The current shift in growth from developed markets to emerging markets such as China, India and Indonesia in terms of both GDP and population is helping to drive consumption of products, particularly those related to technology markets.
By 2050, the Organisation for Economic Co-operation and Development predicts its member’s share of the global economy will decline from 54 per cent in 2010 to less than 32 per cent, while the share of Brazil, Russia, India, Indonesia, China and South Africa (Briics) is projected to grow to more than 40 per cent.
With this growth in GDP comes the growing prosperity and emergence of middle class and high net worth individuals who desire the luxury goods and gadgets commonplace in developed markets.
Philip Poole, global head of macro and investment strategy at HSBC Global Asset Management, says: “There’s no doubt that China in absolute terms has been a big part of marginal consumption growth globally.
“We’re talking about a middle class now of probably 300m people; it’s already probably the largest consumer market in that sense and it’s expected to become the largest consumer market, bigger than the US by 2020 in dollar terms.”
How to spend it
In addition he points out there are now more than a million dollar millionaires in China, ranking it third behind the US and Japan. So consumption has both a middle class and a high-end luxury goods driver.
Mr Poole explains: “Clearly a lot of things that they want to buy have a technological input to them, but not all of them. Luxury goods brands include watches, handbags, cars, so technology is attached to those things but they’re not the kind of things people normally talk about when talking about technology.
“But where there will be a lot more demand for the obvious consumer goods that people buy in the west. Tablets, for example have taken off - and smartphones.”
This is supported by figures from the International Data Corporation’s (IDC) Worldwide Quarterly Mobile Phone Tracker in August, which suggests China will become the largest market for smartphones this year, accounting for 26.5 per cent of all smartphone shipments in 2012, compared to 17.8 per cent for the US.
Gordon Happell, portfolio manager on the Henderson Global Technology fund, adds: “The rise of the middle classes in emerging markets is undoubtedly helping to provide a robust demand environment for many technology companies, particularly those with strong product offerings in the smartphone and tablet markets that are attracting lots of consumer interest.
“We consider both Samsung Electronics and Apple to be clear benefactors of this trend; both companies have seen particularly strong demand for their respective high end products the Galaxy S3 and iPhone 5 in recent months.
“It appears we are seeing a rapid change in consumer preferences across the world when it comes to consumer electronics, with more mature categories such as LCD TV and notebooks experiencing much more challenging conditions against newer more fashionable devices.”