relationship between an increase in the number of people in the age group likely to save more and the impact on stock-market valuations. This was recently updated in our Boomers & markets 2 report of August 2007, in which Chris emphasised the valuation impact of the “MY ratio”, ie, the middle-aged to young ratio in the demographics of a country. Figure 44

A 69% R-square for MY ratio and Topix adjusted for inflation

Japan: Real Topix vs MY ratio 3,500

1.6

3,000

1.4

2,500

1.2

2,000 1.0 1,500 0.8

1,000

Real price index MY ratio (RHS)

500 0 1950

0.6 0.4

1965

1980

1995

2010

2025

2040

Source: Japan Statistics Bureau, United Nations, CLSA Asia-Pacific Markets

Where the population of those aged 40-49 is growing faster than the population aged 20-29, a higher proportion of people can be expected to be saving for their more imminent retirement. In the US, where a longer series of data is available, studies show the MY ratio has a 55% R-square in a regression of the S&P 500 PE between 1945 and 2002; the correlation is

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39

Mr & Mrs Asia


higher at 78% since 1965. For Japan, the correlation between the MY ratio and the Topix index adjusted for inflation is 69% since 1949. According to this work, Asia’s gradually ageing population will have a positive impact on market valuations as those getting closer to retirement stash away more of their income, putting some of this into equities. Our recent CLSA U report, Shifting the balance, by Richard Hokenson provides data on the changes in population for different age brackets for the countries covered in this survey. Figure 45

For current decade MY ratio is most positive for China; to 2020 most positive for India

Change in population aged 40-49 less change in population aged 20-29 China Indonesia Japan Thailand

2001-2010

S Korea

2011-2020

Taiwan Singapore Hong Kong Malaysia Philippines

(%)

India (10)

0

10

20

30

40

50

Source: CLSA Asia-Pacific Markets, U.N., Hokensons & Co

For the current decade to 2010, the population aged 40-49 is growing faster than the population aged 20-29, suggesting an increase in savings that will be generally supportive of equity markets in China, Indonesia, Japan, Thailand and South Korea. Over the next ten years to 2020, the ageing dynamic is much more positive for equity valuations in India, but remains positive for China, Indonesia and Japan. Rising per-capita income and increased savings going into equities

The ageing population is a key issue arising in a study of Asian households, and is likely to lead to some moderation in overall GDP growth. However, we note two positives that also follow. Productivity should improve as companies will have to be more efficient in their use of labour as this factor becomes scarcer. Secondly, the ageing profile is not likely to lead to a major decline in savings ratios in most countries. The evidence is that the overall savings ratio could be stable, but with more savings by the population approaching retirement age, these funds are more likely to go towards financial instruments including equities to support their retirement, while the younger population tend to save toward purchases of a car, house and other biggerticket items. Mr & Mrs Asia are ageing and their fertility rates are declining. However percapita incomes are set to pick up in the coming years. Savings may well remain high, but funds will be directed to different ends, with a likely increase in demand for wealth management. Consumption spending should continue to grow, with spending depending very much on specific income levels. Greater detail is provided in the presentation slides for each country that follow.

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Mr & Mrs Asia

Country profiles China – High savers.......................................................................... 43 Hong Kong – Cashed up.................................................................... 65 India – Income momentum .............................................................. 83 Indonesia – Fiscally challenged...................................................... 107 Japan – Fiscally conservative ......................................................... 125 Korea – Local spenders .................................................................. 149 Malaysia – Hunting for properties .................................................. 171 Philippines – Malling and reproducing............................................ 189 Singapore – Rooting for government.............................................. 211 Taiwan – Cautious on prospects ..................................................... 227 Thailand – Low confidence ............................................................. 243

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Mr & Mrs Asia

Notes

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Autumn 2007

China

Mr & Mrs China

China - High savers The media and investment industries spend a lot of time debating the size of China’s burgeoning middle class and trying to predict consumption growth rates. Necessarily, the data used to fuel this debate are government statistics that are, at best, opaque. To circumvent this issue and, in doing so, provide more considered analysis of this critical consumer base, our unique research network on the mainland, China Reality Research (CRR), undertook a comprehensive bottom-up survey of middle-class families across the country.

James Paterson Country Head – Hong Kong/China

The conclusions are fascinating. And none more so than the sheer aspiration of Mr & Mrs China. For anyone questioning the middle class’s propensity to consume or wanting to know their preferred brands, this is essential reading.

Why is it so important? The first reason is sheer scale. CLSA Global Strategist Christopher Wood estimates that in 2005 there were 59 million discretionary spenders in China - with GDP per capita in excess of US$5,000. The number should quadruple by 2010. Right now, Mr & Mrs China are saving 20% of their income - much lower than the official savings rate of 40%, which includes corporate savings. Talking with people in cities across the country provides a clear picture of what they plan to do with those savings. Most are aiming for classic middle-class choices: a bigger home, kids’ education, retirement, healthcare and a car. This kind of targeted saving promises a steady flow of spending in the years ahead.

Perhaps more critically, Mr & Mrs China sit at the intersection of three key CLSA investment theses - Billion Boomers; Asia decoupling; and Chindia®. In Asia’s Billion Boomers, published in 4Q02, Christopher Wood laid out the key demographic drivers and shift in psychology that would create the foundations for the forthcoming surge in domestic demand across the region. Complementing this work, Diamonds are Forever, out this month, focuses on 11 blue-chip consumer stocks (including six China plays), which are prime long-term beneficiaries of domestic demand growth. And while the Asia decoupling thesis is not new, Russell Napier makes a particularly compelling and erudite argument for this phenomenon in his January 2007 Solid Ground report, Six degrees of separation. One of the six pillars for this decoupling is a Chinese consumption boom fuelled by a newly recapitalised, profit-seeking mainland banking sector. The availability of cheap consumer credit will facilitate consumption, especially of durable goods, much as the advent of hire purchase and auto financing triggered the consumption boom in the Roaring 20s in the US. Lastly, we most recently quantified the rise of Chindia in our October 2006 report, Chindia: A new economic world order by 2020. By then, our macroeconomic forecasts suggest that these two economies will have a combined GDP of US$16 trillion, or 25% larger than today’s US economy. Demographics and size mean that these two nations will contribute some 256 million new workers, or 85% of the world’s total, to the global labour force by 2020. As such, China and India will impact the pricing of goods and services in two fundamental ways – rapidly rising demand and the ongoing supply of low-cost labour. The rise of Mr & Mrs China is central to each of these themes.

Not just another middle-class survey! Despite the proliferation of reports, analysis and opinion on China’s middle-class consumers, there is little consensus as to how many people fall into this social layer. Of course, it doesn’t help that there is no standard definition of middle class. Estimates vary from 25 million to 250 million, but one thing all agree on is that the numbers are burgeoning. By 2015 there will be somewhere between 260 million and 650 million, depending on which source you use. As far as we can tell, most reports rely on official government data.

CRR* has taken a different approach. Working closely with a domestic market-research firm, we spoke to almost 1,300 middle-income families in 57 cities across China. Our aim is not to tell you how many middle-class people there are in China. Instead, we want to give you some insight into the spending, saving and consumption patterns of regular urban families. * China Reality Research (CRR) is an integral part of the CLSA China offering. Dedicated to grassroots economic research in China, this special unit speaks with provincial policymakers, business people, consumers and others around China, gathering local economic information.

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China

Mr & Mrs China

Implications of middle-class spending As % of total consumption spending²

Incremental spending by sector (US$bn)

ASP estimate for selected products (US$)

Implied incremental sales volume (m)

1.0 3.5

10.1 35.2

919 106

11.0 331.7

1.3

13.3

191

69.9

8.0 53.2

80.3 532.5

23,377 326 psm

3.4 1,715 sm

2.7 7.1 1.7 1.0 0.7 0.6 1.8 0.2 0.3 0.4 1.7 0.7 6.0 0.0 1.7 5.9 0.4 100

26.5 71.0 17.1 9.8 6.8 5.8 17.7 2.0 2.9 4.4 16.8 7.1 59.8 0.5 17.2 59.3 3.7 1,000

Selected products Desktops Consumer electronics excluding desktops and mobile phones Mobile phones Passenger cars Residential property sold (equity value)¹

Other products Alcoholic drinks Clothing Footwear Cosmetics and toiletries Disposable paper products Refrigeration appliances Domestic electrical appliances excluding fridges Eyewear Hot drinks Household care Household wares OTC healthcare Packaged food Pet food and pet care products Soft drinks Tobacco Toys and games Total

Significance of magnitude of incremental sales volume

Same as total US annual sales volume One-third of global consumer electronics production in 2001 This would exceed the annual mobile phone sales volume in India or equal 10% of global annual production. This would be half of US's annual new car registration Assuming average size of 150 sm, 11.4m houses / flats would need to be added to China, which would equal half of the total housing stock addition worldwide in 2006, according to Euromonitor.

Desktops

Sales volume in US (2006)

Global production in 2001

11

Sales volume in China (2006)

14

Implied incremental sales volume in China

11

0

5

10

(m)

Sales volume in India (2006)

1,010


332

0

500

55


444


15

(m) 1,000

1,500

88


70

0

20

40

60

(m)

80 100

Residential properties

Passenger cars New registration in the US (2006)

6.9

New registration in China (2006)

3.4

0

2

4

World's housing stock addition (2006)

20.3

China's housing stock addition (2006)

2.8

Implied incremental new registration in China

¹ Assume leverage level remains unchanged, ² Weights assigned based on 2005 consumption level. Source: CEIC (cars and properties), Euromonitor (other products)

Mobile phones

Consumer electronics excluding desktops and mobile phones

Implied incremental sales

(m) 6

5.6

8

11.4

0

5

10

15

(m) 20

25

Key findings Mr & Mrs China are fiscal conservatives, saving 20% of their income. Excluding cars, the average cost of the big-ticket items they bought in the past year was Rmb3,740 (US$485). 65% of families own a PC. 60% own their homes but only 17% took out a mortgage. 40% plan to refurbish their home in the next five years.

44


Chinese brands lead in home appliances but lag in telecoms. 30% of families have a credit card. 20% bought funds or equities in the past 12 months. 44% plan to travel outside their home province in the next year. It costs almost US$100,000 to raise a child in China’s top cities.

Autumn 2007

China

Mr & Mrs China

Who are they? Family snapshot Mum and dad: Aged 25-45. Child: Aged three months to 18 years (average age: 7) There is just one child - in fact, there are 100 million single-children in China. Grandma and grandpa: 40% living with at least one grandparent. Household income: Local average, plus or minus 20%.

Money and the future Financial: 60% own a house; 8% own a car and 17% plan to buy one in the next three years; 30% hold a credit card; 20% have invested in stocks/funds in the past 12 months and another 26% plan to buy in the next 12 months. Aspirational: 75% are white-collar workers; 99% want their kids to go to college and 56% would like them to study abroad; 44% plan to travel outside their home province in the next 12 months.

In the middle Mr & Mrs China mainly belong to the middle to upper-middle income group. However, they have the ambition and ability to move up the ladder.

Highest 10% (US$3,740)

Mr & Mrs China

Urban China**

Mr & Mrs US**

Per-capita disposable income (2006)

US$1,720*

US$1,527

US$31,735

Age group (25-45)

100%

40%

37%

57

150

9

High 10% (US$2,230)

Upper-middle 20% (US$1,640)

Mr & Mrs China

Cities with urban population of >1m

Middle 20% (US$1,200)

Lower middle 20% (US$870) Low 10% (US$630) Lowest 10% (US$400)

*

Average figure of the surveyed group. The per-capita disposable income of our families is 15% above the national average as our 57 cities have higher-thanaverage incomes.

** Source: NBS, US Department of Commerce, US Census Bureau, www.citymayors.comVer

Chinese urban households by per-capita disposable income (2005)

Autumn 2007


45

China

Mr & Mrs China

Spanning fifty-seven cities We talked to 1,235 families from 57 cities (populations >1m) in 24 provinces.

z

z

z

Beijing z

z

z

zz z z z z

z z

z

z

z z

z

z z

z z

z z

z

z z

z z zz z z zz z Shanghai z z zz z z

z

z

z

z z z

z

z

z zz

z z

Today and tomorrow Today: Big savers What do they have? What are they saving for? What are they spending on?

Tomorrow: Purchase plans When do they plan to buy a second house? Do they plan to buy a car? New home appliances? Any interest in stocks and insurance? Vacation plans?

46


Autumn 2007

China

Mr & Mrs China

Family finance How do Mr & Mrs China manage their money? Average household income breakdown

Education for kids 15% Housing 10% Groceries 23%

Spending 80%

Savings 20%

Other 8% Communication 5%

Clothing 8% Transport 6% Healthcare 5%

Family finance: Savings On average, Mr & Mrs China save 20% of their income every month. How much family income do you save? No savings

What are you saving for?

54

1-9%

142

10-19%

Home

Healthcare

Kids’ education

Car

Retirement

Vacation

353

20-29%

322

30-39%

232

40-49%

107

50%+

(No. of families)

25

0

4% have no savings

100

200

300

400

2% save 9% save 50%+ 40-49%

Car 7%

Vacation 1%

Healthcare 15%

11% save 1-9%

House 35%

19% save 30-39% 29% save 10-19% 26% save 20-29%

Autumn 2007

Retirement 18%


Kids' education 24%

47

China

Mr & Mrs China

Family finance: Spending What are Mr & Mrs China spending on? Top-three household expenditures

More than 60% of the families spend 10-30% of their income on groceries. More than 70% dine out at least twice a month.

Groceries

More than 30% spend 10-20% of their income on kids’ school fees and extracurricular lessons. As the kids grow up, so do the bills.

Kids' education

Housing

Less than a fifth of families have a mortgage, but 23% rank housing as their chief expense. 35% are saving for a new house.

Clothing

Healthcare

Still relatively young, Mr & Mrs China do not have big medical bills. However, with 24% of them having no form of insurance, medical costs can impose a big - and sudden financial burden as they age.

Communications

Transport

Adult education

0

*

99% of these families have at least one mobile phone and 21% have bought a new one in the past 12 months.

(No. of weighted votes¹)

Other 500

1,000

1,500

2,000

2,500

Meanwhile, 65% own a PC (versus 61.8% in the US in 2003*) and 16% have made the purchase in the past 12 months.

3,000

(*Source: US Census Bureau)

A No.1 ranking gives a category 3 votes and a No. 2 ranking 2 votes, No. 3 ranking 1 vote.

Biggest single-item purchase in the past 12 months Biggest single-item purchase in the past 12 months

No. of families

Mobile phone

267

PC

203

Colour TV

131

Air conditioner

107

Clothing

75

Electronic products (DVD, digital camera, digital video camera, MP3, etc)

67

Motorcycle/electric bike

65

Refrigerator

59

Small home appliances (microwave oven, water heater, etc.)

49

Furniture

41

Washing machine

36

Car

29

Jewellery

21

Sound system

Average price of cars purchased: Rmb93,000 (US$12,000)

Price range of big ticket items >Rmb10,000 6%

Rmb5,00110,000 15%

50% 1%

41-50% 2%

31-40% 4% 21-30% 12%

Hold a mortgage: 17% Paid cash: 40% Renting: 14%

41-50% 10%

Zero 57% 1-10% 14%

The house you live in

Rented 14%

Purchased from state units 3%

Belongs to parents 26%

Paid on mortgage 17%

Paid with savings & borrowings 40%

About 57% of the families don’t have any expenditure on home mortgage/rent as they either don’t have to pay for housing or have paid off their debts already. However, for those who borrow from a bank, mortgage payments account for 23-60% of their monthly income.

Tomorrow: Second home For those who do not own a home, 85% plan to buy one in the near future. For those who already own their own home, 28% plan to buy again in the next three years and 16% in four to eight years from now.

Why a second home? For retirement 7% Investment 8%

For children 28%

Upgrade 57%

When do you plan to buy your second home?

Why a second home?

2016-2020 14%

After 2020 6%

No plans 36% 2011-2015 16% 2007-2010 28%

Autumn 2007

z

For larger space, better location and greater privacy

z

For the next generation

z

For lease and investment

z

For retirement


49

China

Mr & Mrs China

Today: Home improvement Buying a home is just the start . . .

At least 70% of new residential projects are “mao pi fang”(毛坯房), consisting of just a drywall interior - cement floor, plain ready-to-paint walls, plumbing and working electrical outlets and lights. As a result, most families spend the first year or so in their new dream home listening to the neighbours drilling and hammering. Good news for suppliers of construction materials though, including flooring, paint, tiles, kitchen and bath ware products.

More than half of the families who own their homes refurbished them in the past five years.

When did you last refurbish your home?

Before 1996 7%

2002-2007 52%

1996-2001 41%

(Photo: CRR)

Tomorrow: Home refurbishing About 40% of the families plan to refurbish their homes in the next five years.

Average period between refits: 10 years Good news for big retailers of homeimprovement tools and supplies such as B&Q and Ikea.

When do you next plan to refurbish your home?

No plans 41%

after 2023 3%

50

2018-2023 3%

2007-2012 41%

2013-2018 12%

Floor and wall tiles on display at a B&Q outlet in Beijing. (Photos: CRR)


Autumn 2007

China

Mr & Mrs China

Today: Bus, bike and motorcycle What is your main form of transport? (multiple choice)

59% of these families use buses or subways for daily transport. 23% ride an electric bike (regular bike with an added battery-powered electric motor). 17% ride a regular bicycle. 14% ride a motorcycle (more common in central and southern China).

Bus/subway

59

By foot

23

Electric bike

23

Taxi

19

Regular bike

17

Motorcycle

14

Private car

8

Company bus

Only 99 families (8% of the total) own a private car. Of these, 29 bought their car in the past 12 months.

6

Company car

(% of respondents)

2

0

20

40

60

80

Tomorrow: A private car Some 17% of the families plan to buy a car within three years. Today, 7% of the families are saving to buy a car. Payment preference

Brand preference Models priced below Rmb150,000 (US$19,500) are most popular among these potential buyers. Here are their top-five picks:

Model

Market price (US$)*

Chery QQ

3,500-7,000

VW Jetta

9,500-15,000

Hyundai Elantra VW Santana GM Excelle

When you buy a car, how do you plan to pay for it?

Credit 41%

Cash 59%

13,000-17,500 9,800-11,700 13,500-18,000

Source: CRR * Price range for each model is based on quotations from PCauto

Autumn 2007


51

China

Mr & Mrs China

Today: Home appliances Colour TV: 1.4 units per family What brand is your TV?

How many colour TVs do you have? 3 TVs 6%

Changhong

329

Konka

220

TCL 2 TVs 25%

207

Skyworth Hisense

157 114

Panasonic Sony

1 TV 69%

91 85

Haier Philips

48

Toshiba

45

82

Panda Xiahua

Top-three brands Changhong (600839 CH) Konka (200016 CH) TCL (1070 HK)

39 36

LG Hitachi

34 27

Samsung Sanyo

Top foreign brands Panasonic (6991 JP) Sony (6758 JP) Philips Toshiba (6502 JP)

25 17

Xihu

12

Amoisonic

10

Beijing Sharp

8 5

(Total No. of units)

Other

51

0

100

200

300

400

Today: Home appliances Aircon: 0.9 units per family What brand is your aircon? Gree Haier Midea Chun Lan Mitsubishi National Aux Hisense Kelon Galanz Chigo LG Changhong Shinco TCL Hitachi Aucma XinFei Sanyo Sharp Electrolux Dakin Samsung Toshiba Other

3 aircons 5%

233 181

4 aircons 1%

2 aircons 15%

127

No aircon 33%

82 60 52 52 36

1 aircon 46%

36 35 30 26 22 16

Top-three brands Gree (8056 HK) Haier (1169 HK) Midea (000786, 000527 CH)

16 14 12 11 10 9 7

Top foreign brands Mitsubishi (6503 JP) National (6991 JP) LG

7 6 4 44

0

52

How many air conditioners do you have?

50

100

150

200

250


Autumn 2007

China

Mr & Mrs China

Today: Home appliances Computer: 0.7 per family How many PCs do you have?

What brand is your PC?

2 PCs 5%

Self-assembled Lenovo Founder Dell HP Samsung TCL Tsinghua Tongfang LG IBM Haier Sony Toshiba Hisense ASUS BenQ Great Wall Shenzhou Acer UNIS Konka Other

No PC 35% 1 PC 60%

Top-three brands Lenovo (992 HK) Founder (418 HK) Dell Top foreign brands Dell HP Samsung (005930 KS)

262 215 77 57 29 28 25 20 18 17 16 13 9 9 8 8 6 5 5 3 2 27

0

50

100

150

200

250

300

* About 31% of the families use self-assembled PCs instead of branded ones.

Today: Home appliances Mobile phone: 1.8 per family What brand is your mobile? Nokia Motorola Samsung Lenovo Philips Amoisonic UTStarcom TCL Sony-Ericsson Siemens Bird LG NEC Haier ZTE Panasonic Konka Dopod CECT Hisense Kejian Other

How many mobile phones do you have? 715 421

3 10%

No mobile phone 1%

392 67

1 26%

66 52 50

2 62%

44 43 37 34 33 29 25

Top-three brands Nokia Motorola (MOT UN) Samsung (005930 KS)

18 17 17 16 16 11 11 162

0

200

400

600

800

* Little Smart (PHS) is popular in second- and third-tier cities given its low telecom service fees. UTStarcom controls about 40% of the PHS system equipment and handset market in the mainland.

Autumn 2007

4 1%


Top domestic brands Lenovo (992 HK) Amoisonic (600057 CH) UTStarcom (UTSI UQ) TCL (1070 HK)

53

China

Mr & Mrs China

Tomorrow: Home appliances As most families have all the basic home appliances, only 32% are planning a new purchase in the next 12 months. Do you plan to buy new home appliances in the next 12 months?

If yes, what items do you plan to buy? PC

101

Air conditioner

Yes 32%

80

Colour TV

No 68%

78

Refrigerator

41

Electronic products*

36

Small home appliances

If not, why? 80

(%)

24

Washing machine

21

75

Sound system

70

5

60 50

Electric bike

3

Other

2

40 30

22

20 10

0

2

0 I've got all I need

No spare money

(No. of families)

I'm saving for a new house

20

40

60

80

100

120

* Including DVD, digital camera, digital video recorder, MP3, mobile phone, etc.

Brand preference: Domestic names dominate Which brand do you plan to buy?

PC: Lenovo, IBM, Founder 45

Aircon: Gree, Haier, Midea, Hisense

(%)

40 40

35

40

(%)

35

37

30

30

26

25

25

25

20

20

15

15 10

6

6

5

5

9

10

4

4

5

0 Lenovo

Selfassembled

IBM

Founder

HP

TV*: TCL, Haier, Sony, Panasonic

Gree

12

45

9

8

30

8

25

8

Haier

Midea

Hisense

LG

44

12

10

5 4

(%)

3

8

National Samsung

(%)

15

6

6

2

20

6

4

Galanz

2

35

9

2

Aux

2

40

9

0

2

Refrigerator: Haier, Siemens, Xin Fei 50

TCL Haier Panasonic Sony Changhong Konka Skyworth Hisense Samsung Philips Toshiba LG

2

0

Dell

10

12

14

10

7

7

Electrolux

Midea

5 0 Haier

Siemens

Xin Fei

* Most of them plan to replace their old TVs with large-panel, especially LCD TVs.

54


Autumn 2007

China

Mr & Mrs China

Today: Insurance About 48% of the families have commercial insurance policies. Medical is the most common type and Ping An is the most popular insurer. About 27% have state social security and commercial insurance. However, 24% have neither. What type of commercial insurance have you bought?

From which insurance company?

Pension 10%

Ping An

Contributory 10%

36

China Life

No commercial insurance 52%

Life 10%

30

China Pacific

19

New China Life

Medical 18%

2

PICC

1

Taikang Life

1

(% of commercial insurance holders) 0

10

20

30

40

Tomorrow: Insurance Of those who have not bought commercial insurance, only 20% plan to buy in the future. Of the 80% who don’t plan to buy insurance almost half say they don’t need it. If you haven't bought any yet, would you like to buy commercial insurance? Why?

To cover increasing medical cost as I grow old

31

I don't need any insurance

45

Yes 20%

Have seen others file insurance claims

25

Friends recommended

I don't know much about insurance

26

I don't trust insurance companies

23

24

No 80%

Insurance salesmen recommended

14

(% of respondents) 0

To provide insurance for my kid's education

7

0

Autumn 2007

Commercial insurance is too expensive

10

10

20

30

40

50

(% of respondents)

10

20

30

40


55

China

Mr & Mrs China

Today: Bank card About 30% of the families have at least one credit card and 85% have at least one debit card. While most people use debit cards for cash withdrawal from ATMs, 54% have also shopped with their debit cards - a small step away from becoming a creditcard customer. How many credit cards do you and your spouse have? 2 10%

How many debit cards do you and your spouse have?

3 2% More than 3 1%

More than 4 No debit card 4% 15%

4 6% 3 18%

1 17%

1 26% 2 31%

No credit card 70%

From which bank? Top 8 issuers by No. of card holders in this survey Credit card

1

2

3

4

5

6

7

8

ICBC

CCB

BOC

CMB

BoCom

ABC

Minsheng

CITIC

142

101

79

69

39

35

31

28

ICBC

CCB

ABC

BOC

BoCom

CMB

China Post

CITIC

574

445

338

283

162

153

67

42

Number of card holders in this survey Debit card Number of card holders in this survey

Brand winners Today*

Tomorrow*

Car - ChangAn Alto

Car - Chery QQ

TV - Changhong

TV - TCL

Air conditioner - Gree

Air conditioner - Gree

Computer - Lenovo

Computer - Lenovo

Mobile phone - Nokia

Washing machine - Haier

Bank - ICBC

Refrigerator - Haier

Insurance - Ping An

Digital camera - Samsung Digital video recorder - Sony

* Results are based on a CRR proprietary survey among 1,235 families in 57 cities across the country in 2007.

56


Autumn 2007

China

Mr & Mrs China

Stocks and funds With the benchmark SSE Composite Index more than tripling since the beginning of 2006, the mainland stock market has caught Mr & Mrs China’s attention. 20% of those surveyed bought stocks or equity funds in the past 12 months. For those who didn’t, 26% plan to try their luck in the next 12 months. Many believe the A-share market will continue to rally through 2008 because of the “Beijing Olympics effect”.

Have you invested in stocks/funds in the past 12 months?

If not, do you plan to buy stocks/funds in the next 12 months?

Yes 20%

Yes 26%

No 74%

No 80%

Travel plans Preferred destinations 44% of the families plan to travel for leisure outside their home province in the next 12 months. Remember, given the distances involved, this is the equivalent of international travel for most Europeans. Beijing, Sanya, Guilin, Dalian and Qingdao are the top-five destinations. About 2% are interested in overseas spots like Phuket (Thailand).

z z

z z

z

z

Beijing

z

z

z

z

z Dalian zz

zQingdao

z

z

Do you plan to travel outside your home province in the next 12 months?

zz

z

z

z

z z z

z z

z Yes 44% No 56%

z

z z

z

zz

z

z

z

z

z

z

Guilin z

z zzz z

z

z

Sanya

Autumn 2007


57

China

Mr & Mrs China

Responsibilities: Supporting the old About 30% of those surveyed provide some financial support to their parents. They spend an average of Rmb3,000 (US$390), or 8% of their annual income, on their parents.

Your parents’ financial situation

Have no pension or income 11% Halfsustained with pension or income 19%

How much do you spend on your parents every year?

Rmb5,0016,000 2% Rmb4,0015,000 11%

All passed away 1%

Rmb3,0014,000 7%

Selfsustained 69%

>Rmb6,000 5% Rmb200 9% Rmb101-200 13%

81

Books

60

Toys

41

6,000

Other 14%

5,000-5,999

14

4,000-4,999

Have no pension or fixed income 14%

Financially selfsustained 39%

5

39

3,000-3,999

69

2,000-2,999

172

1,000-1,999

208

21

Child’s extracurricular lessons Number of respondents

>8,000 2% 10% rise Average rise in income was lowest in west India at 10% and highest in the east at 18%

Decreased 9%

Rate of increase in income (%) 41 to 50 1%

50+ 1%

Regional rate of increase in income

Can't say 8%

20

(%)

18

18

31 to 40 0%

16

14

14

21 to 30 5%

12

12

North

South

10

10 11 to 20 18%

11

8 6

0 to 10 67%

4 2 0 West


India

East

Incomes: Optimistic Expected rise in income in next 12 months 11 to 20 17%

31 to 40 1%

21 to 30 6%

41 to 50 2% 50+ 0%

Other 16%

Cant say 12% 0 to 10 62%

How has life changed in past 10 years? About the same 11%

63% expect their incomes to rise in the next 12 months; average expected increase is 12.7% 83% of respondents believe that they are better off than 10 years ago 84% expect further improvement in their lives over the next five years

Expectations for the next five years? About the na same 2% 11%

na 1%

Worse off 5%

Worse off 2%

Better off 83%

Better off 85%


92

anirudha.dutta/prakhar.sharma/amar.gill@clsa.com

Autumn 2007

India

Mr & Mrs India

Key concerns Biggest worry of survey respondents Unemployment 10%

Daughter's marriage 10%

Medical costs 10%

Housing price/ rents 7% Retirement 4%

Rising price levels is the biggest worry for 34% of the respondents; education fees (18%) and medical costs (10%) are the next two biggest concerns

Can't say/nothing 2% Repayment of loans 2% None 1%

Other 7%

Education fees 18%

10% say unemployment is a major concern; 10% worry about their getting their daughters married

Rising interest rates 1%

Rising prices 34%

Housing costs/rent and rising interest expense are low down in the order of concerns among those surveyed

Others 1%

Biggest worries of financial-sector employees Retirement 20%

20% of financial-sector employees worry about financing retirement expenses; only 4% of all survey respondents worry about retirement

Property prices 32%

Child education 14%

Unemployment 13%

In China, unemployment (27%), healthcare (27%) and property prices (26%) are the biggest concerns

Healthcare 21%


Savings: Below national average Rate of savings across SEC and regions 18

(%)

Our respondents save 13% of their income; Mr & Mrs China save 20% of their income

17.1

17 16 15 14

13.1

This is significantly lower than the 29% national average for households, partly as our survey does not weight for higher savings of affluent

13.7 12.6

13

12.7

12.6

12 11

10.1

10 9 8 Overall

SEC A

SEC B

North

West

South

East

What would they do if given 10 million rupees? Buy property

48.8

Save for kids' future 32.5

Buy a car

10.4

Donate

9.8

No response

5.8

Holiday abroad

4.5

Others

3.1

Settle loans

2.8

Buy durables

2.6

Retire

2.5 0

(%) 10


Autumn 2007

If given Rs10m, 49% would buy property, 44% would save and invest for children’s future and 32% would start a business; 10% would donate some money to charity

44.1

Start own business

20

30

40

50

High propensity to save in the south, consistent with their relatively conservative image

60

In contrast, 91% of Mr & Mrs China would “live the good life” if they received one million yuan


93

India

Mr & Mrs India

Savings: Children are key priority Key reasons for saving

Children are families’ central priority 61.5

Emergency requirements Children's education

Main reasons for savings: emergency requirements (62%), children’s education (55%), healthcare (35%), children’s marriage (30%) and property purchase (24%)

55.0 34.9

Healthcare Children's marriage

30.1

Buying a property

23.6

Retirement

13.5

Buying household durables

11.6

Buying a car

8.5

Hholiday trip

4.3 0

(%)

10

20

30

40

50

60

70

Key reasons for saving by region 90

North South

(%)

80

West East

70

Health and education are key concerns due to the poor state of public services and the high cost in the private sector Retirement savings is low down on the priority of our sample households More people save for purchase of property in the south; healthcare in the east; children’s education in the west

60 50 40 30 20 10 0 Healthcare

Children's education

Children's marriage

Emergency requirements

Buying a property


Investments: Property barons? Distribution of wealth by assets

Cash 21%

Fixed deposits 9%

Mutual fund Equity 2% Govt sec 2%

Other 16%

Bonds 2%

51% of wealth is in land and property; 21% in cash and 9% in fixed deposits Shares 1%

Mutual fund Debt 0% LIC 0% Pension fund 0%

Land and property 51%

Surprisingly no one mentioned jewellery as significant holding

Can't say 12%

Distribution of investment from savings Cash 24%

3% of total savings (ie, 8% of financial assets) in equities or mutual funds

Fixed deposits 10% Govt sec 4%

Stocks & equity funds 3% Bonds 2%

Other 17% Property 44%

LIC 2% Mutual fund Debt 1% Others 10%

National distribution of investment from savings Shares and debentures 5%

Currency 9%

PF/PPF 11% Deposits 47% Insurance funds 13% Claims on govt 15%

Source: RBI, CLSA Asia-Pacific Markets

94


Autumn 2007

India

Mr & Mrs India

Investments and insurance: Safe bets Most profitable investment Govt sec 4%

Fixed deposits 10%

For 42% of the respondents, land and property has been the best investment

Stocks 2% Bonds 2%

Cash 22%

LIC 2%

11% have invested in stocks and equity mutual funds in the past 12 months and 10% plan to buy stocks or equity mutual funds

Mutual fund Equity 1% Other 17%

Land & property 42%

Others 3% Can't say 12%

80% of households have purchased some insurance product, but 78% have no plans to buy new insurance

Insurance penetration: Life and general 90

(%)

In comparison, 48% of families in China have commercial insurance and 21% plan to buy insurance

86 85 80

80

80 76

75

75

Insurance penetration is highest in south India (86%) and lowest in the east of the country (75%)

70 65 60 South

North

Overall

West

East


Expenditure: Food and groceries is 25% Breakdown of consumption basket Others

25% of expenditure goes towards food and groceries

10.0

Furnishing

0.6

Vacations

0.7

9% is spent on education and 8% on entertainment

Jewellery

1.3

Rent & utilities

1.3

Homecare

1.5

Household help

2.2

Cable & internet

2.2

Loan repayment

2.3

Mobile phones, vehicles and property are the popular high-value purchases

Apparels

2.8

Toys & gifts

3.0

Footwear

3.1

Healthcare

3.2

Communication

Average spent on property and land was more than Rs500,000 71% have not bought any major item in the past 12 months

3.7

Personal care

4.2

Stationery

4.3

Fuel & transport

4.3

Mobile phones

7.7

Entertainment

8.3

Education

8.9

Food & groceries

24.5 0

5

10

15

20

25

(%) 30


Autumn 2007


95

India

Mr & Mrs India

Four-wheel autos: 19% penetration Four-wheeler ownership 1 18%

19% of our households have a four-wheel automobile, significantly higher than the national average of eight per 1,000 people

2+ 0%

2 1%

Among those who own four-wheel drives, an overwhelming 65% own Maruti vehicles 21% of households are planning to purchase a vehicle in the next three years; 64% plan to take out loans to buy vehicles

None 81%

Of the above, 58% plan to purchase cars, 34% motorcycles and 4% scooters

Four-wheelers - Owned and preferred 35

(%)

31

30

Owned

Preferred for next purchase

45% of those who intend to buy cars prefer Maruti and just over 7% prefer a product from Tata Motors

25 20 14

15

14 11

8

10

10

9

8

9 7

5

5

5

2

6 3

1

0 Maruti Alto

Maruti 800

Maruti Zen

Hyundai Santro

Tata Indica

Maruti Mahindra Maruti Swift Scorpio Wagon R


Two-wheelers: 72% penetration Two-wheeler ownership

72% of households own two-wheelers; while the average number of twowheelers per family is 1.15 3 2%

2 11% Other 3%

More than 36% of two-wheelers are from the Hero Honda stable; Bajaj is a distant second at 19%

3+ 0%

1 86%

No response 1%

Of the 21% of households planning to purchase a vehicle in the next three years, 34% plan to buy motorcycles and only 3.8% want to buy a scooter

Two-wheelers - Owned and preferred 25 20

(%) 22

Owned

15 10

45% want to buy a Hero Honda model; 19% would prefer a Bajaj Auto model


18

10

11

11 6

5

8 5 5

4 5

4 1

3 4

3

0 Hero Hero Honda Honda Splendor Passion

Bajaj Pulsar

TVS Victor

Bajaj Discover

Hero Honda CBZ

Hero Bajaj CT Honda 100 CD Dawn


96


Autumn 2007

India

Mr & Mrs India

TVs: The media revolution Television ownership

TV penetration is 100%, with 92% of households owning a colour TV Only 6% of households have LCD or plasma TV; lower prices and rising aspirations will lead to fast growth

LCD/Plasma 6%

CRT/regular 87%

B/W 7%

LG, Sony and Samsung are the most popular TV brands (similarly for plasma/LCD TVs) Of those who plan to buy a TV over the next 12 months, 48% would prefer a LG; Sony is a distant second at 15%; homegrown Indian brands are losing out

Televisions - Owned and preferred 60

(%) Currently owned

48

50


40 30 22 20

15 7

10

14

14

13 10

9

6

6 1

7

4

3

3

4 3

0 LG

Sony Samsung Onida Videocon Sharp

BPL

Other

Sansui


Computers: Very low penetration PCs/laptop ownership

Only 17% of households have computers, compared to 65% in China LG is the most popular brand for personal computers; 37% of owners have unbranded PCs

1 16% None 84%

Other 17%

1+ 0%

Among those who plan to purchase computers over the next 12 months, most prefer LG, Samsung and HP

No response 0%

PCs/laptops - Owned and preferred 45 40

While 37% of respondents own unbranded PCs/laptops, only 26% intend to buy an unbranded model

(%) Owned

37


35 30

26

25

21

20

19 13

15

9

10

11

13 9

10

5

2

4

4

2

2

1

0 Unbranded

LG

HP

Samsung Compaq

Lenovo

IBM

Zenith


Autumn 2007


97

India

Mr & Mrs India

Mobile phones: Ringing in growth Mobile phones per household 5 1%

4 2%

3 7%

6+ 0%

91% of households have mobile phones; among these, average ownership is 1.4 phones

0 9%

China enjoys 99% penetration with 1.8 phones per household

2 24%

Subscriber growth is likely to remain strong

1 57%

Popular brands of mobile phones 73.4

Nokia LG

An overwhelming 73% own a Nokia handset; popular brands, including LG and Motorola, lag behind

12.7 9.9

Others Motorola

6.3

Samsung

6.2

Sony

2.9

Panasonic

0.6

BenQ

0.1

Blackberry

0.1

(%)

0

10

20

30

40

50

60

70

80


Consumer durables: Penetration is still low Popular brands of washing machines

41% of households have washing machines; LG, Videocon and Samsung are the three most popular brands

22

LG 14

Videocon 11

Samsung

79% have refrigerators; Godrej and LG are the preferred brands

8

Godrej BPL

5

IFB

5

Onida

3

Others

32 0

5

10

15

20

25

30

(%) 35

Popular brands of refrigerators

Popular brands of VCD/DVD players

Godrej

28

LG

Videocon

6

Onida

6

Videocon

3 2

Others

21 0

5

10

13 10

LG

Samsung

BPL

14

Samsung

12

Voltas

23

Sony Philips

22

Kelvinator

45% have VCR/DVD players; Sony, Philips and Samsung are the most popular brands

15

20

(%) 25

30

4 4

Sansui

2

Panasonic

2

BPL

2 25

Others 0

5

10

15

20

25

(%) 30


98


Autumn 2007

India

Mr & Mrs India

Consumer durables: Penetration is still low Popular brands of digital cameras Sony

38

Canon

15

Kodak

Fewer than 10% of households have vacuum cleaners, microwave ovens, airconditioners and digital cameras

13

Konica

10% have MP3 players and/or iPods; Sony is the market leader in digital cameras, MP3 players and music systems

6

Panasonic

5

LG

3

Yashica

2

Nikon

2

Others

16 0

5

10

15

(%) 20

25

30

35

40

Popular brands of MP3 players

Popular brands of music systems

Sony

30

Samsung

Philips

15

LG

9

Panasonic

5

Sansui

LG

8

Samsung

8 8

BPL

1

Bose

20

Other

3

DK/CS

33

Sony

16

Philips

In India, foreign brands lead in market share; in China, the top-three brands in most categories are local brands

6

Akai

1

5

Panasonic

Others

23 0

5

10

15

20

(%)

25

30

35

4

Sansui

(%)

2 0

5

10

15

20

25

30

35

40


Shopping: Call of the mall? Only 30% regularly shop at malls

Items bought from malls

Most prefer malls due to better choice, convenience and suitability for the family

5

Home furniture

9

Jewellery

Among those who shop in malls, food & groceries and clothes & accessories are the most common items purchased

11

Toys/gifts

16

Books/CDs

19

Home appliances

52

Clothes

67

Food & groceries 0

10

20

30

40

50

60

(%)

70

80

83% of households buy food & groceries from local neighbourhood stores, Big Bazaar and Food Bazaar are most popular among the organised retailers

Preferred stores for purchase of food & groceries

Reason for shopping at malls

Neighbourhood stores

62

Better variety

83.2

Big Bazaar 49

Convenience Spend time with the family

46

Cheaper goods 23

Recreation

22

Multiple activities

22

0 Source: CLSA Asia-Pacific Markets

Autumn 2007

10

20

Subhiksha

9.3

Foodworld

9.3

Reliance Fresh

30

Spend time with friends

17.9

7.3

Vishal Megamart

5.1

Spencer's Daily

3.7

Trinethra (%) 30

40

50

60

70

2.2

Heritage Fresh

0.6

Nilgiris

0.6 0

(%) 20

40

60


80

100

99

India

Mr & Mrs India

Online: Still not logged on Accessed internet in the past 30 days No response 1%

Only 25% households had used the internet in the previous 30 days

Yes 25%

75% log on at their place of work Homes (28%) and cyber cafés (24%) were the next two popular places to log on 80% log on for work, 53% to check personal emails, 29% to chat with friends and 13% to help a child with his or her studies

No 74%

Place for accessing internet

Purpose for accessing internet 74.5

Office Home

Chatting

9.6

Buying

6.6

Banking

0.2 0

11.3

Jobs search

0.9

Personal

29.5 12.7

Downloads

2.8

na

53.2

Project and studies

24.0

Friend's place

79.9

Emails

28.1

Cybercafé

Professional work

(%) 10

20

30

40

50

60

70

0.3

Others

80

(%)

0.5 0

20

40

60

80

100


Online banking: Underpenetrated Use of online banking in the past 12 months

Yes 7%

Only 7% of households have used online banking facilities in the past 12 months Online banking is most popular for money transfers with 54% of respondents using the service

No 92%

Other uses of online banking are for account statements (36%) and bill payment (28%)

DK/CS 1%

West India has highest penetration of online banking (10%) followed by the south (8%)

Regional penetration of online banking 12

Purpose of using online banking

(%)

54.2

Transfer amount

10.4 10

Statements/advices 8.1

28.2

Pay bills

8

3.8

4

21.9

Order cheque books

5.5

6

35.9

9.7

Order debit card 0.9

Business

2

0.0

Professional

(%)

0 West

South

East

North

0

10

20

30

40

50

60


100


Autumn 2007

India

Mr & Mrs India

Dining out: Gaining an appetite Frequency of eating out

The average family dines out 9.6 times a year

Once a month

24.1

Once in 2-3 months

Average number of people per dining experience is 3.04; average bill is Rs503

23.7

Never

18.7

Once a year or less often

34% eat out at least once a month

9.2 8.6

Once in 4-5 months Once a fortnight

Most prefer to eat at home with families

7.3

Twice a year

But dining out is becoming increasingly popular - 60% of IT and financial-sector employees eat out at least once a week

4.6

Once a week or more often

2.6 0

(%)

5

10

15

20

25

30

Frequency of IT and financialservice employees eating out

Average bill for eating out Don’t know

18.1

More than Rs2,000

120

0.9

100

Rs1,001-2,000

5.9

Rs501-1,000

17.7

Rs251-500

37.0

Up to Rs250 0

5

10

15

20

0-1

1-2

2-4

More than 4

11

11

80

13

14

60

36

33

40

42

IT

Financial

40 20

20.5

(%)

(%) 25

30

35

40

0


Credit cards: 20% penetration Distribution by number of credit cards owned 2 4% 1 13%

3 1%

20% of respondents have credit cards (compared to 30% in China)

More than 3 2%

Low penetration partly due to high number of self employed who find it hard to get cards as often they do not file IT returns Average number of cards owned by those who have credit cards is 1.58 with a monthly average credit card bill of Rs10,852

None 80%

35% of respondents having ICICI Bank credit cards; SBI and Citibank are the next two popular credit card issuers

Who are the credit-card issuers? ICICI

Visa has over 54% and MasterCard has 36% market share among payment gateways

35.1

SBI

22.0

Citibank

13.5

HDFC

8.3

HSBC

8.3

Stan Chart

Over 38% of households are unaware of annual credit-card fees and 40% are unaware of interest rates charged for revolving credit

6.2

ABN Amro

2.3

Amex

1.1

Others

3.0 0

5

(%) 10

15

20

25

30

35

90% of those who do not own a card, do not intend to apply for one

40


Autumn 2007


101

India

Mr & Mrs India

Parents: Living in 29% of households Financial situation of parents

40% have parents who are financially stable but 22% of parents/parents-in-law have no pension or fixed income

Don’t know/no parents 29% Financially stable 40%

Have no income 22%

29% households have parents/parents-inlaw living with them 45% of respondents do not spend anything on their parents; the average spend on parents for the other 55% is Rs6,650 pa

Partly selfsustained 9%

Expenditure on parents/senior family members

Profile of dependents With neither 11%

45.0

No spending Above Rs50,000

0.4

Rs20,001-50,000

With children and senior citizens 16%

2.0

Rs10,001-20,000

5.2

Rs5,001-10,000

No children/ senior citizen 61%

9.2

Below Rs5,000

38.2 0

10

20

30

(%)

40

50

With senior citizens, no kids 12%


Children: Education is a priority Distribution by number of children 3 6%

72% of households have children and average number of child per household is 1.05; or 1.7 per household with children

5+ 1%

4 2%

2 23%

43% want their children to get a Master’s degree (31% in China) and 29% want their children to get a PhD (25% in China)

0 38%

94% want their children to be proficient in English; some interest in French, German and Spanish

1 30%

Preferred level of education for children

Language that parents would like children to learn

PhD

MBA/MLA

1.6

None

1.4

German

MBBS

1.0 3.1 7.7 0

10

5.5

French

High school

Others

10.3

Indian languages

13.8

No response

57.3

Hindi

28.8

Bachelor's degree

93.5

English

42.6

Master's degree

(%) 20

30

40

50

3.4 2.0

Spanish

1.3

Japanese

0.8

Others

0.7 0.7

Chinese 0

(%) 20

40

60

80

100


102


Autumn 2007

India

Mr & Mrs India

Children: Investing in the future Average spend on child’s education is Rs12,760 pa; the spend in south is highest at Rs17,400

Annual expenditure on children’s education No response 19% Above Rs100,000 1%

Average spend on additional coaching/tuition is Rs5,754 pa, with 54% of households spending some money on extra academic activities

Below Rs5,000 30%

Rs50,001100,000 2% Rs20,00150,000 12%

41% of parents want their children to study abroad (56% in China); 76% of these say it is for better educational facilities

Rs5,00110,000 22%

Rs10,00120,000 14%

Average pocket money is about Rs500 per month with most spent on food (58%), books (32%), stationery and toys

Reason for educating children in a foreign country

Pocket money given to children up to Rs100 10% Nil 33%

Better educational facilities

Rs101 to 250 13%

75.8

Better employment prospects Rs1,001+ 6%

Rs251 to 500 23%

Rs751 to 1,000 11%

43.1

Better quality of life

20.4

Rs501 to 750 4%

(%) 0


10

20

30

40

50

60

70

80

Children: Ambitions for the next generation Preferred choice of profession for children Engineer

34% would like their children to become engineers, 27% doctors and 16% management jobs

34.1 26.8

Doctor 16.0

Management 12.2

Businessman

10.1

Professor/teacher 2.4

Accountant

1.1

Actor/artists Sports person

1.0

Journalist

0.8 0.7

IAS/IPS

0.3

Lawyer Others

(%)

0.7 0

5

10

15

20

25

30

35

40

Preferred foreign country where children should work US

58.9

Canada

13.9

UK

12.8

Australia

10.0

Singapore

Parental influence is still very strong in India; while in Hong Kong, 72% have no preference for children’s occupation Government services have lost their sheen in the new economic environment in India

7.9

Middle East

4.6

Rest of Europe

4.5

Japan

3.2

Malaysia

3.0

Other N America

41% of parents would like their children to work abroad

2.4

Africa

1.6

New Zealand

1.5

Hong Kong

1.4

China

1.1

Rest of Asia

0.6 0

59% of parents who want their kids to work abroad prefer the US

(%)

10

20

30

40

50

60

70


Autumn 2007


103

India

Mr & Mrs India

Transport and travel: How and where? Destination for overseas official travel Middle East

Members of only 4% of households have travelled abroad; 60% of the travel was for work, 40% was for a holiday

28.9

US

16.3

Indian subcontinent

11.6

Malaysia

29% of the overseas trips were to the Middle East and 16% to US, these two being the most travelled destinations on official work

9.1

Hong Kong

8.5

Singapore

7.9 6.1

UK Australia

3.1

Other N America

3.1

Rest of Europe

2.9

Rest of Asia

2.9 0

(%)

5

10

15

20

25

30

35

Purpose of foreign travel

55% of households use two-wheelers to go to work, 19% use public transport; in China 59% use public transport Mode of transport to office Public transport 19%

Personal/ holiday 40%

Private car 9%

Bicycle/walk 8% Taxi/auto 5% No response 2% Other 4%

Business/ official 60%

Company car 1%

Two-wheeler 55%

Company bus 1%


Travel and vacation: All work, no play? 41% of households have not taken a vacation in the past 12 months

Number of vacations taken 2 17%

30% of households take more than one family vacation per year

3 4% 4 2%

5 0%

1 30%

Singapore and the US are the most popular destinations for future holidays; 21% would like to travel to Singapore; 18% to the US

6+ 1%

Other 6%

Can't say 5%

None 41%

67% respondents travel by train for domestic holidays; 6% use airlines

Preferred destination for overseas travel Singapore Can't say US Middle East Indian sub-continent Canada Rest of Europe

Mode of travel for domestic holidays 21.0 20.8

Railway

67

17.7 11.1

Bus

7.8 6.7

Own transport

4.9

New Zealand Malaysia UK Thailand Australia South America

3.5 3.2 3.0 1.8 1.7 1.6 0

5

43

7

Air (FSC)

4

Air (LCCs)

2

(%)

(%) 10

15

20

25

0

10

20

30

40

50

60

70

80


104


Autumn 2007

India

Mr & Mrs India

Governance: Holding India back? How has India’s political condition changed?

52% of respondents believe the political situation and governance in India has worsened in the past 10 years; 46% think it has improved

No response 2%

Better off 46%

Respondents believe that the economy, reducing corruption and improving education should be top concerns for the government

Worse off 52%

Only 10% in the south feel the need for economic improvement as the south is doing comparatively well, while 27% in the east place the economy as top priority

Concerns that the government should address Improve the economy

20.6

Reduce corruption

16.4

Improve education

15.6

Employment opportunities

8.7

Reduce pollution

6.8

No response

6.6

Control crime

5.9

Control inflation

5.8

Reduce inequality

5.2 3.6

Better public housing Better healthcare

2.7

Better democracy

(%)

2.0 0

5

10

15

20

25

Reducing corruption is a concern for 23% of households in the north, at the seat of political and bureaucratic power, higher than the national average of 16%


Pollution: Not a general priority Is pollution the biggest concern? 12

Only 7% placed environment as a top priority for the government

(%) 10

10 8

8

8 7

6

5

6

4

4 2

Within regions, only 4% in the north rank pollution as a top priority, while the east is most concerned at 10%

0 All India

SEC A

SEC B

East

South

West

North

How much would you pay to reduce pollution? More than Rs500 1%

Can't say 4%

Rs101-500 13%

Nil 31%

Rs1-100 51%


Autumn 2007

65% would pay extra to reduce pollution, but are only willing to spend Rs88 on average 65% are unwilling to pay more taxes to reduce pollution This is likely partly due to uncertainty whether government will produce effective results


105

Mr & Mrs India

India

Notes

106


Autumn 2007

Indonesia

Mr & Mrs Indonesia

Indonesia - Fiscally challenged Eager to tap into the mindset of local households, we approached polling specialist, market-research firm Roy Morgan, to conduct the biggest survey of its kind in Indonesia.

Nick Cashmore Country Head CLSA Indonesia

Mr & Mrs Indonesia is the outcome of that effort. For two months, Roy Morgan surveyed people in 20 cities across the country - from Medan to Makassar and Banten to Bali. A phenomenal achievement. Of our respondents, 88% were over the age of 18 and the gender split was 50:50 between male and female. In all, we spoke with more than 21,000 Indonesians across the country; more than 6,300 people outside of Java alone. The outcome is comprehensive enough to be statistically representative for 67 million urban Indonesians.

The results are fascinating: while the country’s middle class may aspire to the sort of lifestyle displayed on the cover of this report, the reality is that most live a much more frugal existence. Only 30% of them have a full-time job and the average income of those that do is not much more than US$1,300 a year. Still, home ownership is high at 80%; although only 5% of our sample live in homes of more than 150 square metres and only 1% have a mortgage, 7% plan to buy a house in the next year. For most of the 60 million households in Indonesia, their home is their only material asset. Savings are generally sparse. Only 1% own shares; 150 million Indonesians do not even have a bank account. The average

savings in the bank of those that do is US$500. Only 4% of households have any form of insurance. Clearly, financial intermediation has a long way to go. Given such financial constraints, the trappings of modern life are still beyond the reach of all but a few. Only a lucky 5% of the households we spoke to have a car and just 1% have a credit card. The basics of life are of a much more pressing concern; over 80% of households do not have access to piped water and more than 33 million households have no sewerage facilities. Mobile telephony is one bright spot and is now a must-have item for many Indonesians, particularly the young. Of the people we spoke to, 30% had a mobile phone and many more intend to obtain one. Motorbikes were a close second. What Indonesians lack in monetary wealth they make up for in family. Seventy percent of households have children and 34% have two or more. Each household has almost four people on average. Education is an important issue for many families; only 3% make it to university and 50% of children leave school with not much more than primary-school education. This report provides a fascinating insight into Indonesian middle-class families. As the fourth most populous country in the world, the combination of a young, more urbanised middle class, aspiring to a modern lifestyle, will be a significant driver of future growth. More evidence of Asia’s Billion Boomers.

Key findings Mr & Mrs Indonesia are family-oriented, fiscally challenged Urbanisation is a key growth driver: There are 60m households, growing by 1.5m/year; 33% of homes have six or more people

Of those that do, the average savings is 10 years 3%

No plans 72%


Autumn 2007

jessie.wilson/jolyon.montague/amar.gill@clsa.com

129

Japan

Mr & Mrs Japan

Where they work 42% of all men surveyed describe themselves as managers/professionals

Occupation by sex Women

Other

50% of all women surveyed are homemakers

Men Not working

Double income, no kids (DINKs) comprise just 14% of all households; both parents work in just 33% of all households with children

Housewife/homemaker Manual/factory worker Skilled worker/tradesman Public services worker

Employment status by sex

Education/healthcare Own business/ self-employed

Women

Other

Men Voluntarily unemployed

Office/retail worker

Involuntarily unemployed

IT professional

Part-time worker

Middle management

Self-employed

Senior management/ professional

Employed fulltime

Board level director

(%) 0

20

40

60

80

(%) 0

100

10

20

30

40

50

60


Employment inequality Distribution of work by sex Women

Disproportionate number of women employed on short-term contracts as non-regular employees

Men

Managerial positions Production & transport

Few women hold managerial positions

Sales Professional & technical posts

Many women opt to leave the workforce to raise their children, resulting in an Mcurve distribution

Agriculture, forestry, livestock farming, hunting & fishing Services Clerical

(%) 0

20

40

60

80

100

Women’s labour-force participation

Form of employment by age and sex (%)

(%)

10

100

Nonregular staff

80

0 80

60

60

40

40

Regular staff

20

20 0

0 15-24 25-34 35-44 45-54 55-64

65+

Males

Source: Ministry of Health, Labour and Welfare

130

15-24 25-34 35-44 45-54 55-64 65+ Females

80

(%)

1980

70

2005

60 50 40 30 20 10 0 15-19

20-24

25-29

30-44

45-49

50-54


55-59

60-64

65+

Autumn 2007

Japan

Mr & Mrs Japan

Household finances Combined household income in 2006

Composition of financial assets Stocks and bonds 8%

More than ¥20m ¥15-19.99m ¥10-14.99m

Real estate 12% Savings-type insurance policies 5%

¥8-9.99m ¥6.5-7.99m ¥5-6.49m ¥3.5-4.99m

Deposits and savings 60%

¥2-3.49m Less than ¥2m 0

50

100

150

200

250

Investment trusts 2%

Personal annuities 3%

Other 10%

300

(No. of respondents)

60% of financial assets in deposits and savings

Amount of equity in their homes Decline to answer

12% of wealth in real estate

¥50m or more

29% of homeowners have more than ¥25 million equity in their homes

¥25-49.9m

Less than ¥25m (%) 0 10 Source: CLSA Asia-Pacific Markets

20

30

40

50

60

70

Financial dependents 43% have no financial dependents

Parents’ financial independence

9% are supporting elderly relatives No pension or fixed income 8%

51% have children under the age of 18

Not applicable 3%

Halfsustained with pension/ fixed income 24% Financially self-sustained 65%

Financial dependents Other Elderly relative Child 19 and above Child 12-18 Child 5-11 Child under 5

(%) 0

5

10

15

20

25

30

35


Autumn 2007


131

Japan

Mr & Mrs Japan

34% say they are worse off than 10 years ago Better or worse off than 10 years ago?

What they would do if they were given ¥75 million? Other

Much worse off

Have plastic surgery Start a business

Slightly worse off

Go on a shopping spree About the same

Move house Pay off their mortgage

Slightly better off

Buy a new car Travel

Much better off

Invest the money 0

100

200

300

400

500

0

200

400

Change in household income over past 12 months Slight increase 12%

Significant increase 2%

Significant decrease 10%

600

800

(No. of responses)


25% of respondents say their combined household income has decreased over the past 12 months, versus 14% for whom it has risen Only 26% say they are better off today than they were 10 years ago; 34% say they are worse off

Slight decrease 15%

Stayed the same 61% Source: CLSA Asia-Pacific Markets

Banks and financial institutions Financial institutions they currently use

81% put their faith in a postoffice savings account

Online broker Foreign bank

Convenience and trustworthiness are key factors, along with the ability to bank online

Japanese bank Credit cooperative Stockbroking firm Regional bank Major domestic bank Post office

(%) 0

10

20

30

40

50

60

70

80

90

Reasons for selecting their bank Good impression of salespeople Wide range of financial products Higher returns Trustworthiness Lower transaction fees Nationwide branches Facilities such as online banking Convenience and ATM location Source: CLSA Asia-Pacific Markets

132

(%) 0

20

40


60

80

100

Autumn 2007

Japan

Mr & Mrs Japan

Credit cards: Type and lender 79% of our survey respondents have a credit card

Credit cards by issuer UC OMC

The median number of credit cards per person is 2.43

DC Aeon Mitsubishi UFJ Nicos Sumitomo-Mitsui

Visa and JCB are the most popular, comprising 45% and 27%, respectively, of all cards held

Credit Saison JCB Other 0

100

200

300

400

500

600

700

800

(No. of cards)

Number of credit cards held per person Five or more 7%

Four 8%

Credit cards by operator American Express

None 21%

Diners Club Three 16%

MasterCard JCB

One 25%

Visa

Two 23%

0

200

400

600

800

1,000

(No. of cards)


Credit cards: Monthly spend The median monthly spend on credit cards is ¥39,500 but 22% put less than ¥10,000 on their cards each month 49% have a combined credit limit on their cards of more than ¥500,000

Total combined credit limit More than ¥1,500,000 ¥1,000,000-1,500,000 ¥750,000-999,999 ¥500,000-749,999 ¥250,000-499,999

62% don’t pay an annual fee

Up to ¥250,000 0

50

100

150

200

250

300

350

400

(No. of responses)

Average monthly credit card spend

Annual fee

¥100,000 or more ¥90,000-99,999

¥2,500-2,999 1% ¥2,000-2,499 3%

¥80,000-89,999 ¥70,000-79,999 ¥60,000-69,999

More than ¥3,000 10%

¥1,500-1,999 4%

¥50,000-59,999 ¥40,000-49,999 ¥30,000-39,999

Less than ¥1,500 20%

¥20,000-29,999 ¥10,000-19,999

None 62%

Under ¥10,000 0 Source: CLSA Asia-Pacific Markets

Autumn 2007

50

100

150

200 250 (No. of responses)


133

Japan

Mr & Mrs Japan

Investment behaviour 18% have invested in stocks in the past 12 months

Invested in stocks/funds in past 12 months?

11% hold savings in other currencies; the most common being US dollars, Australian dollars, New Zealand dollars and euros 25% plan to increase their stake in Japanese equity and investment trusts over the next 12 months

Yes 18%

No 82%

A possible beneficiary is Sawada (8699), the operator of Gaitame.com, the largest online currency trading platform for individuals in Japan

Areas in which they plan to increase investment

Hold savings in currencies other than yen?

Japanese real estate Savings-type insurance products

Yes 11%

Foreign equities Foreign currency MMF Personal annuities Foreign currency investment trusts Japanese investment trusts

No 89%

Savings accounts Japanese equities 0

50

100

150

200

250

(No. of respondents) Source: CLSA Asia-Pacific Markets

Low-risk appetite Considerations when selecting a financial product

27% believe their best investment has been in property

Capital gains

17% maintain their best investment has been stocks Guaranteed principal is key when selecting a financial product

Ease of cashing in Comprehensive product scheme Reputation of financial institution High yield Ease of deposit/ withdrawal Guaranteed principal

(%)

Best financial investment to date 0

10

20

30

40

50

Artwork Business Forex Trusts and bonds Stocks and shares Housing 0

50


134

100

150

200

250

300

350



Autumn 2007

Japan

Mr & Mrs Japan

Insurance: 76% have life insurance 76% of respondents have life insurance

Life insurance policies purchased None Medical Life 0

200

400

600

800

1,000


Life insurance policies by company

The average number of policies per household (including individual annuities) is 4.3, and the total annual insurance premiums payable per household averages out at ¥530,000 Non-life insurance policies by company

Taiyo Life

Nisshin

Mitsui Life

Nissay Dowa

AXA

Sony

Sompo

Fuji

Asahi Life

Nippon Life

AIG Tokio Marine

AXA

Meiji Yasuda Life

Nipponkoa

Sony Life

Aioi

Sumitomo Life

Sompo

Daiichi Life

Mitsui Sumitomo

AFLAC (%)

Nippon Life 0

2

4

6

8

10

12

(%)

Tokio Marine Nichido 0

14

5

10

15


Expenditure: 41% on food and shelter 20% of respondents’ annual disposable income is spent on housing and utilities 21% is spent on groceries

Monthly discretionary spend on non-essentials More than ¥1m ¥600,000-1m ¥300,000-599,999

Their next largest expense is clothing and footwear (7%), followed by transport and communication (6% each)

¥125,000-299,999 ¥75,000-124,999 Less than ¥75,000 0

100

200

300

400

500


Breakdown of annual expenditure Other 13% Travel 4%

Housing and utilities 20%

Healthcare 4% Savings 12% Personal development 2% Children's education 5% Clothing and footwear 7%

Food 21%

Transport 6% Communications 6%


Autumn 2007


135

Japan

Mr & Mrs Japan

Largest single purchase over the past 12 months Most expensive purchase over past 12 months

Cost of most expensive item

Artwork More than ¥3m

Dishwasher

¥2-3m ¥1-2m

Jewellery

¥750,000-999,999

Bicycle

¥500,000-749,999 ¥300,000-499,999

Motorbike

¥150,000-300,000

Small home appliances

¥50,000-149,999 Less than ¥50,000

Furniture

0

Clothing

50

100

150

200

250

300

350

(No. of respondents) Refridgerator Washing machine Mobile phone

12% say that their single most expensive purchase over the past 12 months was a computer

Air conditioner TV Small electronics product Car Computer 0

20

40

60

80

100

120

140

160



Let’s go shopping! Typical prices of selected products Toyota Corolla ¥1.4 million

Sony 500GB Blu-Ray disc recorder ¥242,500

Fujitsu notebook computer

National dishwasher

Sanyo fridgefreezer

¥74,800

¥49,800

¥174,800 Uniqlo jeans

Sharp 32” LCD TV

¥3,990

¥188,000

Toshiba mobile phone ¥11,520

Canon 7.1 megapixel digital camera ¥27,300

Bridgestone bicycle Hitachi washing machine

¥31,990

¥119,800

136


Autumn 2007

Japan

Mr & Mrs Japan

What they are saving for? Respondents save on average 12% of their household income each month, but what exactly are they saving for? 22% anticipate their largest spend over the next few years will be on their child’s education 17% say it will be the purchase of a new car Anticipated largest spend over the next few years Wedding Funeral Healthcare Overseas travel Real estate Car Child's education

(%) 0

5

10

15

20

25


Travel: Hawaii is the top destination 33% have travelled overseas in the past 12 months, and a similar number plan to travel overseas in the next 12 months 45% travel domestically at least twice a year Hawaii, Guam and Saipan are their top holiday destinations Beneficiaries include HIS (9603) and ANA (9202) Preferred travel destination

Overseas travellers by age

Central and South America Africa and Middle East Hong Kong

(%)

China Central and Eastern Europe

1994

Taiwan

Teens

20s

30s

40s

50s

Over 60

5.2

18.5

28.2

18.9

15.6

11.3

3

Australia and New Zealand

1999

Continental North America

5.4

19.7

24.9

15.7

17.8

13.5

3.1

Western Europe

2003

South Korea

4.5

20.1

22.6

16.8

18.6

14.3

3.3

Guam and Saipan

2006

Southeast Asia Hawaii

4.9

17.2

22.8

17.5

18.8

15.5

(%) 0


Autumn 2007

Under 10

2.3

5

10

15

20

25 Source: Japan National Tourist Organisation


137

Japan

Mr & Mrs Japan

Travel: 24% like to travel alone Types of holiday they prefer

Preference for active, intellectually stimulating trips

2%

23%

5%

10%

18%

15%

5% 7%

14%

Sightseeing

Romantic getaway

Cultural and historical

Shopping/city breaks

Beach/resort

Entertainment/casino

Sporting holiday

Cruise

Other

Not big on romantic getaways!

Preferred travelling companion

Most prefer to travel with family members

Female

By oneself

Male

Men more likely to travel alone than with friends

With partner With family members With same-sex friends Other

(%) 0


10

20

30

40

50

60

70

80

Eating out Our respondents eat out as a family 2.8 times a month on average 19% eat out more than five times a month The average cost of a family meal is ¥4,800

Average cost of each meal

How many times a month they eat out 6 times or more 9%

More than ¥10,000

None 15%

5 times 10%

¥7,500-10,000 ¥5,000-7,500 ¥2,500-5,000 Less than ¥2,500 0

100

200

300

400

500

(No. of respondents) Source: CLSA Asia-Pacific Markets

138

Once 19%

4 times 12%

3 times 18%

Twice 17%


Autumn 2007

Japan

Mr & Mrs Japan

Convenience stores Favourite convenience store

70% shop in convenience stores at least once a week

Poplar am-pm

Top-ranking convenience stores are Seven-Eleven (56%), Lawson (42%) and FamilyMart (34%)

Ministop Daily Yamazaki Circle K Sunkus FamilyMart Lawson Seven-Eleven

(%)

0 10 Source: CLSA Asia-Pacific Markets

How often they shop in convenience stores Once a month or less 9%

Never 3%

Teens 2004 4-5 times a week 13%

1999

1994 Once a week 14%

30

40

50

60

Convenience store visitors by age

Daily 14%

2-3 times a month 18%

20

2-3 times a week 29%

12%

30s

29%

17%

40s

Over 50

22%

15%

35%

22%

1990


20s

20%

37%

31%

22%

14%

18%

34%

14%

12%

15%

11%

10%

10%

Source: Dentsu

Cars: 29% drive a Toyota Age of primary car

Cars owned by brand

29% of all families surveyed own a Toyota; 17% own a Honda; 13% own a Nissan

Other

More than 10 years

Volvo 6-10 years Ford 3-5 years

Mercedes

Foreign brands comprise just 8% of all cars owned by our respondents

Alpha Romeo

1-2 years

Peugot Less than 1 year

(%) 0

5

10

15

20

25

30

35

BMW Volkswagen Subaru

Number of cars per household

Mazda Mitsubishi

Three or more 1%

Daihatsu

None 21%

Two 17%

Suzuki One 61%

Nissan Honda Toyota 0

50

100

150

200

250


Autumn 2007

300

350

400

(No. of cars)


139

Japan

Mr & Mrs Japan

Cars: Time for an upgrade? When they plan to purchase a new car

11% plan to buy a new car within the next 12 months; 32% plan to buy one within the next five years

Within 12 months 11%

24% plan to buy a Toyota, 10% a Honda, and 6% a Nissan

1-2 yrs 12%

The median amount they plan to spend on their next car is ¥2 million; 15% plan to spend more than ¥3 million

Not sure 62%

3-5 yrs 9% More than 5 yrs 6%

42% will take out a loan to pay for their vehicle

Amount of money available to spend on a new car 45

Will they take out a loan to purchase a new car?

(%)

40 35 30 25 Yes 42%

20 15

No 58%

10 5 0 Less than ¥1-2m ¥1ｍ Source: CLSA Asia-Pacific Markets

¥2-3m

¥3-5m

More than ¥5m

Cars: Changing priorities Primary considerations when purchasing a new car Other

Fuel consumption has become a primary concern when looking for a new car

Optional extras

56% use their car on a daily basis

"Dream" car

Eco-friendliness

Size

Performance

Main form of transport

Sty le and image

Other

Reliability

Taxi

Brand Current car

Motorbike

New car

Safety

Bicycle F uel consumption

Public transport

Price

(%) 0

10

20

30

40

50

60

70

80

Private car

(%) 0

10

20

30

40

50

60


140


Autumn 2007

Japan

Mr & Mrs Japan

Clothing: Uniqlo comes up trumps Favourite clothing brands

Where they purchase their clothing

9% of respondents list Uniqlo as one of their three favourite clothing brands

Prada Louis Vuitton Adidas 23 ku Tommy Hilfiger

26% of clothing is purchased from department stores

Gucci Chanel Cecile

30% of respondents shop for clothes at least once a month

Beams Untitled

Other 1%

Outlet stores 6%

Department stores 26%

Catalogues 8% Online 14%

Supermarket 15% Boutique stores 16%

Discount stores 14%

Hermes Global Walker

How often they shop for clothes

United Arrows Eddie Bauer

Rarely

Nike Kumikyoku

Once a year

Ralph Lauren

Once every few months

Muji Burberry

Once a month or more

Comme Ca Gap

Once a week or more

Uniqlo 0

20

40

60

80

100

120

0

100

200

300

400

500

600

700

800




Consumer electronics: Sony is the brand of choice Favourite brands of electronics

Items they are planning to buy

Samsung

Home-theatre system

Sanyo

Refrigerator

Mitsubishi

Vacuum cleaner

NEC

Oven

Hitachi

Robot

National

Air-conditioner

Toshiba

DVD recorder

Panasonic

Washing machine

Sharp Sony

(%) 0

10

20

30

40

50

60

Dishwasher Mobile phone Digital camera

Primary considerations when shopping for electronics Other

Computer TV

(%) 0

Stockist

5

10

15

20

25

30

Latest model Positive reviews

Price and electricity consumption are our survey respondents’ main concerns when shopping for electronics

Size/portability Design Durability Ease of use Brand Electricity consumption (%)

Price 0 Source: CLSA Asia-Pacific Markets

Autumn 2007

20

40

60

80

100


141

Japan

Mr & Mrs Japan

TVs: Most still watching CRTs TV by type

CRTs comprise 73% of all TVs

Other 2%

Plasma 5%

28% of all families surveyed have an LCD TV; 7% have a plasma TV

LCD 20%

24% plan to buy a new TV over the next 12 months

CRT 73%

Sharp is the clear leader in LCD Number of CRT TVs by brand

Number of LCD TVs by brand

Samsung

NEC

NEC

Sanyo

National

National

Hitachi

Samsung

Sanyo

Mitsubishi

Mitsubishi

Hitachi

Toshiba

Toshiba

Sharp

Panasonic

Panasonic

Sony

Sony

Sharp 0

50

100

150

200

250

0

300

50

100

(No. of CRT TVs)


150

200

(No. of LCD TVs)

Computers: 1.8 per household 97.8% of families surveyed have at least one computer; 47% have more than one computer in their home NEC is the top-ranking brand for both desktops and notebooks

Notebook or desktop computer?

Notebook 47%

Desktop 53%

Number of computers by brand Samsung Acer eMachines Mouse Computer Gateway Hitachi

Number of computers per household

Panasonic HP Sotec Sharp

Four or more 7%

IBM Apple

None 2%

Three 9%

Toshiba Dell

One 52%

DIY Sony

Two 30%

Fujitsu NEC 0

50


142

100

150

200

250

300

350

400

(No. of computers)


Autumn 2007

Japan

Mr & Mrs Japan

Digital cameras and MP3 players Number of digital cameras per household

38% have a digital audio player

Four or more 1%

85% have a digital camera (excluding camera-equipped mobile phones)

None 15%

Three 2%

Two 15%

One 67%

Number of digital cameras by brand

Number of digital audio players by brand

Kodak

Samsung

Toshiba

Victor

Pentax

Kenwood

Nikon

Toshiba

Casio

Sharp

Panasonic

Creative

Sony

Panasonic

Olympus

i-River

Fujifilm

Sony

Canon 0

50

100

150

200

250

300

Apple

350

0

(No. of units)

20

40

60

80

100

120

140 160 (No. of units)


Mobile phones Mobile phone provider

An average of 2.7 mobile phones per household

Other 3%

Softbank 17%

The most popular handsets are Sharp (33%), Panasonic (16%), NEC (14%), Toshiba (13%) and Sony-Ericsson (10%)

KDDI 29%

NTT DoCoMo 51%


Mobile phones by brand

Number of mobile phone subscribers in Japan

Motorola

100

LG

90

Samsung

80

Mitsubishi

70

Hitachi

60

Sanyo

50

Sony-Ericsson

40

Toshiba

30

NEC

2G and below

3G

20

Panasonic (%)

Sharp 0

5


Autumn 2007

(Millions)

10

15

20

25

30

35

10 0 1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

Source: Telecommunications Carriers Association


143

Japan

Mr & Mrs Japan

White goods and home appliances 94% have airconditioning in their home; the average number of units per home is 1.9

Top three brands

95% have a washing machine

Airconditioner: Mitsubishi (13%), National (11%), Toshiba (10%)

23% have a dishwasher

Number of airconditioning units per household Three 2%

Washing machine: Hitachi (19%), Sanyo (17%), Toshiba (15%)

Four or more 1% None 6%

Two 24%

Dishwasher: National (32%), Toshiba (9%), Hitachi (5%)

One 67%


Spend on children Parents spend an average of ¥45,000 per month on their children The most common extra-curricular activities paid for by parents for their children are sports classes (32%), music classes (15%), English lessons (13%) and maths classes (12%)

Monthly spend on children ¥60,000 or more

¥45,000-59,999 ¥30,000-44,999 ¥15,000-29,999

Less than ¥15,000 0

50

100

150

200


Children’s extracurricular activities 250


Our respondents’ children are still young (81% under the age of 11), and these costs will increase rapidly once their children enter junior high school (see next page for details)

200 150 100 50 0 Sports

Music

English

Maths

Dance

Science Japanese

Art


144


Autumn 2007

Japan

Mr & Mrs Japan

Average cost of raising a child in Japan According to the Ministry of Health, Labour and Welfare, the average cost of raising a first-born child in Japan now stands at around ¥20 million 40% of this cost is spent on education

Monthly cost of education in Japan

Average cost of raising a child in Japan 25

(¥m)

Basic expenditure

Education

Housing

60,000

(¥)

Other After-school tuition Textbooks and supplementary learning materials Tuition

50,000

20

40,000 15 30,000 10 20,000 5

10,000

0 First child

Second child

Third child

0 0-2 yrs

3-5 yrs

6-11 yrs

12-14 yrs 15-17 yrs 18-21 yrs

Source: Ministry of Health, Labour and Welfare

Children’s pocket money Monthly amount of pocket money children receive 60

(%)

50

56% don’t give their children any monthly allowance When they do give their children money, it is usually spent on books and food

40 30 20 10 0 Less than ¥1,000

¥1,0004,999

¥5,0009,999

¥10,000 or more

No fixed amount

None

What children spend their pocket money on

Music 7% Clothes 7%

Other 7%

Mobile phone 1% Books 27%

Stationery 11%

Toys 18%

Food 22%


Autumn 2007


145

Japan

Mr & Mrs Japan

Children: Education and beyond 78% would like their children to go through tertiary education

Preferred occupations for children Writer

19% would like their children to grow up to become a scientist; 17% would like them to become a professional athlete (because they want their children to fulfil their dreams)

Policeman Executive Pilot Diplomat Teacher

25% would like their child to study abroad, while 60% say it is up to the child to decide

Actor Politician Banker

Educational level they hope their children will attain 50

Computer programmer Interpreter

(%)

45

Accountant

40

Entrepreneur

35 30

Designer

25

Lawyer

20

Doctor

15 10

Professional athlete

5

Scientist

0 High school

Two-year college

University degree

Master's degree

PhD

Other

0

20

40

60

80

100

120

140



Looking ahead: Pessimism prevails Better or worse off five years from now?

31% think that they will be financially worse off in five years’ time than they are today, versus 26% who think they will be better off

Much better off 6%

Much worse off 9% Slightly worse off 22%

Slightly better off 20%

Their biggest concerns are a lack of savings and rising medical costs, as well as an increase in the general cost of living

About the same 43%

Financial concerns

Likely change in income over next 12 months

Other

800

Rising property prices Unemployment

600

Not having enough to live on in later life

500

Amount of pension I will receive

400

Cost of education

300

General cost of living

200

Rising medical costs

100 (%)

Lack of savings


146


700

0

10

20

30

40

50

0 Significant decrease

Slight decrease

Stay the same

Slight increase


Significant increase

Autumn 2007

Japan

Mr & Mrs Japan

Thoughts on the government 66% believe the government in Japan has deteriorated over the past 10 years; just 4% think it has improved 33% think the government’s top priority should be improving the economy, followed by the pension deficit (16%) and improving income inequality (15%)

Top priority for the government to address Other Encourage immigration Curb immigration Better public housing Earthquake prediction Relations with neighbouring countries Encourage greater innovation Declining birthrate

Government better or worse than 10 years ago

Improving childcare facilities Improving education

Much worse

Environment

Slightly worse

Healthcare system Reducing income inequality

About the same

Pension deficit

Slightly better

Improving the economy 0

Much better

250

500

750

1, 000

1, 250

1, 500

1, 750

(Weighted no. of votes¹)

0

100

200

300

400

500

(No. of responses) Source: CLSA Asia-Pacific Markets

¹ Respondents were asked to name the top three areas in which they feel the government should be focusing their efforts, in order of importance. For the purpose of our analysis, firstplaced rankings were given three points, second-placed rankings two points, and third-placed rankings one point.

Concern for the environment 30% listed the environment as one of the top three priorities on which the government should be focusing its attention Only 23% would be prepared to pay more tax to help achieve an overall reduction in pollution levels, but 40% would be prepared to increase their electricity and transportation costs Extra costs they are prepared to pay to achieve a 10% reduction in atmospheric pollution Electricity costs

60%

Transportation costs

60%

18%

11%

5% 5% Nothing

17%

11%

6%

Less than 1%

6%

1% - 1.9%

3% Residents' tax

77%

13%

1%

6% 3%

Income tax

77%

13%

6%

2% - 4.9% 5% - 9.9%

1%


Autumn 2007


147

Mr & Mrs Japan

Japan

Notes

148


Autumn 2007

Korea

Mr & Mrs Korea

Korea - Local spenders Another step in our efforts to understand Asian households, their aspirations and evolving spending and saving patterns, Mr & Mrs Korea is a survey of more than 1,500 households in five regions around the country. Respondents are 25 to 49 years old, with annual incomes ranging from 11m won to more than 98m won.

Shaun Cochran

Deputy Head of Research CLSA Korea

Our findings are both expected and unexpected. Koreans are far more wealthy than 10 years ago with the average household earning 41 million won per year, or 60% more in won terms. Not surprisingly, 76% feel the same or better-off today, despite the fact that income inequality has grown. While the bottom decile grew 34% in the past decade, incomes in the top decile jumped 66%.

But Koreans are not without worries. Although a very healthy 28% of households saw incomes rise in the past 12 months, 55% saw no change. The biggest cause of apprehension remains in the here and now, with 48% citing education and 34% housing (rental or ownership costs) as their biggest financial concern. However, the population is ageing rapidly, reportedly at the fastest pace in the world, and population growth will fall into decline by 2019. With Koreans massively overweight cash (38%) and property (53%) the expected structural shift to equities (6%) has very long legs.

Bearing in mind the country’s demographic issue, it is unsurprising that, despite the fact that education and housing are the top two concerns, 41% said retirement is their biggest motivation for saving; while 25% cite property and 22% education. If they had one billion won to spend, 86% would put this money into appreciating assets, 49% investments and 37% property. Although only 6% of assets are held in stocks, 35% of our sample households invested in stocks in the past year and 42% plan to do so in the next 12 months. Government restrictions certainly appear to have tamed the long-term proclivity for property. Fully 86% of respondents claim that they do not plan to purchase property in the next 18 months - a timeframe that takes us well into the next administration’s term of office. Koreans still love to buy local brands. Samsung, Hyundai and LG dominate durable-goods and electronics preferences. Only in fashion do we see the reverse – with foreign brands accounting for 64% of favourites in this category. Interestingly, you will find almost no iPods here, with only 4% penetration of our sample – perhaps intellectualproperty rights are not a priority to the average Korean. Above all, Koreans remain pro-growth. Respondents believe improving the economy and education should be the government’s main priorities. And while 61% are unwilling to pay more tax to reduce air pollution, roughly half would pay more for transport and electricity. Clearly growth and retirement savings are the biggest issues for Mr & Mrs Korea.

Key findings Dramatic 60% rise in average income over the previous decade in won terms

Local brands dominate the shopping list for consumer durables but not for fashion

Widening income disparity, with a 66% increase in household earnings for the top decile and 34% for the bottom decile

Samsung dominates every durables category except auto (Hyundai); LG is the consistent runner-up; foreign brands account for 64% of fashion favourites

Living conditions are still cramped at 3.65 people per household, however government measures still appear to be working, with only 14% considering a home purchase in the next 18 months The biggest household concerns are education and housing costs which (after groceries at 22%) are the biggest household expenses at 22% and 13%

Autumn 2007

Koreans massively overweight property (53%) and cash (38%), with stocks just 6% of assets, although 42% intend to buy stocks in the next 12 months Our sample prioritised improving the economy and education, followed by income inequality, while only 8% considered pollution to be a priority

shuan.cocharn/robert.bruce/amar.gill@clsa.com

149

Korea

Mr & Mrs Korea

Investment conclusions Financials: Liquidity is the winner, with a secular migration of assets away from property and cash into stocks and funds looking likely. Brokers and bank fees will benefit. KIH offers the best exposure, although the bank’s margins will face sustained pressure - 51% of households are willing to switch to a broker account for higher interest Property: Short-term property investment seems to be at risk due to government restrictions and high penetration. Eighty-six percent of households do not intend to buy property in the next 18 months. Long-term expectations are robust, with property the second-most popular reason to save (25% of respondents). Daelim offers good exposure that is hedged over the short term via infrastructure and offshore projects Education and travel: Education remains the single-greatest priority for parents - BUY Megastudy. Only 4% of households had travelled outside Korea for holidays in the past 12 months Hanatour is the beneficiary as that rises

Insurance: We see limited evidence of the growth opportunities that insurance sector multiples imply - 95% of respondents already have some form of insurance cover (74% for medical, 69% for life) and 69% of those without cover are not interested in purchasing insurance Autos: Domestic auto producers face long-term risks. Only 1% of households own an imported car, although 4% of new buyers are considering one. While still small-scale, the popular imported brands are high-end models. The growing popularity of mid-range cars is a long-term risk. The domestic share is highly concentrated. Kia is at greatest risk here, with the widest gap between its market share and intended purchases Credit cards: Although only 2% of households choose their card for lower interest rates suggesting interest-margin resilience, 56% hold three or more cards. Around 50% use their primary card out of habit, while 40% use it for its benefits. The conditions are ripe for a benefitsdriven market-share war

Who are they? Korea’s average household comprises 3.65 people living in a median-sized apartment of 82m2 Just over half of our sample group own the properties they live in. Of the properties that were mortgaged, only 13% have been paid off. Government property measures appear to be working - 86% of households have no intention of buying property in the next 18 months

In terms of consumer goods and electronics, Mr & Mrs Korea prefer local brands, with Samsung and LG holding a commanding presence in home appliances and electronics while Hyundai dominates car sales

Households average 1.6 children and only 12% have at least one parent or parent-in-law living in their home

Although 80% own cars, only 42% use them as their primary mode of transport while 54% use public transport

Retirement is a major reason for saving and more than 55% of households save at least 20% of their income

Ninety percent of households have credit cards. Although 58% spend less than one million won each month on their credit cards, a large majority have credit limits of at least two million won

According to our data, over 90% of household wealth in Korea is in property or cash. In the past 12 months, only 35% have invested in stocks, however 42% plan to do so in the next 12 months

150

Our respondents spend 44% of their disposable income on groceries and education (22% each) and a further 13% on housing


Autumn 2007

Korea

Mr & Mrs Korea

What do they want? Retirement Retirement is is the the reason reason for for saving, saving, according according to to 41% 41% of of our our respondents, respondents, but but only only 64% 64% are are covered covered by by retirement retirement funds funds

Well Well known known for for high high levels levels of of education, education, itit is is is is not not surprising surprising that that 58% 58% of of Korean Korean parents parents want want their their children children to to complete complete aa bachelor’s bachelor’s degree degree and and 14% 14% aa master’s. master’s. What What is is amazing amazing is is that that 26% 26% expect expect them them to to go go all all the the way way and and earn earn aa doctorate! doctorate!

On On average, average, 53% 53% of of respondents’ respondents’ savings savings is is stored stored in in property, property, 38% 38% in in cash cash and and only only 6% 6% in in stocks. stocks. Thirty-five Thirty-five percent percent have have invested invested in in stocks stocks and and 42% 42% plan plan to to in in the the next next 12 12 months months

Ninety-eight Ninety-eight percent percent want want their their children children to to have have aa tertiary tertiary education, education, 48% 48% want want them them to to study study abroad, abroad, but but only only 30% 30% want want them them to to work work overseas overseas

Invest savings Upgrade the car

Property Property is is still still the the second-most-common second-most-common reason reason to to save, save, accounting accounting for for 25% 25% of of respondents. respondents. With With 66% 66% of of households households made made up up of of four four or or more more people, people, itit is is not not surprising surprising that that 37%, 37%, ifif given given one one billion billion won won to to spend, spend, would would improve improve their their housing housing

Children to college

The The most most commonly-cited commonly-cited big-ticket big-ticket items items were were mobile mobile phones phones (17%), (17%), computers computers (14%), (14%), cars cars (11%), (11%), airconditioners airconditioners (11%) (11%) and and cameras cameras (11%) (11%) Intense Intense competition competition characterises characterises this this segment. segment. English English and and maths maths coaching coaching are are by by far far the the most most popular popular extracurricular extracurricular lessons, lessons, followed followed by by music. music. Kindergarten Kindergarten coaching coaching ranked ranked sixth! sixth! The The typical typical household household has has 1.6 1.6 children children

Retire x

Upgrade house

Fifty-four Fifty-four percent percent of of respondents’ respondents’ parents parents support support themselves themselves

Only Only one one percent percent of of households households surveyed surveyed already already own own aa foreign foreign car, car, but but 4% 4% expressed expressed an an interest interest in in buying buying aa foreign foreign car car within within three three years years Twenty-three Twenty-three percent percent of of parents parents would would like like to to see see their their children children in in teaching teaching positions, positions, while while 21% 21% prefer prefer government government jobs. jobs. The The old old chestnuts, chestnuts, doctors doctors (14%) (14%) and and lawyers lawyers (8%), (8%), come come in in third third and and fourth fourth

Spend and travel

Education Education fees fees are are cited cited most most often often as as the the greatest greatest concern concern for for households, households, with with 48% 48% choosing choosing this this issue issue

Send kids to school

Buy a car Have children

Buy a house

Of Of items items likely likely to to cost cost more more than than two two million million won, won, the the popular popular items items were were all all home-improvement home-improvement products: products: TVs TVs (10%); (10%); kimchi kimchi refrigerators refrigerators (7%); (7%); standard standard refrigerators refrigerators (7%) (7%) and and washing washing machines machines (4%) (4%)

Only Only 27% 27% plan plan to to buy buy aa car, car, 80% 80% own own at at least least one one Eight Eight percent percent of of households households surveyed surveyed are are saving saving in in preparation preparation for for having having children children

Interestingly, Interestingly, 85% 85% have have not not left left Korea Korea in in the the last last 12 12 months. months. When When they they do do holiday holiday overseas, overseas, Koreans Koreans prefer prefer to to travel travel to to China China (22%), (22%), Japan Japan (17%) (17%) and and Thailand Thailand (13%) (13%)

Only Only 14% 14% of of households households plan plan to to buy buy aa house house in in the the next next 18 18 months, months, of of which which only only 29% 29% (ie (ie 4% 4% of of the the total) total) are are seeking seeking their their first first house house

Incomes: Rich getting richer Annual household income deciles 120

The average annual household income is 41.3 million won

(m won)

100

The average annual income for the bottom decile is just 11m won per year, while the average for the top decile is 98m won

80 60 40 20

On average, annual household incomes have increased by 15m won over the last 10 years

0 Avg 1 2 3 4 5 Source: Korean Statistical Information Service

6

7

8

9

10

Change in annual household-income deciles (1996-2006) 70 60

(%) 60 53

57

59

61

62

62

62

5

6

7

8

9

66

46

50 40

34

In that time, the average annual income for the bottom decile has increased by just 2.8m won (34%) while the top decile has seen a 38.9m won (66%) increase

30 20 10 0 Avg

1

2

3

4

10


Autumn 2007


151

Korea

Mr & Mrs Korea

Population: Infertile, ageing Number of live births per 1,000 women

Korea has the fourth-lowest birth rate in the world (1,190 births per 1,000 women), behind Hong Kong, the Ukraine and Slovakia

US France Norway Sweden

Annual population growth is expected to decline over the next 10 years to just 0.1% by 2016

Denmark Australia UK

The dependency ratio (the population younger than 15 and older than 65 years in every thousand) is set to rise from 403 to 644 by 2036

Netherlands Germany Singapore Japan Korea

There are currently 1% more males than females. This situation is likely to reverse, with 2% more females than males by 2036

Hong Kong 0

500

1,000

1,500

2,000

2,500

Source: HK Census and Statistics Department and UNFPA

Projected annual population growth

Dependency and sex ratio projections

160,000

700

140,000

(No. of deps per 1,000 pop)

120,000

1,015

Dependency ratio

600

1,010

Males per 1,000 females (RHS)

1,005

100,000

500

1,000

80,000

400

995

60,000

300

985

200

980

990

40,000 20,000

975

100

0

970

0

-20,000 2007

2009

2011

2013

2015

2017

965 2006

2019

2011

2016

2021

2026

2031

2036

Source: Korean Statistical Information Service, CLSA Asia-Pacific Markets

Source: Korean Statistical Information Service

Homes: Fewer than four per household Size of house

The median apartment size is 82m2

2

(m )

Over 68% live in homes smaller than 99m2

> 198 166 - 198

Less than 7% of households live in homes larger than 130m2

130 - 165 100 - 129

The average household has 3.65 persons

67 - 99 34 - 66 (No. of respondents)

< 33 0

100

200

300

400

Number of people per household Six or more 3%

One 5% Two 8%

Five 11%

Three 21% Four 52%

500

600

700

In our sample, 13% live in households of up to two people, while 86% live in households of up to four people Conversion table Pyong 1 10 20 30 40 50 60 70 80

Square metres 3.31 33.06 66.12 99.17 132.23 165.29 198.35 231.41 264.46

Square feet 35.58 355.83 711.67 1,067.50 1,423.33 1,779.17 2,135.00 2,490.83 2,846.67


152


Autumn 2007

Korea

Mr & Mrs Korea

Homes: Savings pay for 45% of properties Chonsei is a Korean rental system whereby the tenant pays an up-front deposit (usually 40-60% of the property’s value) to the owner. There is no additional periodic rent due for the term of the lease. Unless otherwise stated in the contract, the tenant will usually cover all maintenance expenses during the lease period. The deposit is returned to the tenant at the end of the lease period.

Home-ownership status

Wolsei 4%

Rent public housing 2%

Chonsei 37%

Belong to parents 6%

Owned 51%

Wolsei is similar to Chonsei, but the deposit is significantly smaller and the tenant is required to maintain monthly rental payments that are not refundable.

Main source of finance for property purchase Others 1%

Among our respondents, 43% live in rented private or public housing Forty-five percent of property purchases were paid for primarily out of savings, while 24% were mostly mortgaged Of the properties that were mortgaged, 87% are still being paid off Among our respondents, 39% do not own a property Twenty percent own more than one property Number of properties owned with spouse

Parents 11% Sold previous house/getting back deposit 19%

Savings 45%

>one 20%

None 39%

One 41%

Mortgage 24%


Homes: 51% own, 37% use “chonsei” Home-ownership status

Rented public housing 2%

Belongs to parents 6%

Wolsei 4%

Chonsei 37%

Main source of financing

Other funding 1%

Previous property 19%

Bank loans 9% Parents 13%

Savings 58%

Owned 51%

Previous property 18%

Other funding 2%

Savings 35%

Mortgage 36%

Parents 9%

Still paying loan or mortgage No 12%

No 12%

Yes 88%

Yes 88%


Autumn 2007


153

Korea

Mr & Mrs Korea

Property investment: 86% don’t plan to buy In our sample, only 14% are looking to buy a property in Korea within the next 18 months

Plan to buy property in Korea within 18 months Investment 3%

Of those who plan to buy, 46% are seeking to upgrade, 24% are buying for investment and 29% are renters wishing to own

Upgrade 7%

Less than one percent of respondents plan to buy a property outside Korea in the next 18 months

No plan to buy 86%

Plan to buy property outside Korea within 18 months Undecided

Evidence that government measures have taken effect - 86% of respondents do not intend to buy Korean property in the next 18 months

54

China

Moving from renting to owning 4%

23

US

More than half of those not planning to purchase property in Korea are unsure where they are going to buy

15

Indonesia

8

0

10

Just under a quarter of those planning to purchase property outside Korea are interested in buying in China

(%) 20

30

40

50

60


Income: Telling the taxman the truth. . . The median annual income according to our respondents is 37.5m won, which is slightly higher than official statistics which claim 36.3m won The average annual income according to our respondents is in line with official statistics 41.6m won versus 41.3m won The differences between the data we collected and the official government statistics are insignificant

Annual household income (m won) >100 90-99.9 80-89.9 70-99.9 60-69.9 50-59.9 40-49.9 30-39.9 20-29.9 (%)

10% 10% Up to 10% decrease 7%

Up to 10% increase 16% Increase > 10% 12%

Almost 76% of respondents believe they are at least as well off, if not better off, than 10 years ago Unchanged 55%

The biggest financial concern is the cost of education, followed by housing and rental prices

Family better/worse off than 10 years ago 50

(%)

Biggest concerns Education fees

46

48

Housing prices/rents

40

Other

30

30

34

24

6

Unemployment

5

20

Pensions

10

Medical costs

2

Debt related

2

3

(%)

0 Better off

About the same

Worse off

0

10

20

30

40

50

60


Income: 62% expect no change for 12 months Only 38% of respondents expect to see any change to their household income in the next 12 months - 32% expect an increase while 6% expect a decrease

Household income in the next 12 months Up to 10% decrease 4%

Decrease > 10% 2%

Of those who expect a change in their household income, 77% attribute it to expected salary changes No change 62%

Up to 10% increase 20%

Increase > 10% 12%

Reasons for household income changing Change in tax 3%

Change in investment income 3%

Change in income earning members 9%

Other 8%

Change in salary 77%


Autumn 2007


155

Korea

Mr & Mrs Korea

Savings: Retirement is a major concern Percentage of monthly income saved

Fifty-five percent of respondents save at least 20% of their monthly income

(%) More than 40

In our sample, retirement is the greatest reason for saving, followed by property purchase and then education

13

30-40

17

20-30

25

10-20

If given one billion won, 49% of respondents would invest the money while 37% said they would purchase a new house or improve their existing one

29 6

5-10 Less than 5

(%)

10

0

5

10

15

20

25

30

35

Reason for saving Others 1% Preparing for children 8%

How they would spend one billion won

Healthcare 1% Others 2%

Investment

49

Buy/expand property

37

Others

10

Travel/leisure time Raise children

Retirement 41%

Education 22%

8 7

Purchase products

Property 25%

6

Pension/insurance

5

Volunteer activity

5

0

(%) 10

20

30

40

50

60


Savings: Massively overweight cash & property Fifty-three percent of respondents have put their savings into property On average, respondents only have 7% of their wealth invested in stocks or bonds

Where do households store their wealth? Business investment 2% Bonds Stocks 1% 6%

Forty-six percent said that property has been their best investment Only 18% of respondents said that stocks was their best investment

Cash/ deposits 38%

Properties 53%

Fifty-one percent of respondents would be willing to switch accounts from a bank to a broker for higher interest rates

Best investments

M3/nominal GDP 2.00

House

46

Forex

1.75

28

Stocks

1.50

18

Others

6

Buiness investment

1.25

2

Bonds

1.00

0

0

(%) 10

20

30

40

0.75 50

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006


156


Autumn 2007

Korea

Mr & Mrs Korea

Investments and retirement Only 35% of our respondents invested in stocks/shares in the past 12 months Forty-two percent plan to invest in stocks/shares in the next 12 months Only 64% of respondents are covered by a government or other retirement plan

Invested in stocks/funds in the past 12 months

Covered by retirement fund

No 36% Yes 64%

Plan to invest in stocks/funds in next 12 months

Yes 35%

Yes 42%

No 58%

No 65%


Insurance: 95% already covered Ninety-five percent of our respondents are already covered by some form of commercial insurance Health, life and car insurance are among the most popular forms of coverage Of those not covered, 69% do not intend to purchase commercial-insurance coverage in the foreseeable future

Insurance policies purchased 74

Medical Life

69

Automobile

56

Pension

39

Property

17

Others

2

0

Currently with commercial-insurance coverage

(%) 10

20

30

40

50

60

70

80

Plan to buy commercial insurance

No 5% Yes 31%

Yes 95%

No 69%


Autumn 2007


157

Korea

Mr & Mrs Korea

Expenditure: 44% on groceries and education Annual expenditure

Biggest single-item expenditure in past 12 months Celluar phone

Children/ parents 2%

Healthcare 9%

14

Car

11

Airconditioner

Grocery shopping 22%

Clothing 10%

17

Computer

Self development 2%

11

Camera

10

TV

10

Kimchi refreigerator

7

Refrigerator

Communication 10%

7

Washing machine

Transport 10%

4

Clothing

Education for children 22%

3

Laptop

Rent/mortgage 13%

3

Sofa

2

Rice cooker

2

(%)

0

Respondents spend 22% on groceries and 22% on education for their children Rent/mortgages (13%) and transport (10%) are the next biggest expenses The most common large, single items purchased in the last 12 months were cellular phones (17%), computers (14%) and cars (11%) Kimchi fridges were bigger sellers than washing machines and clothing!

5

10

15

20

Spending on single items in the past 12 months Others

69

Over 10m

109

5-10m

25

3-5m

38

1-3m

508

500,000-1m

293

100,000-490,000

391

Below 100,000

95

0


100

200

300

400

500

600


Expenditure: Next big-ticket purchase The most common purchases planned in the next 12 months are refrigerators, airconditioners and kimchi refrigerators

Next big-ticket purchase Gas range Rice cooker Laptop

Among our respondents, Samsung and LG are the most popular brands Sony is the only foreign brand that ranks among the top six

Water purifier Camera TV Washing machine Car Refrigerator for kimchi


Airconditioner Refrigerator 0

50

100

150

200

250

300

350

Next big-ticket purchase - Preferred brand Samsung

52

LG

33

Hyundai

6

Woongjin

6

Sony

3

Daewoo

1

0

(%) 10

20

30

40

50

60


158


Autumn 2007

Korea

Mr & Mrs Korea

Computers: 1.1 per household Ninety-seven percent of households own at least one computer On average, there are 1.1 computers per household

Number of household computers Three or more None 2% 3% Two 14%

Twenty-three percent of computers are “unbranded”

One 81%

Samsung accounts for approximately 41% of all home computers Broadband penetration 100

Household computers by brand

(%)

Daewoo

90

HP

80 70

Hyunju

60

JuYeon Tech

50

LG

40

Sambo

30 20

Others

10

(%)

Samsung

0 2000

2001

2002

2003

2004

2005

2006

0

10

20

30

40

50


Mobile phones: 2.6 per household Mobile phones owned Others

On average, each household owns 2.6 mobile phones

1

Pantech

With 61% of respondents owning a Samsung cellphone, this is the most common brand in our sample

2

KTFT Ever

3

Sky

4

Motorola

LG comes in second with 22%

6

LG

22

Samsung

61

0

10

20

30

40

50

Number of mobile phones per household

60

(%) 70

Local brands also dominate this space Potential reasons include patriotism and government protectionism, but Samsung and LG also leverage their market power to demand shelf space and advertising slots

Five or more 2%

Four 21%

Three 24%

One 11%

Two 42%


Autumn 2007


159

Korea

Mr & Mrs Korea

TVs: 1.4 per household Number of TVs per household

Brand of TV owned

Three or more 5%

Others

2

Sony

2

Daewoo

Two 27%

4

Anam One 68%

5

LG

39

Samsung

48

0

On average there are 1.4 TVs per household Thirty-two percent of households own at least two TVs The most common brands in our sample are Samsung (48%) and LG (39%)

10

20

30

40

50

(%) 60

Type of TV owned Projection 4%

Others 1%

PDP 9% LCD 12%

Non-Korean brands accounted for a very small portion of our sample

CRT 74%

Nearly three-quarters of households still own traditional CRT televisions


Consumption: Airconditioners On average there are 0.7 airconditioners per household

Number of airconditioners per household Two 5.4%

Thirty-three percent of households do not own an airconditioner Popular brands are Samsung (41%), LG (40%) and Winia (10%)

Three or more 0.4%

None 33.2% One 61.0%

Brand of airconditioner owned Others Century Carrier Winia LG Samsung

(%) 0

10

20

30

40

50


160


Autumn 2007

Korea

Mr & Mrs Korea

Consumption: MP3s and digital cameras Number of MP3 players per household

Brands of MP3 players

Three or more Two 2% 10%

Others LG Apple

None 47%

Sony

One 41%

I-river (%)

Samsung 0

Number of digital cameras per household

5

10

15

20

25

30

35

40

Brands of digital cameras

Two or more 7%

Others Fuji Nikon

None 28%

Olympus Canon

One 65%

Sony (%)

Samsung 0

10

20

30

40

50


Consumption: Apparel and accessories Foreign versus local

Apparel brands purchased Fila

5

Levi's

5

Giordano

5

Polo Ralph Lauren

100 100% 7

Adidas

7

BangBang

60 60%

8

Parkland

8

Daks

40 40%

8

Indian Mode

10

Nike

20 20%

13

Bean Pole

14

0

2

4

6

8

Korean

80 80%

7

Crocodile

Foreign

(%)

10

12

14

(%)

0 0%

16

Our respondents prefer Bean Pole (14%) apparel, followed by Nike (13%) and Indian Mode (10%) For accessories, Nike (30%) is most popular followed by KumKang (17%) and Adidas (15%) There is an almost identical 60:40 split between foreign and domestic brands purchased in both apparel and accessories segments

Apparel

Accessories

Fashion-accessory brands purchased Asics

3

Gucci

3

Fila

4

Landrova

4

El Canto

5 6

Prospecs Puma

6

Esquire

7

Adidas

15

KumKang

17

Nike

30

0

5

10

15

20

25

30

(%) 35


Autumn 2007


161

Korea

Mr & Mrs Korea

Consumption: Transport and driving Among our respondents, 54% use public transport as their main method of transport Twenty-seven percent of all our respondents plan to buy a car within the next three years

Main mode of transport Bicycle 1.4%

Fifty-nine percent of those plan to buy a Hyundai

Taxi 2.0%

Car 41.6%

Others 1.2%

Public transport 53.8%

Thirty-five percent intend to pay cash

Make of planned motor-vehicle purchase

Plans to purchase a motor vehicle Yes, within 12 months 8%

Others imports

Yes, within 2-3 years 19%

3

Lexus

1

BMW

1

GM Daewoo

4

Ssangyong No plan to buy 73%

5

Kia

12 15

Renault Samsung

59

Hyundai 0

10

20

30

40

50

(%)

60

70


Consumption: Cars, choosing a brand. . . Current brands owned

Current car ownership No 20%

Hyundai

52

Kia

24

Daewoo

12

Ssangyong

6

Samsung

5

Imports Yes 80%

(%)

1

0

10

20

30

40

50

60

Brands – Planned purchases Hyundai

Plans to purchase a motor vehicle

59

Kia

11

Daewoo

4

Ssangyong

4

Samsung No 26%

No 34%

15

Imports

(%)

7

0

10

20

30

40

50

60

70

Market share winners/losers

Yes 74%


162

Yes 66%

3 2 1 0 (1) (2) (3) (4)

(%)

Samsung

Hyundai

Imports

Ssangyong


Daewoo

Kia

Autumn 2007

Korea

Mr & Mrs Korea

Consumption: 99% of cars are local brands Eighty percent of our respondents owned at least one car

Age of car Older than 10 years

Of the cars owned, only 1% were imports

6-10 years

Hyundai is extremely dominant, making up 51% of all of our respondents’ cars

Ssangyong 6%

300

2-3 years

280

Less than one year

143

0

100

(No. of respondents) 200

300

400

500

600

Number of cars owned per household

Brand of car owned Samsung 5%

523

4-5 years

Almost half the vehicles owned are at least six years old Twenty-seven percent of our respondents plan to buy a car within three years and 65% of those plan to pay for their vehicle using credit

134

Three or more 1%

Imports 1%

Two 12%

GM Daewoo 13%

None 20%

Hyundai 51% Kia 24%

One 67%


Credit cards: Type and issuer Fifty-four percent of our respondents’ cards were Visa and only 20% were MasterCard Twenty-four percent of respondents were unsure of the types of cards they possessed The most common issuers were BC (18%), LG (17%), KB (15%) and Samsung (14%)

Credit card type Don't know

24

Diners Club

0

JBC

0

Amex

1

MasterCard

20

Visa

54

0

Credit-card issuing bank

10

20

30

40

50

(%) 60

Number of credit cards per household

Citi

No cards 10%


Hana Woori Korea Exchange Bank

1 card 12%

>4 cards 24%

Shinhan Hyundai Lotte

4 cards 13%

Samsung Kookmin Bank

2 cards 22%

3 cards 19%

LG BC 0 Source: CLSA Asia-Pacific Markets

Autumn 2007

200

400

600

800


163

Korea

Mr & Mrs Korea

Credit cards: Monthly spending, limits too high Thirty percent of respondents spend less than 500,000 won each month on their credit cards

Typical aggregated monthly credit-card bills

Fifty-eight percent spend less than one million won each month

2-3m won 8%

Over 5m won 1% Unsure 2%

3-5m won 3%

However, 79% of respondents have monthly limits greater than two million won

1-2m won 28%

Up to 0.5m won 30%

0.5-1m won 28%

Total credit-card limit (m won) Unsure

2

Above 10 mil

2

5~ 10 mil

31

3~ 5 mil

26 20

2~ 3 mil 8

1~ 2 mil 0.5~1 mil Up to 0.5 mil

7

(%)

4

0 5 10 Source: CLSA Asia-Pacific Markets

15

20

25

30

35

Credit cards: Reasons for using cards BC is the most frequently used card (24%), followed by KB (19%), LG (17%) and Samsung (14%) Half of the respondents stated that they use their preferred card out of habit, while 40% use them for associated benefits such as reward points Only 2% of respondents use their preferred cards because of lower interest rates

Most frequently used card Others

9

Lotte

4

Shinhan

5

Hyundai

8

Samsung

14

LG

17

Kookmin Bank

19

BC

24

0

5

10

15

20

25

(%) 30

Reasons for using card Low interest rate Others 2% 3% Low annual fee 5%

Related benefits 40%

Habit 50%


164


Autumn 2007

Korea

Mr & Mrs Korea

Credit cards: 98% do not want new cards Ninety-eight percent of respondents do not intend to apply for a new card within the next 12 months Of those who indicated that they do want a new card, none of our respondents cited cheaper interest rates as a reason Seventy-six percent of respondents who want a new card cited benefits associated with the card as the main reason Forty-three percent do not care what type of card they get

Applying for a card in next 12 months - Bank LG

18

BC

15

Shinhan

12

KB

12

Lotte

9

Samsung

9

Hyundai

9

Woorie

6

Citi

3

Hana

3

No preference

(%)

3

0

5

10

15

20

New credit-card brand preference American Express 3%

Unsure 3%

MasterCard 12% Don't care 43% Visa 39%


Filial piety: Parents self sustained Number of parents and in-laws per household Two or more One 4% 8%

Only 12% of respondents have parents or in-laws living with them Eight percent have just one parent or in-law in their home, while 4% have two or more Only 14% of parents have no pension or other source of income Fifty-four percent of respondents’ parents are selfsustained

None 88%

Sixty-four percent of respondents spend less than one million won on their parents each year

Parents’ financial position No pension /income 14%

Others 5%

Annual expenditure on parents (won) Uncertain

3

>5m

4

3-5m

Halfsustained with pension /income 27%

Selfsustained 54%

5

1-3m

25

500,001-1m

21

300,001-500,000

15

Up to 300,000

(%)

27

0

10

20

30


Autumn 2007


165

Korea

Mr & Mrs Korea

Children: 86% of households have children Extracurricular lessons that parents pay for Other foreign language

60


Special skills

106

Others

110

Other exam subjects

130

Fine art

132

Chinese characters

Sixty-three percent of respondents spend at least 500,000 won on their children each month

145

Essay writing

Eighty-one percent of children take extracurricular lessons

197

Kindergarten

205

Science

210

Sports/dance

On average, families spend 886,000 won/month on their children

255

Music

270

Maths

663

English

746

0

100

200

300

400

500

600

700

800

Number of children per household Three or more 7%

Two 58%

On average, there are 1.6 children per household

None 14%

Twenty-three percent of children receive English lessons, 21% maths and 8% music Overall monthly spending on children 2-3m won 2% 1-2m won 17%

Over 3m won 1%

Up to 200,000 won 10% 200,000500,000 won 27%

One 21% 500,000-1m won 43%


Children: Allowance Twenty-five percent of parents do not give their children an allowance Of those who do give children allowances, the monthly average is 76,500 won The median monthly allowance is approximately 50,000 won Children mostly spend their allowance on food (37%), books/stationery (23%) and entertainment (14%)

Children’s monthly allowances 100,000300,000 won 12%

> 300,000 won 5%

50,000100,000 won 13%

No allowance 25%

< 20,000 won 21%

20,00050,000 won 24%

Children’s allowances - Spending Donation

1

Pet

1

Birthday present

2

Saving


9

Transportation

17

Others

30

Toy

101

Clothing/fashion accessory

210

PC room/comic/game

247

Entertainment

319

Book/stationery

529

Food

862

0

100

200

300

400

500

600

700

800

900


166


Autumn 2007

Korea

Mr & Mrs Korea

Children: A PhD please . . . Ninety-eight percent of parents want their children to have a tertiary education

Parents’ desired education level for children Child's preference 1%

Only 48% of parents want their children to study abroad, although 70% of parents expect their children to work overseas

High school 1%

PhD 26%

Of parents who expressed a preference, 23% would like their children to be in the teaching profession, 21% want their children to have government jobs. Medical doctors (14%) and law (8%) come in third and fourth

Bachelor's degree 58%

Master's degree 14%

Preferred future occupation for children Other

Reasons for wanting children to study abroad If children would like to go

6.8

Musician

1.3

Pharmacist

2.0

Athlete

2.4

Computer programmer

2.4

Self-employed

To find a job

Office worker

4.9

Laboratory researcher

5.0

Journalist

5.1

Legal professional

0.8

To apply for school abroad

4.1

4.2

To learn a foreign language

14.4

(%)

Government official

22.7

10

15

20

34.7

For a rich experience

21.3

Teaching professional 5

16.8

For specialised education

7.7

Medical doctor

0 Source: CLSA Asia-Pacific Markets

0.3

42.2

0

25

10

20

30

40

(%) 50

Children: Language and work Korean is the only language spoken in 97% of households

Preferred second language for children

Forty-eight percent of parents want their children to learn English. Chinese is also highly popular with 29% wanting their children to learn the language

French 4.0%

Countries where parents think children may work 20

Other European

17

UK

0.6%

English 48.3%

Chinese 28.8%

Main language used at home


Japanese 0.4%

Chinese 0.4%

English 2.5%

23

France

Spanish 0.8% Russian

Japanese 16.1%

Of those who expect their children to work overseas, 54% think they will work in the US, 8% in China and 7% in Japan

Others

German 1.4%

Russian 0.1%

24

Canada

25

Australia

28

Japan

29

China

Korean 96.7%

36

US

236

0

50

100

150

200

250


Autumn 2007


167

Korea

Mr & Mrs Korea

Travel: 85% have not left Korea in 12 months External holiday destinations Other destinations

Thirteen percent of respondents have travelled outside Korea for work in the past 12 months. Twenty-eight percent of those went to Japan, 17% to China and 17% to South Asia

20

Europe

6

Cambodia

6

Philippines

7

Other South Asia

8

Thailand

13

Japan

17

China

22

0

5

10

15

(%)

20

Only 1% of respondents have travelled overseas purely for a holiday in the last 12 months. Of those, 22% went to China, 17% to Japan and 13% to Thailand

25

Reasons for travel

External business travel destinations

Business and holiday Business 3% 11% Holiday 1%

Other

2

Turkey

2

Canada

2

Hong Kong

3

US

4

Europe and UK No travel 85%

7

South Asia

9

China

9


Japan

15

0

5

10

15

20


Governance: Economy the priority Governance changes in the past 10 years 50

Forty-nine percent of our respondents believe that governance is worse than it was 10 years ago

(%)

40

Thirty percent of respondents believe that improving the economy should be the government’s primary concern

30 20 10

Social welfare, employment and public security are not high priorities for the majority of respondents

0 Better

Not sure

Worse

Priorities for government to address Social welfare


1

Increasing democratic rights

24

Pollution

121

Better public housing

253

Reducing income inequality

310

Improving education

361

Improving the economy

455

0

100

200

300

400

500


168


Autumn 2007

Korea

Mr & Mrs Korea

Pollution: Not if I’m paying Would you pay 10% more for transport to cut pollution by 10%? Not sure 15%

Forty-nine percent are not willing to pay higher transport costs and 51% are not willing to pay higher electricity costs if it would decrease pollution

Yes 36%

Sixty-one percent are not willing to pay higher taxes to reduce air pollution

No 49%

How much more tax would you pay to reduce air pollution? 6-10% more 9%

1-5% increase 29%

Only 8% of respondents said pollution is a top priority for government

>10% more 1%

Nothing 61%

Would you pay 10% more for electricity to decrease pollution by 10%? Unsure 15%

Yes 34%

No 51%


Autumn 2007


169

Mr & Mrs Korea

Korea

Notes

170


Autumn 2007

Malaysia

Mr & Mrs Malaysia

Malaysia - Hunting for properties

Niklas Olausson Head of Research CLSA Malaysia

During four weeks stretching into August 2007, we sent our band of intrepid questioners to locations around Peninsular Malaysia to find out just who is Mr & Mrs Malaysia.

Our findings clearly show that the value of property ownership is well-engrained in Malaysia and, given ongoing stimulation of the sector by the government, we believe the attractiveness of this can only increase.

Of the 1,770 respondents, 40% came from outside the Klang Valley: Penang, Perlis, Kelantan, Terengganu, Pahang, Negeri Sembilan, Melaka, Perak, Kedah and Johor Baru. Peninsular Malaysia accounts for 80% of Malaysia’s population with the Klang Valley including Selangor, representing 24%.

Just 15% of respondents’ households have no children. Indeed, Malaysia has one of the world’s highest fertility rates - 3.01 births for every woman. Population growth is running at about 2% pa. The population structure is very young with 67% being below the age of 30.

Our respondents are 20 to 60 years old, with 52% of them male. Incomes range from below RM2,000 per month (17%) to above RM20,000 (3%).

The results of our survey reveal an array of interesting facts: home ownership in Malaysia is about 66%; 42% of respondents are looking to buy property in the next 18 months; they save about 15% of their income, with the bulk of non-property wealth in cash; only 16% of our sample bought shares or funds in the past 12 months; and of those that have not, only 6% wanted to do so in the next 12 months. The latter point reflects a general sentiment of equity aversion among small savers, after huge volatility during the Asian Crisis, but also a sluggish climb back up to pre-Crisis levels. While savings in mutual funds have increased, we note that the Malaysian public has much scope to increase their equity exposure.

The median income of our sample is RM3,300, compared with the official statistic of RM2,500. Our survey sample is skewed to the low to middle end of the wage structure. Domestic brands proved popular, with locally listed Padini proving more popular than apparel brands Nike, Seed, John Master, Adidas and MNG, while its Vincci shoe brand also scored highly among fashion-accessory brands. However, the amount of responses indicating no brand preference was overwhelming in several of the consumer-choice categories, suggesting scope for companies to raise brand awareness. Interestingly, 64% of our respondents own a car. Public transport is not popular, and clearly there is lots of room for improvement (and is being executed under the Ninth Malaysia Plan). As detailed below, we will be releasing similar studies for each country we cover. Watch out for this must-read series that gets into the homes and, more importantly, the minds of Mr & Mrs Asia, who will largely determine the strength of the global economy in the coming years.

Key findings Among our respondents, 66% own properties, though 57% of households are mortgage-free

Cars, mobile phones, PCs and TVs represented the biggest single expense in the past 12 months.

Of those surveyed, 42% intend to purchase a property in the next 18 months

Malaysia has one of the highest fertility rates in the world at about three births per woman

The average household-savings ratio is 15%, versus the official 19% for private-sector savings

As of 2006, the country’s population consisted of 4% more males than females

Our respondents have 56% of their wealth in property, 31% in cash and fixed deposits

Malaysia’s governance has improved since the Asian Crisis, according to 46% of those sampled

Only 16% had made investments in equities or funds in the past 12 months

But 13% feel that it has deteriorated, while 15% preferred not to respond to this question

Of those that had not, only 6% thought they would in the next 12 months

The economy, education and public housing emerged as top priorities for the government

Groceries and mortgage/rent account for 36% of expenditure among those surveyed

Only 13% of respondents felt that pollution should be one of the top-three government priorities

Autumn 2007

niklas.olausson/amar.gill@clsa.com

171

Malaysia

Mr & Mrs Malaysia

Investment conclusions Interest in property: 42% of respondents want to buy property in Malaysia over the next 18 months; 45% of these are looking for an investment, while 23% want to move from being renters to owners Property winners: Property developers (eg, SP Setia, Sunway City and WCT Land) will benefit; as will banks via mortgages (eg, Bumiputra-Commerce, Maybank, AMMB, Public Bank and Eon Capital) Adding equity exposure: Retail participation only accounts for about 35% of total volumes, down from above 60% pre-Crisis. Cash levels are high, with 31% of wealth holdings in the bank, according to our survey and represent a significant liquidity reserve Credit-card opportunity: 41% of respondents don’t have a credit card in their household, yet only 8% intend to apply for one. Foreign banks are popular 43% looking to get a card indicate preference for Citibank and HSBC. Maybank is the top local choice, with 9% of those intending to apply for a card

Local brands popular: Locally listed Padini topped apparel brands Nike, Seed, John Master, Adidas and MNG, while its Vincci shoes scored high among fashion-accessory brands purchased. But a lack of brand preferences for several categories suggests scope for companies to raise brand awareness Air travel a growth area: 33% said they had been abroad on holiday in the past year, mainly travelling to Asean destinations. Budget airlines (eg, AirAsia) should have years of growth ahead Mobile operators are also a consumer play: Players such as DiGi, Telekom Malaysia and Maxis should be able to tap into what appears to be a relatively low 70% mobile penetration rate, with rising affluence supporting average revenue per user Strong potential for broadband: 40% of respondents said that they did not have a computer. Hence, Telekom Malaysia and new broadband players have good potential to tap demand in the long term

Who are they? Our survey found that Malaysia has about six million households, with an average of 4.8 people living in a median-sized house of 900sf

Our respondents may be overstating their income, or official data could understate due to unreported income and profits from dividends/businesses

About 42% of Malaysians do not own any properties (34% according to our survey) and only 43% have a mortgage

We found people saving an average of 10% of their income, lower than the 19% official rate

We found 1.97 children per household on average, or 2.3 per family that have children

172

They spend 36% on groceries and housing, followed by children’s education and transport

Some 15% of our households surveyed are childless, while 66% of the children in our survey group are 11 years old or younger

In households with at least one such device, there is an average of 1.86 mobile phones, 1.25 PCs, 1.18 airconditioners 1.08 TVs, 1.28 MP3 players, 1.16 digital cameras and 1.03 washing machines

Some 61% of respondents have one or more parent or in-law living in the household

As many as 64% of respondents have a car, with public transport not yet a major conduit

Official median monthly household income is RM2,500, versus RM3,300 in our survey

Of the 69% with credit cards, typically 2.4 each, they charge RM800 on average per month


Autumn 2007

Malaysia

Mr & Mrs Malaysia

What do they want? Equity Equity aversion: aversion: only only 16% 16% have have invested invested in in stocks stocks or or funds funds in in the the past past 12 12 months; months; of those that have not, only 6% indicated of those that have not, only 6% indicated aa willingness willingness to to in in the the next next 12 12 months months

Biggest Biggest single single item item bought bought recently: recently: cars, cars, mobile mobile phones, phones, computers, televisions computers, televisions

11% 11% plan plan to to buy buy property property outside outside of of Malaysia; Malaysia; the top preference the top preference is is for for Australia Australia

Preferred Preferred apparel apparel brands: brands: Padini, Padini, Nike, Nike, Seed, Seed, John John Master Master

Security: Security: 23% 23% concerned concerned about about unemployment; unemployment; 87% put their 87% put their savings savings mainly mainly in in cash cash and and property property

Eat Eat out out typically typically four four times/month times/month

Some Some 42% 42% intend intend to to buy buy aa house, house, of of which which 27% 27% are are upgrading upgrading

22% 22% plan plan to to buy buy aa car car

Some Some 33% 33% plan plan to to take take aa holiday; holiday; most most likely likely to to another another Asean Asean country country

Large Large and and growing growing families: families: three three children children per per woman woman

They They want want the the government government to to improve improve the the economy, economy, education education and and public public housing housing

95% 95% want want children children to to have have tertiary tertiary education; education; 51% 51% for for children to study abroad children to study abroad

61% 61% want want children children to to learn learn English English as as aa second second language; language; 18% Mandarin 18% Mandarin

Some Some 8% 8% want want another another credit credit card; card; preferred preferred issuers: issuers: Citibank, HSBC and Amex Citibank, HSBC and Amex

Population: Young and growing Malaysia enjoys a high fertility rate, with 3.01 births per woman

Fertility rate Malaysia US France Norway Australia Denmark UK Sweden Switzerland Germany South Korea Japan Singapore Hong Kong

2.09 1.98 1.78 1.76 1.74 1.66 1.66 1.44 1.40 1.28 1.23 1.07 0.98

0.0

0.5

1.0

1.5

2.0

3.01

The population is young, with 67% of people under the age of 30 years old About 4% more males than females in 2006, which will drop slightly by 2010 (Births per woman) 2.5

3.0

3.5

Population growth - Birth and death rate 30 25

(per 1,000 population) 25.3

24.8

24.2

Birth rates 23.7

23.4

Dependency and sex-ratio projections 66.5

Death rates 23.1

22.7

22.7

20 15 10 5.25

5.2

5

5.16

5.12

5.08

5.06

5.05

5.05

(%)

66.0

Males per 1,000 females

1,037.5

Dependency ratio (LHS)

1,037.4

65.5

1,037.3

65.0

1,037.2

64.5

1,037.1

64.0

1,037.0

63.5

1,036.9

63.0

1,036.8 1,036.7

62.5

0 2000

2001

2002

2003

2004

2005

2006

2007

2005

2006

2007

2008

2009

2010

Source: CIA Fact Book

Autumn 2007


173

Malaysia

Mr & Mrs Malaysia

Incomes: A skewed bell curve Number of households per 1,000 persons by monthly income

Some 16.3% of households surveyed earn less than RM2,500/month

(RM)

>75,000 65,000-75,000 55,000-65,000 45,000-55,000 35,000-45,000 25,000-35,000 15,000-25,000 10,000-15,000 7,500-10,000 5,000-7,500 2,500-5,000 1,750-2,500 1,000-1,750 750-1,000 500-750 0-500

In 2001-06, there was a 66% increase in households earning RM2,500-5,000/month (No. of households) 0

200

400

600

800

1,000

1,200

1,400

Percentage change in households by monthly income between 2001 and 2006 (RM)

During the same period, there was a 45% rise in households earning RM10,000-15,000/month There was a huge 95% increase in households earning RM1,7502,500/month

>75,000 65,000-75,000 55,000-65,000 45,000-55,000 35,000-45,000 25,000-35,000 15,000-25,000 10,000-15,000 7,500-10,000 5,000-7,500 2,500-5,000 1,750-2,500 1,000-1,750 750-1,000 500-750 0-500

(%)

0 Source: Euromonitor

20

40

60

80

100

Homes: Relatively spacious Size of house

The median size dwelling is 900sf 82

>3,001sf

Average household has 4.3 persons

49

2,501-3,000sf

75

2,001-2,500sf

310

1,501-2,000sf

40% live in 3-4-person households; 34% have 5-6 people

496

1,001-1,500sf 501-1,000sf

359 53

3 3 4% 5%

None 34%

2 15%

1 42%


Property investment: 42% plan to invest 42% are looking to buy a property in Malaysia in the next 18 months Of these, 27% want to upgrade from their current property 45% are buying for investment, 23% are renters wishing to own

Reason for wanting to buy a property in Malaysia in the next 18 months Others 5% Upgrade 27%

Investment 45%

From renting to own 23%

Location for those wishing to buy a property outside Malaysia in the next 18 months Others 17%

China 9%

Singapore 22% Europe 15%

HK 4% Australia 33%

11% plan to buy a property outside Malaysia in the next 18 months 33% of these people are looking to buy their property in Australia


Autumn 2007


175

Malaysia

Mr & Mrs Malaysia

Incomes: Middle-income-centric Monthly household income RM10,00019,999 8%

Official government statistics suggest that 56% of households make less than RM5,000/month

>RM20,000 3% 10% 25%

A further 25% saw more than a 10% increase in household income Around 87% of households say they are better off now than 10 years ago

Down 0-4% 1% Down 5-10% 3%

Up 5-10% 53%

Down >10% 1%

Biggest concern is education fees, then housing cost and unemployment Family situation versus 10 years ago 1,800 1,600

Up 0-4% 9%

No change 8%

The biggest concerns


Pensions 6%

1,533

Others 2%

1,400

Medical costs 21%

1,200 1,000

Unemployment 23%

800 600 400 200

104

95

Worse off

Same

0 Better off

Education fees 25%

Housing prices/rents 23%


176


Autumn 2007

Malaysia

Mr & Mrs Malaysia

High savings ratio Our sample saves 15% of their income; greater if weighted for higher incomes

Percentage of monthly income saved 275

>30%

The official statistics indicate a 19% savings ratio for the private sector

408

20-29% 10-19%

A car and property are the main reasons for saving, then holiday, healthcare, retirement and education evenly split

590

319

1-9% 0%

178 0

100

200


400

500

600

Reasons for saving Education 12%

If they had a million, 62% would invest it, which probably mostly means in property

700

What they would do with a million ringgit Car 24%

1,088

Investment 431

Savings

Retirement 13%

366

Holiday 98

Pay debt

79

Charity

61

Material items

Healthcare 14%

Property 23%

Children

31

Enjoy life and retire

23 (No. of respondents)

21

Education

Holiday 14% Source: CLSA Asia-Pacific Markets

0

200

400

600

800

1,000

1,200

Savings: 87% in cash and property Cash and deposits is the biggest savings class outside of property Putting 56% of their wealth in property, but only 5% in stocks 81% chose property as their best investment; 10% said shares/trusts

Assets in which wealth is kept Others Business 3% 4%

Cash/deposits 31%

Bonds 1% Shares 5%

Some 87% of respondents put their entire savings in ringgit Their best investment

M3/nominal GDP

Business Cash/deposits 1% 1%

0.56

Other 7%

Property 56%

(x)

0.55 0.54

Shares/ unit trust 10%

0.53 0.52 0.51 0.50 Property 81%

0.49 0.48 0.47 0.46

Source: CLSA Asia-Pacific Markets, Bank Negara

Autumn 2007

Mar-01 Dec-01 Sep-02


Jun-03 Mar-04 Dec-04 Sep-05

Jun-06 Mar-07

177

Malaysia

Mr & Mrs Malaysia

Investments/insurance Investments in stocks/funds in the past 12 months

Insurance policies purchased 1,077

Life 714

Medical Yes 16%

No commercial insurance

365

Pension No 84%

191

No response

115

Participating

62


0

Coverage by another retirement fund than EPF

200

400

600

800

1,000

1,200

Only 16% of our respondents invested in stocks/shares in the past 12 months Of those that did not, only 6% plan to

No 50%

50% had retirement coverage other than the basic government EPF system

Yes 50%

Life was the most popular insurance policy purchased, followed by medical Source: CLSA Asia-Pacific Markets

Expenditure: 36% on rent and groceries Biggest single-item expenditure in past 12 months

Annual expenditure breakdown

C ar

Other big items 12%

Rent/Mortgage 19%

208

M o bile pho ne

16 2

C o m put e r

13 4

TV

Healthcare 9%

71

P ro pe rt y

70

F urnit ure

62

A irc o n

54

C a m e ra

Grocery 17%

Transport 12%

51

T ra v e l

43

Wa s hing m a c hine

Communication 8% Clothing 9%

41

R e f rige ra t o r

27

M o t o rc yc le

26

H o m e re no v a t io n

Education 14%

24

Wa t c h

15

H e a lt hc a re

11

C a r m a int e na nc e

Cost of biggest single item in the past 12 months >RM20,000

11

Ins ura nc e

9

M ic ro wa v e

7

M a s s a ge c ha ir

198

6

Wa t e r t re a t m e nt

RM10,000-19,999

66

RM5,000-9,999

583

RM1,000-4,999

196 100


178

50

10 0

15 0

200

250

Spend 19% on rent/mortgage, then 17% on groceries, 14% on school and 9% on clothing

113

0

3 0

20

0 0

Brand of automobile owned Proton Perodua Toyota Honda Nissan BMW Hyundai Mercedes Others Kia Naza Mazda Ford Suzuki Volvo Mitsubishi

54 35 33 30 21 20 17 17 14 12 9 8 0

100

184

283

1-5

6-10

Average cost of outside meal 690

366

900


800

731

700 600 470

500 400 300

288

200 (No. of respondents) 200

300

400

500

600

700

800

106

100

98

77

0 RM200


Credit cards: Type and issuer Number of credit cards per household 4 7%

Existing type of credit card

>5 5%

JCB 0.2%

Amex 2.5%

3 8% None 41%

Diners Club 1.5%

MasterCard 45.5% Visa 50.3%

2 22%

1 17%

41% do not have a credit card Of those respondents with at least one credit card, 33% had more than two Of those with cards, 46% have MasterCard, while 50% have Visa The most popular issuer is Citibank (19%), followed by Maybank at 14% Source: CLSA Asia-Pacific Markets

182

Issuing bank of existing credit cards Citibank Maybank HSBC CIMB Maumalat RHB PBB UOB Hong Leong AM StanChart EON OCBC MBF Bank Islam Alliance Affin BSN BIMB Bank Rakyat

70 70 69 56 45 43 36 25 24 12 9 4 1 0

50


105

100

211

152 144 138

346

251


200

250

300

350

400

Autumn 2007

Malaysia

Mr & Mrs Malaysia

Credit cards: Monthly spending Median monthly spending on credit cards is RM800

Annual credit-card fee RM80-600 24%

Around 43% spend less than RM800; close to 10% spend over RM3,000 68% have credit limits below RM10,000; 14% over RM20,000

Waived by bank 34%

Annual fees are waived for 34% Credit-card loan approvals 80

No card 42%

Total credit-card limit

(YoY %)

RM20,00050,000 14%

60

Up to RM5,000 34%

40 RM10,00020,000 18%

20 0 (20) (40) May-00

May-01

May-02

May-03

May-04

May-05

May-06

May-07

RM5,00010,000 34%

Source: CLSA Asia-Pacific Markets, Bank Negara

Credit cards: Interest rates, new cards Among cardholders, 35% are not sure what the rate is on their cards Around 8% of respondents intend to apply for a card in the next 12 months Of those who intend to apply, 58% are hoping to get a Visa card

Credit-card issuer they intend to apply to 36

Citibank HSBC

22 16

Amex UOB

14 12

Maybank Standchart

10 10

Public Bank CIMB

6 6

EON Am Bank

4 2

Affin Hong Leong

Interest rate on credit-card balances

5

10

15

20

25

30

35

40

Type of credit card they intend to apply for Amex 10%

18 per cent 17% Not sure 35%


2 0

More than 18 per cent 1%

MasterCard 32%

Visa 58%

No card 47% Source: CLSA Asia-Pacific Markets

Autumn 2007


183

Malaysia

Mr & Mrs Malaysia

Parents: Not a major burden Number parents or in-laws living in household

Some 39% of respondents do not have parents sharing their household

4 >5 1% 2%

3 19%

Only 25% of their parents are without a pension or fixed income

0 39%

But nearly 54% do need to support their parents in one way or another

2 11%

1 28%

Parents’ or in-laws’ financial position

Monthly expenditure on parents

Have no pension or fixed income 25%

>RM30,000

13

RM20,000-29,999

21 76

RM10,000-19,999

Financially selfsustained 46%

209

RM5,000-9,999

532

0-RM4,999

Half-sustained with pension/ fixed income 29%

919

0 0

200

400

600

800

1,000



Children: None in 15% of households 15% of households do not have any children

Age of children 300

Of those with kids, there is an average of 1.97 children per household


250

The biggest category is the 0-5 age group, accounting for 40% of households with kids

200 160 150 106

104

Families spend an average of RM635/month on their children

100 45

50

57

English and maths were the overwhelmingly most popular extracurricular lessons for kids

0 No kids

0-5 years

6-11 years

12-17 years

18-21 years

Overall monthly spending on children More than RM1,000 12%

0-RM200 19%

>21 years

Children’s extracurricular lessons 600


551 478

500 400

86

Dancing

152

156

161

Others

81

Chinese

81

Painting

26

76

Chemistry

100

Physics

200

Piano

300 RM501-1,000 26%

184


English

Maths

RM201-500 43% Source: CLSA Asia-Pacific Markets

Chess

0

Autumn 2007

Malaysia

Mr & Mrs Malaysia

Children: Allowance Some 42% of respondents do not give children any allowance

Monthly allowance to children 350 300

Of those that do provide it, the median allowance is about RM120/month


250 186

200 152

150 100

Children spend their money on food (44%) and toys (12%), as well as books (20%) and stationery (16%)

26

34

RM301-500

>RM500

50 0 No allowance

RM1-100

RM101-300

What children spend allowance on Stationery 16%

Saving 4%

Interrnet café 4%

Food 44%

Books 20% Toys 12%


Children: Education Parents’ desired education level for children 800 700


Some 51% would like to send their children abroad, for better prospects and education, as well as foreign exposure

600 500 400

349

298

300 200 100

46

24

High school

Other

0 University

PhD

Among parents, 95% want to see their children reach tertiary education

Master's

Reasons for wanting children to study abroad Better-quality education 12%

Around 35% have no preference for their children’s future occupation; while a doctor is the clear hope for those who do Preferred occupation for children Doctor

329 155

Professional

Working abroad 1%

Business

151 114

Engineer Lawyer

Better job prospects 19%

Don't want them studying abroad 49%

Better studying environment 3% Source: CLSA Asia-Pacific Markets

Autumn 2007

Foreign exposure/ Meeting people from different cultures 16%

112

Teacher

99

Accountant

28

Pilot

12

Police

10

Finance

9

Lecturer

7

Architect

7

IT

4

Musician

3

Professor

2

Dentist

1 0



100

150

200

250

300

350

185

Malaysia

Mr & Mrs Malaysia

Children: Language and work Among our respondents, 38% speak Malay at home, 23% English, 18% Mandarin, 9% Cantonese, 7% Tamil and 4% Hokkien English is far and away parents’ preferred second-language choice for their children (61%), followed by Mandarin (18%) Around 26% expect their kids to work outside Malaysia: most in Europe (27%), then Singapore (18%) and Australia (18%)

Countries where parent thinks children might work Others 15%

Europe 27%

Mandarin 18% Cantonese 8% Arabic 3% Japanese 3%

English 61%

Tamil 2% Others 5%

Main language used at home Hokkien 4%

Japan 6%

Tamil 7%

Others 1%

English 23%

Cantonese 9%

US 16% Singapore 18%

Preferred second language for children

Mandarin 18% Malay 38%

Australia 18%


Transport and travel Main mode of transport Company bus 2%

Company car 2% Public transport 14%

Motorcycle 15%

Private car 64%

Electric bike 0% Taxi 2%

Bicycle 1%

External business-travel destinations Rest of AsiaPacific 18%

Europe 5% HK, China & Taiwan 19% Source: CLSA Asia-Pacific Markets

186

A third have travelled out of Malaysia for work in the past 12 months, with half visiting other Asean countries A third also went abroad for a holiday in the past 12 months - again Asean countries were the top choice External holiday-travel destinations UK 3%

Australia 8%

Middle East 2%

Rest of AsiaPacific 12%

US 4% Middle East 4%

Cars are the main mode of transport for 64%; only 14% use public transport

Asean 50%

Asean 48% HK, China, Taiwan 20% US 2%

Europe 5%


Autumn 2007

Malaysia

Mr & Mrs Malaysia

Governance: Priority on the economy Malaysian governance in the past 10 years No response 15%

Among our respondents, 46% believe that governance in Malaysia has improved in the past 10 years

No change 26%

13% feel it has deteriorated, while 15% of respondents chose not to answer Worse 13%

For 40%, the government’s top priority should be improving the economy

Better 46%

Top priority for the government to address Improve the economy

Other areas of concern are: Education (18%) Public housing (16%) Income inequality (14%) Pollution (13%)

711

Improve education

314

Improve public housing

276

Reduce income inequality

246

Reduce pollution

223 0

100

200


300

400

500

600

700

800


Pollution: Not a general priority Willingness to pay more for transport and electricity in order to reduce pollution by 10% 6-10% increase 22%

18% are not willing to pay higher transport and electricity charges to reduce air pollution

1-5% increase 60% Not willing to pay more 18%

Willingness to pay more income tax to reduce air pollution by 20%? 6-10% of income 23%

1-5% of income 48%

The environment came last in terms of preferred government focus with 13% picking this as a top priority

11-15% of income 6%

But 60% would pay about 1-5% more for these services in order to reduce pollutants by 10% 23% are unwilling to pay more in income taxes to reduce pollution But 48% are willing to pay 1-5% of income and 29% to pay more than 5% to reduce pollution by 20%

Not willing to pay any taxes 23% Source: CLSA Asia-Pacific Markets

Autumn 2007


187

Mr & Mrs Malaysia

Malaysia

Notes

188


Autumn 2007

Philippines

Mr & Mrs Philippines

Philippines - Malling and reproducing The country’s ongoing economic recovery and youthful population of 88 million ensure that Mr & Mrs Philippines is essential reading. In July and August 2007, we surveyed 1,000 households in five locations covering the major islands of Luzon, Visayas and Mindanao as well as the capital city and surrounding areas.

Alfred Dy

Head of Research CLSA Philippines

Metro Manila represents 60% of respondents, in line with the 60% of GDP that emanates from the capital city region. Our respondents are 21 to 59 years old, with monthly incomes ranging from P30,000 per month to more than P100,000. Note that 37% of households have an overseas Filipino worker and 10% have a business-processoutsourcing worker.

With low-cost deposits resulting in good spreads, this is positive for Philippine banks like Metrobank, Banco De Oro, Bank of the Philippine Islands and Rizal Commercial Banking Corp. The average household has five members and spends most on groceries and utilities. Family leisure time is important and visiting malls a way of life. This is good news for shopping-mall plays like SM Prime, Ayala Land and Robinson’s Land, as well as fast-food names like Jollibee. Utility companies including Meralco, Manila Water, PNOC-EDC, First Gen and Aboitiz Power are further core plays on Philippine household expenditure. Working abroad, rather than studying abroad, is a more prevalent aspiration of parents for their children. This mindset should keep the overseas-Filipino-worker story strong in coming years and benefit major plays on this critical theme, which include PLDT, Globe Telecom, SM Prime, Ayala Land and Megaworld.

The results are fascinating: 68% own their home, with an average area of 106 square metres. Among the non-homeowners, 38% plan to buy in the near future - a boon for listed property plays such as Ayala Land, Megaworld and Filinvest Land.

Most prefer domestic travel over international tours and, with the Philippines being an archipelago of 7,100 islands, air travel is key. This is positive for Philippine Airlines and Cebu Pacific Air, both of which plan to go public within the next 12 months.

Respondents save 16% of their income, mainly for children’s schooling, which bodes well for listed education plays like Centro Escolar University, Far Eastern University and iPeople, which owns Mapua Institute of Technology. The bulk of their savings is in cash with only 3% having bought stocks and bonds in the past 12 months.

Environmental issues are a low priority. While most respondents believe that governance is worse than 10 years ago, they are against a switch to a parliamentary system. Further, Mr & Mrs Philippines expect their situation to be better five years from now and, as GDP per capita rises, this optimism will be one of the key pillars for domestic spending.

Key findings The Philippines has excellent demographics, with a population base of 88 million growing by 2.8% per annum and 46% below 21 years

For those planning to buy a car, the top-three brands under consideration are Toyota (48%), Honda (18%) and Mitsubishi (7%)

Among respondents, 37% of families have an overseas Filipino worker (OFW) and 10% have a business process outsourcing (BPO) professional

Leisure time with family, visiting malls and dining out are the preferred activities

In our sample, 68% own their home, with an average floor area of 106m². Among nonhomeowners, 38% plan to buy in the near future The household-savings ratio is 16%. Some 42% of savings is in cash; only 3% in stocks and bonds The biggest expenditure items are groceries (32%), utilities (14%) and education (14%)

Working abroad rather than studying overseas is a more prevalent aspiration of parents for their children Most respondents prefer domestic travel over international tours Of those surveyed, 27% have enjoyed income growth in the past 12 months. 44% expect income increases over the next 12 months

Source: GFK

Autumn 2007

alfred.dy/amar.gill@clsa.com

189

Philippines


Investment conclusions Property: Among non-homeowners, 43% plan to buy property. This is positive over the medium term for Ayala Land, Megaworld, Robinson’s Land and Filinvest Land Autos: About 38% of these families plan to buy a new car in the next three years. This bodes well for companies with car dealerships like Ayala Corporation and House of Investments Shopping malls, food companies: “Malling” and dining out are the preferred activities, which benefits shopping-mall operators like SM Prime, Robinson’s Land and Ayala Land as well as fast-food chains like Jollibee

Education: The bulk of savings is earmarked for children’s education. The winners here are listed but illiquid education plays like Centro Escolar University, Far Eastern University and iPeople, which owns Mapua Institute of Technology (MIT) Banks: The household savings ratio is 16%, with 42% of savings in cash. This is good news for banks as they pay low interest rates for current accounts/ savings accounts (CASA), which allows them to preserve net interest margins in excess of 4%. Key beneficiaries are Bank of the Philippine Islands, Metrobank, Banco De Oro and Rizal Commercial Banking Corporation

Source: GFK

Covering major urban cities 1,000 families representing diverse areas across the Philippines

Face-to-face interviews Age group: 21-59 years old Monthly income ranges from P30,000 to more than P100,000 Representation is as follows: Baguio City (North Luzon), Lucena City (South Luzon), Cebu City (Visayas), Davao City (Mindanao) Metro Manila: 17 cities and municipalities, including the capital city of Manila Note: Number of households surveyed in parentheses Source: GFK

190


Autumn 2007

Philippines


Youthful demographics The Philippine population stands at 88m and is growing by 2.8% per annum. It is also relatively young with 46% aged below 21 years The labour force should grow at 3.1% per annum from 2005 to 2010 Demographics support a large and growing domestic consumer base Year 2000

Year 2025

(Age) 80+ 75-79 70-74 65-69 60-64 55-59 50-54 45-49 40-44 35-39 30-34 25-29 20-24 15-19 10-14 5- 9 0- 4

(Age) Male

(6)

(4)

80+ 75-79 70-74 65-69 60-64 55-59 50-54 45-49 40-44 35-39 30-34 25-29 20-24 15-19 10-14 5- 9 0- 4

Female

(2)

0

2

4

6

Male

(6)

(4)

Female

(2)

0

2

4

6

Source: UN, Hokenson & Co.

Who are they? Family snapshot Parents aged 21-59 years old Average number of children is two (typically school-aged) Typical households have five people. Extended family members, such as in-laws, also sometimes live in the home

Money and the future 68% own a house or are paying a mortgage; 66% own a car and 38% plan to buy one in the next three years; 27% have a credit card 37% of households have an overseas worker; 88% want their children to go to college, 41% to study abroad and 80% to work overseas Source: GFK

Autumn 2007


191

Philippines


Consumption surges from the middle Mr & Mrs Philippines belong to the middle to upper-income class. Their aspirations for their family show a determination to improve their circumstances Income-class distribution of the survey

27% (US$18,601 and above)

24% (US$13,301-18,600)

47% (US$13,300 and below)

Source: GFK

Income classification: Government versus Mores¹ Government classification: Three income brackets Mores classification: Three socioeconomic strata within the Class I category of the government’s classification Government

Mores

Classification

Income bracket

Classification

Income bracket

Class I

P38,362 and above

AB

P70,001 and above

C1

P50,001-70,000

C2

P30,001-50,000

Class II

P19,232-38,361

D

P15,000-P30,000

Class III

P19,231 or less

E

Less than P15,000

¹ Marketing Opinion Research Society (Mores), Philippines, guidelines are not solely based on income range. Source: GFK

192


Autumn 2007

Philippines


Expenditure Expenditure as a percent of total income

Vehicle Spending 84%

Savings 16%

0

Mortgage

1

House rental

2

Commute

27% of spending goes towards groceries

5

Leisure

6

Clothing

6

Private transport

7

Healthcare

7

Education

12

Utilities

12 27(%)

Groceries

12% on utilities and the same on education

0

5

10

15

20

25

30

Note: In weighted-average percentages, based on number of families spending for the item multiplied by average percentage spent; recomputed to total spending of 84%.

Source: GFK

Family finance: Spending Percentage of total expenditure Vehicle

1

Mortgage

1

House rental

More than 60% of families spend about 30% of their income on food and groceries; on average, they dine out three times a month The majority spend 10-20% of their income on utilities

2

Commute

6

Leisure

More than 70% spend 10-20% of their income on children’s school fees and other educational requirements as well as extracurricular lessons

7

Clothing

8

Private transport

8

Healthcare

8

Education

14

Utilities

14

(%)

Groceries

32

0

10

20

30

40

Note: In weighted average percentages, based on number of families spending for the item multiplied by average percentage spent Source: GFK

Autumn 2007


193

Philippines


Family finance: Savings On average, Mr & Mrs Philippines save 16% of their income (national savings ratio: 20% of GDP) No savings

What are you saving for?

255

50%+

32

40-49%

Kids’ education (36% of respondents)

9

30-39%

Healthcare (21%)

43

20-29%

233

10-19%

273

1-9%

143

Refused

(No. of families)

12

0

50

100

150

200

250

Property (17%) Retirement (15%)

300 Emergencies

25

Vehicle

48

Holiday/vacation

52

Retirement

177

Property

199

Healthcare

(No. of families)

240

Kids' education

420

0

100

200

300

400

500

Source: GFK

Biggest purchase in the past 12 months Average cost per item (excluding cars): P18,529 (US$412) Average price of cars purchased: P673,625 (US$12,000)

Mobile phone Entertainment system (TV, sound system) Vehicles Refrigerator Furniture Jewellery Desktop computer Clothing Washing machine Airconditioner Laptop computer Kitchen facilities Microwave Electronic products None Total (number of families)

102 85 67 59 49 45 42 36 31 31 14 13 8 7 411 1,000

Price range of big-ticket items

P30,001P50,000 6%

P10,001P30,000 44%

P50,001P70,000 1% Above P70,000 2%

Below P10,000 47%

Source: GFK

194


Autumn 2007

Philippines


Today: Home The house you live in Purchased w/ mortgage still being paid 3%

Average floor area: 106m² Belongs to parents 16% Privately rented 16%

Owned, inherited/ given by parents 43%

Purchased w/ no mortgage currently 22%

House mortgage as % of household spending 31-40% 4%

21-30% 2%

The extended-family system transcends Mr & Mrs Philippines housing arrangements 3% have a mortgage to pay and 16% pay rent, but most have no housing costs For those who borrow from a bank, mortgage payments account for less than 20% of their monthly income

House rental as % of household spending 31-40% 1%

Below 10% 16%

50% + 1% Below 10% 16%

21-30% 6%

10-20% 78%

10-20% 76%

Source: GFK

Tomorrow: Own home Of those who do not own a home, 38% plan to buy one in the next five years Greater privacy and children’s welfare are the primary motives When do you plan to buy your own home?

Why own a home? Better location 14%

For the children 21%

For larger space 14%

No plans 57%

For leasing and investment 7% For the next generation 6% Greater privacy 30%

To own a house 4%

Next 6-20 years 5%

Next 5 years 38%

To upgrade 3% For retirement 1% Source: GFK

Autumn 2007


195

Philippines


Tomorrow: Additional home Half of those who plan to purchase homes in the future (whether first time or additional) have no idea where to source the property About 12% intend to purchase via direct sellers or relatives Ayala Land, Filinvest Land and Robinson’s are among the betterknown developers

Why own an additional home? To own a For retirement house 5% 5% For the next generation 6%

To upgrade 1% For the children 26%

Greater privacy 11% For larger space 11%

For leasing & investment 24%

Better location 11%

Top choice of real-estate developers Ayala Land Filinvest Land Robinson’s Sta. Lucia Crown Asia

6% 5% 5% 3% 3%

Source: GFK

Home improvements 77% have renovated in the past 5-10 years Meanwhile, 49% plan to renovate their homes in the next five years

When did you last renovate your home?

Not done any renovation 20%

When do you plan to renovate your home again?

Don't/can't recall 3%

2013-18 5% Don't know 16%

1996-2001 26%

2007-12 49%

2002-2007 51%

No plan 30%

Source: GFK

196


Autumn 2007

Philippines


Transport Main means of transport Company car

Car ownership Do not own a car 34%

1

FX/garage service/AUV

2

Taxi

4

Motorcycle

5

Own a car 66%

Public transport (Jeep/bus/MRT/LRT)

32

(%)

Private car/own car

56

0

10

20

30

40

50

60

66% own a car

Current car owned

To save money, some who own private vehicles do not use them as their main means of transport but only when necessary

Toyota Mitsubishi Honda Jeep (local-type) Nissan Isuzu Kia

31% 13% 10% 9% 8% 6% 5%

Source: GFK

Transport About 38% of the families plan to buy a new car in the next three years Almost half intend to buy a Toyota; Honda and others trail behind

Future car purchase - Preferred brands Toyota Honda Mitsubishi Isuzu Nissan Hyundai

Means of payment 48% 18% 7% 6% 6% 4%

Company car plan 8%

Installment via dealer financing 18%

Trade-in 3%

Cash 50%

Installment thru bank financing 21%

Source: GFK

Autumn 2007


197

Philippines


Today: Home appliances Apart from topping the list of biggest single-item purchases, mobile phones are considered an essential gadget Television (Home theatre)

1

Television (LCD/Plasma)

1

Laptop

2

Vacuum cleaner

35

MP3/iPod

45

Digital computer

55

Desktop computer

64

Air conditioner

74

Television (CRT TV)

94

Washing machine

97

CD/DVD/VCD player

Source: GFK

98

Refrigerator

99

Mobile phone

99

0

20

40

60

80

(%)

100

120

Home appliances owned Mobile phones

Two mobile phones per family

Panasonic

1

Siemens

Nokia is the phone of choice

2

Samsung

13

Sony Ericsson

17

Motorola

19

(%)

Nokia

94

0

20

40

60

80

100

Refrigerators

One refrigerator per family Panasonic and GE are the preferred brands

Winner

1

Toshiba

1

LG

2

Samsung

2

Sharp

3

Whirlpool

3

Westinghouse

4

Sanyo

5

Kelvinator

10

Condura

12

General Electric (GE)

29

(%)

Panasonic

198

38

0

Source: GFK


5

10

15

20

25

30

35

40

Autumn 2007

Philippines


Home appliances owned Washing machines

One washing machine per family

Others

5

Samsung

2

Daewoo

2

Whirlpool

Sharp and National lead the way in washing machines

3

Panasonic

7

LG

10

National

33

Sharp

(%) 37

0

5

10

15

20

25

30

35

40

TVs Others National TLC Aiwa LG Sanyo Pioneer Philips Samsung JVC Panasonic Sharp Sony

One CRT TV per family Sony is the television of choice

4 2 2 2 2 2 2 4 5 18 18 26 49

0

Source: GFK

10

20

30

40

50

(%) 60

Home appliances owned Airconditioners Kelvinator

1

Samsung

1

Uniair

2

Kolin

2

General Electric (GE)

4

Panasonic

5

LG

7

Sharp

9

Carrier

12

National

16

Condura

25

0

5

10

15

20

25

(%) 30

One airconditioner per family Condura, National and Carrier are the leading choices for the home Source: GFK

Autumn 2007


199

Philippines


Tomorrow: Home appliances Do you plan to buy new home appliances in the next 12 months?

If yes, what items do you plan to buy? Others

1

Vacuum cleaner

1

Television (Home theatre)

Yes 28%

4

Digital camera

5

CD/DVD/VCD player

5

Laptop

6

MP3/iPod

7

Mobile phone

No 72%

8

Television (CRT TV)

9

Television (LCD/Plasma)

10

Refrigerator

14

Desktop computer

15

Air conditioner

16

Washing machine 0

60 50

50

(%) 18

5

10

15

20

47

Purchase of appliances is not a priority in the next 12 months as most households have the basics

40 30 20

14

10

Mr & Mrs Philippines plan to buy washing machines and airconditioners in the next 12 months

1

0 We are saving We've got all we for other things need

We don't have enough money

Others

Source: GFK

Today: Insurance What type of insurance policy have you bought? Fire

1

Memorial life

2

Home owner's insurance

6

Accident insurance

18

Educational insurance

Coco Life

2

Pru Life UK

2

AXA Life

2

Fortune

2

Ayala Life

10

Pension

From which insurance company?

3

Platinum

4

Manulife

4

ACE

4

20

Insular

Health insurance (HMO)

24

Auto insurance

26

7

Pioneer

8

Sun Life

8

Prudential Life Life insurance

67

0

20

40

60

(%)

11

Philam Life

80

62

0

20

40

60

(%) 80

About half of the families have an insurance policy Life insurance is the most common type at 67% of our sample 62% have a policy from Philam Life Source: GFK

200


Autumn 2007

Philippines


Tomorrow: Insurance If you haven’t bought any yet, would you like to buy an insurance policy? Why? For security

3

Future uses

Yes 20%

5

Emergency purposes

7

Recommended by friends

7

Have seen others claim

No 80% 12

To cover increasing medical costs

33 (%) 45

To provide insurance for my kids’ education 0

10

20

30

40

50

Only 20% plan to buy insurance

Saving for other things

Majority don’t trust insurance companies or feel policies are expensive

3

I don't know much about insurance

4

I don't need any insurance

26

I don't trust insurance companies

For 45%, insurance is to cover for children’s education

33 (%)

Insurance is very expensive

37 0

Source: GFK

5

10

15

20

25

30

35

40

Today: Bank card How many credit cards do you and your spouse own? own 3 2% own 2 7%

How many debit cards do you and your spouse own?

More than 3 2%

own 2 1%

own 1 5%

own 3 1%

own 1 16%

No credit card 73%

No debit card 93%

Seven out of 10 do not have a credit card Almost none hold a debit card Top-eight issuers by number of cardholders in this survey Credit card Number of cardholders in this survey Debit card Number of cardholders in this survey

1

2

3

4

Citibank

Metrobank

BPI

HSBC

92

74

BPI

Metrobank

28

15

64 Equitable-PCIBank 9

5 Equitable PCI Bank

6

7

8

Banco de Oro

Unionbank

AIG

64

29

18

12

3

HSBC

Citibank

Unionbank

Bance de Oro

AIG

8

7

2

2

1

Source: GFK

Autumn 2007


201

Philippines


Wealth Wealth in different assets

Bonds

Investments in different assets

Foreign exchange

1

Stocks & shares

Stocks & shares

2

Business investments

14

41

Cash/deposits

(%) 20

30

77

Time deposit

42

10

50

Business

Properties

0

42

40

79

House & lot

88

(%)

50

0

20

40

60

80

100

Preferred investments are properties and deposits Only 3% of wealth in stocks and bonds, although 50% have experience of investing in stocks and shares Source: GFK

Stocks and funds Have you invested in stocks and bonds in the past 12 months?

If not, do you plan to buy stocks or funds in the next 12 months?

3%

2%

No 97%

No 98%

Investment in stocks is not Mr & Mrs Philippines’ cup of tea Only 3% of respondents bought stocks in the past 12 months Slightly fewer (2%) intend to purchase stocks in the next 12 months Source: GFK

202


Autumn 2007

Philippines


Travel plans Do you plan to travel within the Philippines in the next 12 months?

Mr & Mrs Philippines like to travel “out-of-town” Improved accessibility and the government’s “holiday economics” policy have paved the way for increased local tourism and travel

Yes 47%

Half of those surveyed intend to take a holiday in places such as Baguio, Pangasinan and Cebu International travel is restricted to two in 10 families. Favourite destinations are in Asia - mainly Hong Kong and Japan

No 53%

Do you plan to travel outside the Philippines?

Yes 24%

No 76%

Source: GFK

Family lifestyle Leisure activities Activity

Frequency/month

Average cost (P)

Watching movies

2x

1,200

Sports

3x

1,200

Hobbies

3x

800

Dining out

2-3x

2,000

Out-of-town vacation

Once

7,200

Leisure activities are an important part of the Filipino lifestyle and new malls have shaped the way families have fun Activities such as watching movies, dining and even some sports are all available in the malls Nearly 90% of families dine out almost every week Most apparel and accessories are bought in the mall, whether in boutiques or department stores Source: GFK

Autumn 2007


203

Philippines


Dining out Food establishments 5

Dencio's Restaurant

9

Greenwich

17

Max's Restaurant KFC

19

McDonald's

22

Jollibee

61

Fast food

81

0

10

20

30

40

50

60

70

80

(%) 90

Jollibee enjoys top-of-the-mind recall and high patronage among Filipino households Other fast-food chains, whether in standalone structures or in malls, have been equally successful Source: GFK

Brands that shine Car - Toyota TV - Sony Airconditioner - Condura Refrigerator - Panasonic & GE Washing machine - Sharp Mobile phone - Nokia Bank - Citibank Insurance - Philam Life Real estate - Ayala Land Source: GFK

204


Autumn 2007

Philippines


Responsibilities: Supporting the old Your parents’ financial situation Have no pension

How much do you spend on your parents every month? No fixed amount

2

Have nothing self generating

3

6

Above P3,000

Have support from children

20

16

P2,001-3,000 With pension

11

23

P1,000-2,000 Deceased

55

24

Self-sustaining

41

0

10

20

30

Below P1,000

10

(%)

40

(%)

50

0

10

20

30

40

50

60

Of those surveyed, 37% provide some financial support to their parents; they spend an average of P2,500 a month Source: GFK

Money for children How much allowance do you give your child/children every month? Not studying/ no longer studying

What do they spend it on?

16

None

Internet café

9

Above P12,000

Books

2

P9,001-12,000

3

P6,001-9,000

3

7

9

Communication (load)

20

School project/ requirement

P3,001-6,000

22

Transport

25

P3,000 and below

45

Food allowance

42

72

(%) 0

10

20

30

40

50

(%) 0

20

40

60

80

Average allowance: P3,400; more than two-thirds of this is spent on food Source: GFK

Autumn 2007


205

Philippines


Additional education for children Does/do your child/children have extracurricular lessons/activities? Yes 17%

What are these? Anything else? Club/ organisations

5

Language lessons

5

Dance/arts

7

Music

29

Sports

No 83%

30

Tutorial (school subjects)

43

0

10

20

30

(%)

40

50

Extracurricular lessons are considered a luxury for the average household Among those taking extra classes, tutorials on school subjects are the more popular. Music and sports are also preferred Source: GFK

Hopes: Children What education level do you want your child/children to attain?

Preferred occupation for children It is up to them

5

None

Post graduate 11% College graduate 88%

2

Not applicable

1

Businessman/entrepreneur

1

Counselling/religious

1

Entertainers

1

Police/military

1

Service class

Other qualifications 1%

2

Skilled worker

3

Computing/IT

8

Manager

9

Teacher

10

Accountant

12

Doctor

Would you like your child/ children to study abroad?

(%)

31

Engineer

36

Other professionals

37 0

5

10

15

20

25

30

35

40

Engineers and doctors are ranked the most desirable occupations for children

Yes 41% No 59%

These jobs offer not only a good income and high social status, but also the prospect of working overseas

Source: GFK

206


Autumn 2007

Philippines


Fears and hopes What is your biggest economic worry?

Others 6%

Housing prices/rents 5%

What are the most important areas that you think the government should address?

Improving education 11%

Pension 1% Law & order 14%

Unemployment 50%

Medical costs 12%

Enhancing investments 2%

Increasing democaratic rights 1%

Employment/ jobs 28% Improving the economy 38%

Education fees 26%

Pollution 3%

Others 1%

Better public housing 1% Reducing income inequality 1%

Employment and education are prominent issues for Mr & Mrs Philippines, reflecting their concerns about leading stable lives Source: GFK

Social security and healthcare Are you covered by SSS/GSIS¹ or other retirement funds?

What percentage of your monthly household income do you spend on healthcare? Above 20% 1%

11-20% 12%

No 23%

Yes 77%

1-10% 87%

While there is wide coverage of social security among those surveyed, healthcare expenditure is only given 8% allotment from income Note: ¹ Social Security System (SSS), Government Service Insurance System (GSIS) Source: GFK

Autumn 2007


207

Philippines


Hopes: Generally optimistic Income change from one year ago

Income change (expectation) one year from now

Decreased 17%

Increased 27%

Decreased 6%

Stayed the same 56%

Increased 44%

Income change (expectation) five years from now

Can't say 1%

Will stay the same 18%

Can't say 1%

Will be worse off 4%

Stay the same 49%

Will be better off 77%

27% have seen income growth in the past 12 months 44% expect income to increase in the next 12 months 77% expect to be better off five years from now Source: GFK

GDP per capita Rising per capita GDP 1,600

(US$) 1,351.2

1,400 1,200 1,000

1,157.4

1,116.3 988.8 864.5

985.2 905.7

956.4

972.1

1,039.9

800 600 400 200 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Per-capita GDP declined after the Asian financial crisis However, it has started to recover in the past three years with per-capita GDP surpassing the 1997 level in 2005 Source: GFK

208


Autumn 2007

Philippines


Sociopolitical issues Do you think governance is better or worse than 10 years ago?

Do you think the Philippines should move towards a parliamentary form of government?

Better 29%

Yes 10%

Worse 70%

No 77% No change 1%

Does not matter 13%

70% think governance is worse than 10 years ago 77% not in favour of changing to parliamentary form of government Source: GFK

Environmental concerns 120 100

(%) 5

6 7

Definitely agree

9

80

16

Slightly agree

15

60

18

Can't say

16

Slightly disagree

40 52

Definitely disagree

55

20 0 Willing to pay more for utilities to improve pollution levels

Willing to pay additional tax to improve pollution levels

Concern for the environment is a given but people are unwilling to pay the price, especially if it means losing a part of their income 55% unwilling to pay additional taxes to reduce pollution Source: GFK

Autumn 2007


209

Philippines


Who wants to be a millionaire? What would you do if you were given 25 million pesos?

Others

14

Invest in stocks/trust fund

1

Save for the future

4

Spend on children's education

10

Spend on leisure activity

11

Donate to charity/help the poor

11

Invest in property

21

Invest in a business

28 0

5

10

15

20

25

(%) 30

35

Source: GFK

210


Autumn 2007

Singapore

Mr & Mrs Singapore

Singapore - Rooting for government

Neel Sinha

Head of Research CLSA Singapore

As we have been arguing since the publication last year of our special report, The Red Dot gets bigger, Singapore’s ongoing reinvention into a knowledgebased economy is setting it on a path of sustained expansion over the next decade.

A very small 8% of respondents are looking to buy property in the next 12-18 months, although a significant 26% of them acknowledge that property has been their best investment so far. The main motivation for those interested in buying property in the near future is either for investment or to upgrade from their existing homes.

Key to the country’s success will be the strength of its people. To better understand who are Mr & Mrs Singapore, we surveyed 1,200 individuals in August, with a focus on heads of households, ie, the key decisionmakers for consumer and capital spending.

Households are small with an average of 3.8 people. There are children in 72% of the households, while 25% have the household heads’ parents or in-laws living under the same roof. But filial financial obligations are fairly low, even among these households, as more than 38% of live-in parents are financially independent.

Our respondents range from 20 to 70 years old, with the bulk of household heads in the 31 to 40year-old age group. Some 57% of them are female, 75% are ethnically Chinese and 77% are married.

Demographics indicate an ageing population and one that is increasingly infertile, with the net reproduction rate per resident female having dropped from 1.42 in 1970 to 0.60 in 2005. This snapshot is likely to change over the medium term, however, given the government’s focus on building new industry clusters and attracting qualified immigrants to bolster the current resident population.

Monthly incomes range from less than S$1,400 to well above S$10,000. White-collar workers make up 58% of the group surveyed, 13% are housewives and 11% are blue-collar workers, while the rest of our respondents are either self-employed or retired. The median income in our survey sample is about S$4,800, which is around 7% higher than the S$4,500 for 2006 indicated by the Singapore Department of Statistics. Almost 16% of households lie in the highestincome category of above S$10,000 per month.

Read on for more insights, as we bring you into the homes of Mr & Mrs Singapore, giving you a window onto their lives to get a sense of their lifestyle, financial outlook, expenses and savings patterns, investment tendencies, concerns and aspirations.

Global market research group Taylor Nelson Sofres conducted our household survey

Home ownership in Singapore is a high 90%, slightly below the 92-94% estimates suggested by property sector participants; 88% of our sample live in apartments with the lion’s share in government housing.

Key findings Of our survey universe, women comprise the majority of decisionmakers for household capex at 57%. Households are small with most at 2-4 people; 75% do not have filial obligations 88% of households live in apartments. Of these, 87% live in government housing (Housing & Development Board). Home ownership is very high at almost 90% and 61% have mortgages Food & beverages make up the single-largest expense, followed by housing/rent - combined they account for 42% of expenses. 63% have a credit card with an average 2.3 cards/household The ratio of savings to per capita GDP is around 22%, of which we estimate 10-12% to be in cash and the rest in other investments. Property concentration is high - 50% of households have more than half of their assets in property Singaporeans love to travel and dine out. More than 50% have plans for an overseas trip in the next 12 months. 56% dine out at least once a week with a 70% preference for hawker centres

Autumn 2007

Individual stock-market participation in the past year is a surprisingly low 24% and only 4% plan to invest in stocks in the next 12 months Demographics indicate a middle-aged population, with 50% between 25-50 years old. But the current snapshot could be a misleading indicator due to the recent government focus on attracting immigrants to increase the population by about 50% to 6.5m people over 10-15 years 84% are satisfied with government performance and 74% believe that the integrated resorts (IRs) are a positive development. Yet somewhat surprisingly, 24% consider migrating out of Singapore for better prospects Improving the economy, reducing income inequality and improving the education system are the top-three priorities for the government Regarding the government’s desire to grow Singapore’s immigrant population base, top concerns expressed are over higher costs of living, a loss of employment and increased crime

neel.sinha/amar.gill@clsa.com

211

Singapore

Mr & Mrs Singapore

Investment conclusions Banks and financial services: 63% of households surveyed have credit cards, which is somewhat low for a developed economy and potentially holds upside. The savings and cash-holdings levels also indicate good growth prospects for private banking and financial services. Local banks DBS, UOB and OCBC could be likely beneficiaries at the middleincome segment given their distribution networks

White-goods retail: Overall white-goods penetration is high. Of those planning a purchase in the next 12 months, 37% want AV equipment, mainly flat-screen TVs, 21% want a computer and 13% household appliances. Retailers like Courts, Challenger, Isetan and CK Tang are likely to benefit from this demand

Education: With 52% of children under the age of 16 years old and almost 100% of parents surveyed wanting their children to reach tertiary education, companies like Raffles Education, Oriental Century, Hartford and Informatics are well placed to benefit

Property: With high home ownership, the amount of new property purchasers is low. But our survey does not capture demand for housing from population growth through immigration or foreign investment. With government plans to increase the population by about 50% over 10-15 years, the property sector will be a big winner. And the current population is likely to get involved in investment buying, upgrading, downgrading, etc. Domestic developers CapitaLand, City Dev, Keppel Land, Allgreen, UOL, SC Global, Fraser Centrepoint, Wheelock, Wing Tai and Hersing among others are beneficiaries

Healthcare: Overall population demographic point to a middle-age concentration, which should be positive for healthcare companies like Parkway, Raffles Medical and Thomson Medical

Market liquidity: The savings rate is around 22%, of which roughly half is estimated to be in cash. M3 over GDP remains high, increasing from 116% in 2004 to 128% in 2006. Singapore Exchange could benefit

Travel: More than 50% of households plan to holiday overseas, with Malaysia, Hong Kong, Australia, Thailand and China as the top destinations. A possible beneficiary is Singapore Airlines

Heads of households: Who are they? Of Singapore’s 1.22m households, we surveyed 1,200 individuals who represented the key decisionmaker for consumer and capital spending within their household Survey questions were generally categorised by monthly household incomes, ranging from less than S$2,000 to more than S$10,000 The majority of household heads are female, married, white-collar workers or professionals, and of Chinese ethnicity The bulk of household heads are in the 31-40-year-old age group Head of household characteristics Blue collar 11

White collar 58

Occupation

Ethnic group

Female 57

Male 43

Gender 0

10

20

na 2 na 5

Married 77

Single 18

Marital status

Indian 9

Malay 14

Chinese 75

na 6 >60 years 8

51-60 years old 16

41-50 years old 30

31-40 years old 31

S$10K 10

S$6-10K 21

S$4-6K 22

S$2-4K 28

S$10K

28

25

15

Total

20%

3

Decrease 10-20%

3

Appears to be a widening income divide Two-thirds of lowest earners feel a fall in household income, while two thirds of highest income group see an increase

2

Decrease S$10K

67

54 42

30

9

0

47

60 50 40

Worse off

32

70

40

Stay the same

(%)

50

60

20 10 0

14

11

NT$200k 4%

NT$150-200k 6%

Median disposable income is NT$75,000, which correlates with official mean disposable income of NT$76,100

70 61-70

21 32

51-60

89

41-50

19% saving for retirement; 18% for children’s education; 16% for investment

116

31-40

211

21-30

222

11-20 5-10

If given NT$15m, 18% would invest it while 16% would live the good life. Another 15% would buy a new apartment

229 139

10% increase in charges 2% None 39%

0-2% increase in charges 39%

How much more income tax they are willing to pay 5-10% increase in tax 3-4% increase 5% in tax 8% 1-2% increase in tax 16%

>10% increase in tax 1%

Only 2% consider the environment a top priority; 8% put in the top three 39% are not willing to pay higher transport and electricity charges to reduce pollution; only 22% are willing to pay more than 2% to reduce pollutants by 10% Half would not pay more tax to reduce pollution. Only 14% would pay more than 3% extra income tax to cut pollution by 20%

No 50%

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