Investors love a good story. And few are more enticing than the emergence of a large middle class in the developing world, whose spending buoys the shares of a wide array of retail groups.
The thesis enjoys both robust fundamentals and a compelling narrative. HSBC estimates that almost 3bn people – mostly from developing countries – will become “middle-class” by 2050. By then they will make up two-thirds of the world’s consumption of goods and services.
But Arjun Divecha, head of emerging market equities at investment manager GMO, points out that emerging markets already make up more than half of global car sales. “Emerging markets have benefited from a demographic dividend over the past 20 years and will continue to do so for another 20 years,” Mr Divecha predicts.
The returns have already been buoyant. The MSCI Emerging Markets index has gained 122 per cent since its post-financial crisis trough, but the consumer discretionary index has climbed 224 per cent. The consumer staples index has done even better, rallying 232 per cent since the post-crisis low.
Some asset managers say future returns will dwarf even this. Didier Rabattu, manager of a Lombard Odier fund that focuses on emerging market consumption, says many investors still fail to appreciate the extent to which developing countries are shifting away from export-led growth models of recent years and are instead nurturing consumer spending as a way to keep their economies expanding at a steady rate.
“Emerging market policy makers realise that developed markets will be in trouble for the next 20 years, so they won’t be able to grow by exporting to them any more. So they want to encourage domestic consumption,” he says.
Indeed, some investors and analysts say the implications of this “revolution” go far beyond mere stock market returns. A smattering of bulls say the rise of a middle class in the developing world can play the same role that the post-second world war birth surge did in hauling western economies out of their funk and driving robust economic growth for decades afterwards.
“Emerging market consumers are the big story,” says Jim Paulsen, chief strategist at Wells Capital Management.
“They will be our new baby-boomer generation. It’s a generational thing, but we’re already starting to see signs of it.”
The enthusiasm for emerging market consumption has also offered welcome support to western stock markets, where many listed companies are geared towards retail spending in the developing world.
Luxury goods companies in Europe are particularly popular, given the predilection of wealthier Asian and Latin American for Bulgari jewellery or Burberry coats.
Asia is now the biggest source of revenue for companies such as LVMH, the French conglomerate behind brands including Bulgari and Louis Vuitton, luxury tie-maker Hermès and the UK’s Burberry.
The shares of all three have performed far better than their overall domestic exchanges, as demand in the developing world counteracts a slowdown in their traditional local markets.
“As people get richer they care more about brand and less about price,” Mr Divecha says. “The sweet spot is when savings rates start to fall and consumption is on the rise.”
Nonetheless, despite the undoubted economic potential of emerging market consumption, not everyone thinks it is an attractive investment opportunity. Their main concern is that optimism over the prospects of soaring retail spending in the developing world has already been factored fully into share prices.
“The difference between a great story and something you should be buying is the price,” says Sam Vecht, managing director at BlackRock.
“Technology and the internet did change our lives, but you wouldn’t have made very much money betting on it.”
Valuation metrics for consumer stocks are certainly richer than for the broader gauges. The MSCI EM index is trading at a trailing price-to-earnings of 11.9 times, compared with 20.3 times for consumer staples. Even after a 7 per cent drop this year, the consumer discretionary sub-index is priced at just over 13 times trailing profits.
For some favoured stocks – particularly in consumer staples such as food – the valuations look even punchier. Hindustan Unilever is trading at more than 36 times its trailing earnings, and Jollibee, a Philippines-based fast food company, is priced at 35 times. Several European luxury goods are trading at similar metrics. Hermès, for example, is priced at 37 times its trailing earnings.
Their forward-looking earning metrics, which take into account the expectation of rising profits, make these companies look somewhat cheaper.
Yet several of the European groups have had to issue profit warnings from time to time, as assumptions get too rosy.
Mr Vecht concedes that he may be “in a minority of one” in his argument that consumer stocks are too expensive – and stresses he does not doubt that the rising emerging market middle class will drive global spending for years to come.
But he says as an investment thesis the story has already run its course: “The certainty with which so many people say that EM consumption is the biggest story means that it’s likely already in the price.”
新兴市场的回报率已然相当喜人。与金融危机后的低点相比，摩根士丹利资本国际新兴市场指数(MSCI Emerging Markets)上涨了122%，而非必需消费品指数上涨了224%。日用消费品指数表现得更为强劲，相对于危机后的低点上涨了232%。
一些资产管理公司表示，未来的回报率甚至会让上面这些涨幅相形见绌。Lombard Odier旗下一支基金的经理迪迪埃?拉巴图(Didier Rabattu)表示，许多投资者仍未能意识到，发展中国家近来已在多大程度上改变了出口带动经济增长的模式、转而培育消费支出以确保经济能以稳定的速度增长。拉巴图负责的基金主要投资于新兴市场的消费。
Wells Capital Management的首席策略师吉姆?保尔森(Jim Paulsen)表示：“新兴市场消费者是重大题材。