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.
2
[email protected]
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
[email protected]
3
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.
[email protected]
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
[email protected]
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
6
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.
[email protected]
Autumn 2007
Mr & Mrs Asia
Section 1: Rising income, falling fertility
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
[email protected]
7
Section 1: Rising income, falling fertility
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%.
8
[email protected]
Autumn 2007
Mr & Mrs Asia
Section 1: Rising income, falling fertility
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
[email protected]
9
Mr & Mrs Asia
Section 1: Rising income, falling fertility
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
10
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$1,000 for India and the Philippines. Across this range of income levels, household expenditure patterns and discretionary expenditure will vary. At the top end, households have greater income to spend on BMWs, Gucci and iPods; at the lower end, the marginal level of discretionary expenditure is spent on indulgences like cigarettes – Indonesia for instance is one of the largest markets for cigarettes with per capita 1,000 sticks smoked per year.
[email protected]
Autumn 2007
Mr & Mrs Asia
Section 1: Rising income, falling fertility
Figure 7
Savings ratio stays high even at higher levels of household incomes
Per capita income and private sectors savings (US$)
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
Source: CEIC, CLSA Asia-Pacific Markets
Autumn 2007
[email protected]
11
Mr & Mrs Asia
Section 1: Rising income, falling fertility
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
Source: CEIC, CLSA Asia-Pacific Markets
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.
12
[email protected]
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
Source: CLSA Asia-Pacific Markets
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.
[email protected]
13
Section 2: Income, wealth, properties
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.
14
[email protected]
Autumn 2007
Mr & Mrs Asia
Section 2: Income, wealth, properties
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
Source: CLSA Asia-Pacific Markets
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.
[email protected]
15
Mr & Mrs Asia
Section 2: Income, wealth, properties
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
Source: CLSA Asia-Pacific Markets
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
[email protected]
Autumn 2007
Mr & Mrs Asia
Section 2: Income, wealth, properties
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
Source: CLSA Asia-Pacific Markets
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.
[email protected]
17
Mr & Mrs Asia
Section 2: Income, wealth, properties
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
Source: CLSA Asia-Pacific Markets
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.
[email protected]
Autumn 2007
Mr & Mrs Asia
Section 2: Income, wealth, properties
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
Source: CLSA Asia-Pacific Markets
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.
Autumn 2007
[email protected]
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
Source: CLSA Asia-Pacific Markets
20
[email protected]
Autumn 2007
Section 3: Where does it all go?
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.
Autumn 2007
[email protected]
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
Section 3: Where does it all go?
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
Source: CLSA Asia-Pacific Markets
22
[email protected]
Autumn 2007
Mr & Mrs Asia
Section 3: Where does it all go?
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
Source: CLSA Asia-Pacific Markets
. . . 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.
Autumn 2007
[email protected]
23
Mr & Mrs Asia
Section 3: Where does it all go?
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
Source: CLSA Asia-Pacific Markets
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
[email protected]
Autumn 2007
Mr & Mrs Asia
Section 3: Where does it all go?
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
Source: CLSA Asia-Pacific Markets
Autumn 2007
[email protected]
25
Mr & Mrs Asia
Section 3: Where does it all go?
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
Source: CLSA Asia-Pacific Markets
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.
[email protected]
Autumn 2007
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
Source: CLSA Asia-Pacific Markets
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.
Autumn 2007
[email protected]
27
Section 4: Home, children and government
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
[email protected]
Autumn 2007
Mr & Mrs Asia
Section 4: Home, children and government
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
Source: CLSA Asia-Pacific Markets
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
Source: CLSA Asia-Pacific Markets
Autumn 2007
[email protected]
29
Section 4: Home, children and government
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
Source: CLSA Asia-Pacific Markets
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.
[email protected]
Autumn 2007
Mr & Mrs Asia
Section 4: Home, children and government
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
Source: CLSA Asia-Pacific Markets
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.
Autumn 2007
[email protected]
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.
32
[email protected]
Autumn 2007
Mr & Mrs Asia
Section 5: Investment implications
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
Source: CLSA Asia-Pacific Markets
. . . 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
Source: CLSA Asia-Pacific Markets
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.
[email protected]
33
Mr & Mrs Asia
Section 5: Investment implications
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
Source: CLSA Asia-Pacific Markets
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
[email protected]
Autumn 2007
Mr & Mrs Asia
Section 5: Investment implications
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
Source: CLSA Asia-Pacific Markets
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
Source: CLSA Asia-Pacific Markets
Autumn 2007
[email protected]
35
Section 5: Investment implications
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
Source: CLSA Asia-Pacific Markets
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.
36
[email protected]
Autumn 2007
Mr & Mrs Asia
Section 5: Investment implications
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
Source: CLSA Asia-Pacific Markets
Autumn 2007
[email protected]
37
Mr & Mrs Asia
Section 5: Investment implications
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
Source: CLSA Asia-Pacific Markets
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.
38
[email protected]
Autumn 2007
Mr & Mrs Asia
Section 5: Investment implications
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
Source: CLSA Asia-Pacific Markets
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
Autumn 2007
[email protected]
39
Mr & Mrs Asia
Section 5: Investment implications
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.
40
[email protected]
Autumn 2007
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
Autumn 2007
[email protected]
41
Mr & Mrs Asia
Notes
42
[email protected]
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$16 trillion, or 25% larger than today’s US economy. Demographics and size mean that these two nations will contribute some 256 million new workers, or 85% of the world’s total, to the global labour force by 2020. As such, China and India will impact the pricing of goods and services in two fundamental ways – rapidly rising demand and the ongoing supply of low-cost labour. The rise of Mr & Mrs China is central to each of these themes.
Not just another middle-class survey! Despite the proliferation of reports, analysis and opinion on China’s middle-class consumers, there is little consensus as to how many people fall into this social layer. Of course, it doesn’t help that there is no standard definition of middle class. Estimates vary from 25 million to 250 million, but one thing all agree on is that the numbers are burgeoning. By 2015 there will be somewhere between 260 million and 650 million, depending on which source you use. As far as we can tell, most reports rely on official government data.
CRR* has taken a different approach. Working closely with a domestic market-research firm, we spoke to almost 1,300 middle-income families in 57 cities across China. Our aim is not to tell you how many middle-class people there are in China. Instead, we want to give you some insight into the spending, saving and consumption patterns of regular urban families. * China Reality Research (CRR) is an integral part of the CLSA China offering. Dedicated to grassroots economic research in China, this special unit speaks with provincial policymakers, business people, consumers and others around China, gathering local economic information.
Autumn 2007
[email protected]
43
China
Mr & Mrs China
Implications of middle-class spending As % of total consumption spending²
Incremental spending by sector (US$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
Sales volume in China (2006)
332
0
500
55
Sales volume in China (2006)
444
Implied incremental sales volume in China
15
(m) 1,000
1,500
88
Implied incremental sales volume in China
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
[email protected]
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
[email protected]
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
[email protected]
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%
[email protected]
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
[email protected]
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)
[email protected]
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
[email protected]
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
[email protected]
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%
[email protected]
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
[email protected]
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
[email protected]
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
[email protected]
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
[email protected]
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
Source: CLSA Asia-Pacific Markets
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%
Source: CLSA Asia-Pacific Markets
92
anirudha.dutta/prakhar.sharma/
[email protected]
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%
Source: CLSA Asia-Pacific Markets
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
Source: CLSA Asia-Pacific Markets
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
anirudha.dutta/prakhar.sharma/
[email protected]
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
Source: CLSA Asia-Pacific Markets
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
anirudha.dutta/prakhar.sharma/
[email protected]
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
Source: CLSA Asia-Pacific Markets
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
Source: CLSA Asia-Pacific Markets
Autumn 2007
anirudha.dutta/prakhar.sharma/
[email protected]
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
Source: CLSA Asia-Pacific Markets
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
Preferred for next purchase
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
Source: CLSA Asia-Pacific Markets
96
anirudha.dutta/prakhar.sharma/
[email protected]
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
Preferred for next purchase
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
Source: CLSA Asia-Pacific Markets
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
Preferred for next purchase
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
Source: CLSA Asia-Pacific Markets
Autumn 2007
anirudha.dutta/prakhar.sharma/
[email protected]
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
Source: CLSA Asia-Pacific Markets
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
Source: CLSA Asia-Pacific Markets
98
anirudha.dutta/prakhar.sharma/
[email protected]
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
Source: CLSA Asia-Pacific Markets
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
anirudha.dutta/prakhar.sharma/
[email protected]
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
Source: CLSA Asia-Pacific Markets
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
Source: CLSA Asia-Pacific Markets
100
anirudha.dutta/prakhar.sharma/
[email protected]
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
Source: CLSA Asia-Pacific Markets
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
Source: CLSA Asia-Pacific Markets
Autumn 2007
anirudha.dutta/prakhar.sharma/
[email protected]
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%
Source: CLSA Asia-Pacific Markets
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
Source: CLSA Asia-Pacific Markets
102
anirudha.dutta/prakhar.sharma/
[email protected]
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
Source: CLSA Asia-Pacific Markets
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
Source: CLSA Asia-Pacific Markets
Autumn 2007
anirudha.dutta/prakhar.sharma/
[email protected]
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%
Source: CLSA Asia-Pacific Markets
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
Source: CLSA Asia-Pacific Markets
104
anirudha.dutta/prakhar.sharma/
[email protected]
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%
Source: CLSA Asia-Pacific Markets
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%
Source: CLSA Asia-Pacific Markets
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
anirudha.dutta/prakhar.sharma/
[email protected]
105
Mr & Mrs India
India
Notes
106
anirudha.dutta/prakhar.sharma/
[email protected]
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%
Source: CLSA Asia-Pacific Markets
Autumn 2007
jessie.wilson/jolyon.montague/
[email protected]
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
Source: CLSA Asia-Pacific Markets
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
jessie.wilson/jolyon.montague/
[email protected]
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
Source: CLSA Asia-Pacific Markets
Autumn 2007
jessie.wilson/jolyon.montague/
[email protected]
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)
(No. of respondents)
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
jessie.wilson/jolyon.montague/
[email protected]
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)
Source: CLSA Asia-Pacific Markets
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)
jessie.wilson/jolyon.montague/
[email protected]
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
Source: CLSA Asia-Pacific Markets
134
100
150
200
250
300
350
(No. of respondents)
jessie.wilson/jolyon.montague/
[email protected]
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
(No. of respondents)
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
Source: CLSA Asia-Pacific Markets
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
(No. of respondents)
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%
Source: CLSA Asia-Pacific Markets
Autumn 2007
jessie.wilson/jolyon.montague/
[email protected]
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
(No. of respondents)
Source: CLSA Asia-Pacific Markets
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
jessie.wilson/jolyon.montague/
[email protected]
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
Source: CLSA Asia-Pacific Markets
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
Source: CLSA Asia-Pacific Markets
Autumn 2007
Under 10
2.3
5
10
15
20
25 Source: Japan National Tourist Organisation
jessie.wilson/jolyon.montague/
[email protected]
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
Source: CLSA Asia-Pacific Markets
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%
jessie.wilson/jolyon.montague/
[email protected]
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
Source: CLSA Asia-Pacific Markets
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
Source: CLSA Asia-Pacific Markets
Autumn 2007
300
350
400
(No. of cars)
jessie.wilson/jolyon.montague/
[email protected]
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
Source: CLSA Asia-Pacific Markets
140
jessie.wilson/jolyon.montague/
[email protected]
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
(No. of respondents)
(No. of respondents)
Source: CLSA Asia-Pacific Markets
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
jessie.wilson/jolyon.montague/
[email protected]
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)
Source: CLSA Asia-Pacific Markets
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
Source: CLSA Asia-Pacific Markets
142
100
150
200
250
300
350
400
(No. of computers)
jessie.wilson/jolyon.montague/
[email protected]
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)
Source: CLSA Asia-Pacific Markets
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%
Source: CLSA Asia-Pacific Markets
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
Source: CLSA Asia-Pacific Markets
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
jessie.wilson/jolyon.montague/
[email protected]
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%
Source: CLSA Asia-Pacific Markets
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
(No. of respondents)
Children’s extracurricular activities 250
(No. of respondents)
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
Source: CLSA Asia-Pacific Markets
144
jessie.wilson/jolyon.montague/
[email protected]
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%
Source: CLSA Asia-Pacific Markets
Autumn 2007
jessie.wilson/jolyon.montague/
[email protected]
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
(No. of respondents)
Source: CLSA Asia-Pacific Markets
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
Source: CLSA Asia-Pacific Markets
146
(No. of respondents)
700
0
10
20
30
40
50
0 Significant decrease
Slight decrease
Stay the same
Slight increase
jessie.wilson/jolyon.montague/
[email protected]
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%
Source: CLSA Asia-Pacific Markets
Autumn 2007
jessie.wilson/jolyon.montague/
[email protected]
147
Mr & Mrs Japan
Japan
Notes
148
jessie.wilson/jolyon.montague/
[email protected]
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/
[email protected]
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
shuan.cocharn/robert.bruce/
[email protected]
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
Source: CLSA Asia-Pacific Markets
Autumn 2007
shuan.cocharn/robert.bruce/
[email protected]
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
Source: CLSA Asia-Pacific Markets
152
shuan.cocharn/robert.bruce/
[email protected]
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%
Source: CLSA Asia-Pacific Markets
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%
Source: CLSA Asia-Pacific Markets
Autumn 2007
shuan.cocharn/robert.bruce/
[email protected]
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
Source: CLSA Asia-Pacific Markets
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
Source: CLSA Asia-Pacific Markets
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%
Source: CLSA Asia-Pacific Markets
Autumn 2007
shuan.cocharn/robert.bruce/
[email protected]
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
Source: CLSA Asia-Pacific Markets
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
Source: CLSA Asia-Pacific Markets
156
shuan.cocharn/robert.bruce/
[email protected]
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%
Source: CLSA Asia-Pacific Markets
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%
Source: CLSA Asia-Pacific Markets
Autumn 2007
shuan.cocharn/robert.bruce/
[email protected]
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
(No. of respondents)
100
200
300
400
500
600
Source: CLSA Asia-Pacific Markets
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
(No. of respondents)
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
Source: CLSA Asia-Pacific Markets
158
shuan.cocharn/robert.bruce/
[email protected]
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
Source: CLSA Asia-Pacific Markets
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%
Source: CLSA Asia-Pacific Markets
Autumn 2007
shuan.cocharn/robert.bruce/
[email protected]
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
Source: CLSA Asia-Pacific Markets
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
Source: CLSA Asia-Pacific Markets
160
shuan.cocharn/robert.bruce/
[email protected]
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
Source: CLSA Asia-Pacific Markets
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
Source: CLSA Asia-Pacific Markets
Autumn 2007
shuan.cocharn/robert.bruce/
[email protected]
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
Source: CLSA Asia-Pacific Markets
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%
Source: CLSA Asia-Pacific Markets
162
Yes 66%
3 2 1 0 (1) (2) (3) (4)
(%)
Samsung
Hyundai
Imports
Ssangyong
shuan.cocharn/robert.bruce/
[email protected]
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%
Source: CLSA Asia-Pacific Markets
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%
(No. of respondents)
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
shuan.cocharn/robert.bruce/
[email protected]
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%
Source: CLSA Asia-Pacific Markets
164
shuan.cocharn/robert.bruce/
[email protected]
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%
Source: CLSA Asia-Pacific Markets
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
Source: CLSA Asia-Pacific Markets
Autumn 2007
shuan.cocharn/robert.bruce/
[email protected]
165
Korea
Mr & Mrs Korea
Children: 86% of households have children Extracurricular lessons that parents pay for Other foreign language
60
(No. of respondents)
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%
Source: CLSA Asia-Pacific Markets
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
(No. of respondents)
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
Source: CLSA Asia-Pacific Markets
166
shuan.cocharn/robert.bruce/
[email protected]
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
(No. of respondents)
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
Source: CLSA Asia-Pacific Markets
Autumn 2007
shuan.cocharn/robert.bruce/
[email protected]
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
(No. of respondents)
Japan
15
0
5
10
15
20
Source: CLSA Asia-Pacific Markets
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
(No. of respondents)
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
Source: CLSA Asia-Pacific Markets
168
shuan.cocharn/robert.bruce/
[email protected]
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%
Source: CLSA Asia-Pacific Markets
Autumn 2007
shuan.cocharn/robert.bruce/
[email protected]
169
Mr & Mrs Korea
Korea
Notes
170
shuan.cocharn/robert.bruce/
[email protected]
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/
[email protected]
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
niklas.olausson/
[email protected]
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
niklas.olausson/
[email protected]
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%
Source: CLSA Asia-Pacific Markets
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
Source: CLSA Asia-Pacific Markets
Autumn 2007
niklas.olausson/
[email protected]
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
(No. of respondents)
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%
Source: CLSA Asia-Pacific Markets
176
niklas.olausson/
[email protected]
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
(No. of respondents) 300
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
niklas.olausson/
[email protected]
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
(No. of respondents)
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
Source: CLSA Asia-Pacific Markets
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
(No. of respondents)
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
Source: CLSA Asia-Pacific Markets
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
niklas.olausson/
[email protected]
105
100
211
152 144 138
346
251
(No. of respondents) 150
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%
(No. of respondents)
2 0
More than 18 per cent 1%
MasterCard 32%
Visa 58%
No card 47% Source: CLSA Asia-Pacific Markets
Autumn 2007
niklas.olausson/
[email protected]
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
(No. of respondents)
Source: CLSA Asia-Pacific Markets
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
(No. of respondents) 246
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
(No. of respondents)
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
niklas.olausson/
[email protected]
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
(No. of respondents) 296
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%
Source: CLSA Asia-Pacific Markets
Children: Education Parents’ desired education level for children 800 700
(No. of respondents) 684
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
(No. of respondents) 50
niklas.olausson/
[email protected]
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%
Source: CLSA Asia-Pacific Markets
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%
niklas.olausson/
[email protected]
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
(No. of respondents)
300
400
500
600
700
800
Source: CLSA Asia-Pacific Markets
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
niklas.olausson/
[email protected]
187
Mr & Mrs Malaysia
Malaysia
Notes
188
niklas.olausson/
[email protected]
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/
[email protected]
189
Philippines
Mr & Mrs 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
alfred.dy/
[email protected]
Autumn 2007
Philippines
Mr & Mrs 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
alfred.dy/
[email protected]
191
Philippines
Mr & Mrs 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
alfred.dy/
[email protected]
Autumn 2007
Philippines
Mr & Mrs 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
alfred.dy/
[email protected]
193
Philippines
Mr & Mrs 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
alfred.dy/
[email protected]
Autumn 2007
Philippines
Mr & Mrs 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
alfred.dy/
[email protected]
195
Philippines
Mr & Mrs 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
alfred.dy/
[email protected]
Autumn 2007
Philippines
Mr & Mrs 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
alfred.dy/
[email protected]
197
Philippines
Mr & Mrs 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
alfred.dy/
[email protected]
5
10
15
20
25
30
35
40
Autumn 2007
Philippines
Mr & Mrs 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
alfred.dy/
[email protected]
199
Philippines
Mr & Mrs 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
alfred.dy/
[email protected]
Autumn 2007
Philippines
Mr & Mrs 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
alfred.dy/
[email protected]
201
Philippines
Mr & Mrs 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
alfred.dy/
[email protected]
Autumn 2007
Philippines
Mr & Mrs 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
alfred.dy/
[email protected]
203
Philippines
Mr & Mrs 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
alfred.dy/
[email protected]
Autumn 2007
Philippines
Mr & Mrs 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
alfred.dy/
[email protected]
205
Philippines
Mr & Mrs 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
alfred.dy/
[email protected]
Autumn 2007
Philippines
Mr & Mrs 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
alfred.dy/
[email protected]
207
Philippines
Mr & Mrs 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
alfred.dy/
[email protected]
Autumn 2007
Philippines
Mr & Mrs 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
alfred.dy/
[email protected]
209
Philippines
Mr & Mrs 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
alfred.dy/
[email protected]
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/
[email protected]
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%
10%; O-PF = Expected to outperform the local market by 0-10%; U-PF = Expected to underperform the local market by 0-10%; SELL = Expected to underperform the local market by >10%. Performance is defined as 12-month total return (including dividends). ©2007 CLSA Asia-Pacific Markets (“CLSA”). This publication/communication is subject to and incorporates the terms and conditions of use set out on the www.clsa.com website. Neither the publication/ communication nor any portion hereof may be reprinted, sold or redistributed without the written consent of CLSA. MICA (P) 232/11/2005. V. 061213. CLSA has produced this publication/communication for private circulation to professional and institutional clients only. The information, opinions and estimates herein are not directed at, or intended for distribution to or use by, any person or entity in any jurisdiction where doing so would be contrary to law or regulation or which would subject CLSA to any additional registration or licensing requirement within such jurisdiction. The information and statistical data herein have been obtained from sources we believe to be reliable. Such information has not been independently verified and we make no representation or warranty as to its accuracy, completeness or correctness. Any opinions or estimates herein reflect the judgment of CLSA at the date of this publication/ communication and are subject to change at any time without notice. Where any part of the information, opinions or estimates contained herein reflects the views and opinions of a sales person or a non-analyst, such views and opinions may not correspond to the published view of the CLSA research group. This is not a solicitation or any offer to buy or sell. This publication/communication is for information purposes only and is not intended to provide professional, investment or any other type of advice or recommendation and does not take into account the particular investment objectives, financial situation or needs of individual recipients. Before acting on any information in this publication/ communication, you should consider whether it is suitable for your particular circumstances and, if appropriate, seek professional advice, including tax advice. CLSA does not accept any responsibility and cannot be held liable for any person’s use of or reliance on the information and opinions contained herein. To the extent permitted by applicable securities laws and regulations, CLSA accepts no liability whatsoever for any direct or consequential loss arising from the use of this publication/communication or its contents. Subject to any applicable laws and regulations at any given time CLSA, its affiliates or companies or individuals connected with CLSA may have used the information contained herein before publication and may have positions in, may from time to time purchase or sell or have a material interest in any of the securities mentioned or related securities or may currently or in future have or have had a relationship with, or
may provide or have provided investment banking, capital markets and/or other services to, the entities referred to herein, their advisors and/or any other connected parties. This research report is being distributed into the United States of America by CLSA solely to persons who qualify as “Major U.S. Institutional Investors” as defined in Rule 15a-6 under the Securities and Exchange Act of 1934 and who deal with CALYON. However, the delivery of this research report to any person in the United States shall not be deemed a recommendation to effect any transactions in the securities discussed herein or an endorsement of any opinion expressed herein. Any recipient of this research in the United States wishing to effect a transaction in any security mentioned herein should do so by contacting Calyon Securities (USA), Inc. (a broker-dealer registered with the Securities and Exchange Commission) and an affiliate of CLSA Japan: This publication/communication is distributed in Japan by Calyon Securities Japan, a member of the JSDA licensed to use the “CLSA” logo in Japan. United Kingdom: Notwithstanding anything to the contrary herein, the following applies where the publication/communication is distributed in and/or into the United Kingdom. This publication/communication is only for distribution and/or is only directed at persons (“permitted recipients”) who are (i) persons falling within Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (the “FPO”) having professional experience in matters relating to investments or high net worth companies, unincorporated associations etc. falling within Article 49 of the FPO, and (ii) where an unregulated collective investment scheme (an “unregulated CIS”) is the subject of the publication/communication, also persons of a kind to whom the unregulated CIS may lawfully be promoted by a person authorised under the Financial Services and Markets Act 2000 (“FSMA”) by virtue of Section 238(5) of the FSMA. The investments or services to which this publication/communication relates are available only to permitted recipients and persons of any other description should not rely upon it. This publication/ communication may have been produced in circumstances such that it is not appropriate to categorise it as impartial in accordance with the FSA Rules. The analyst/s who compiled this publication/communication hereby state/s and confirm/s that the contents hereof truly reflect his/her/their views and opinions on the subject matter and that the analyst/s has/have not been placed under any undue influence or pressure by any person/s in compiling such publication/ communication.
MSCI-sourced information is the exclusive property of Morgan Stanley Capital International Inc. (MSCI). Without prior written permission of MSCI, this information and any other MSCI intellectual property may not be reproduced, redisseminated or used to create any financial products, including any indicies. This information is provided on an "as is" basis. The user assumes the entire risk of any use made of this information. MSCI, its affiliates and any third party involved in, or related to, computing or compiling the information hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. MSCI, Morgan Stanley Capital International and the MSCI indexes are services marks of MSCI and its affiliates. The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's. GICS is a service mark of MSCI and S&P and has been licensed for use by CLSA Asia-Pacific Markets. 04/07/2007