The trajectory of Hong Kong-listed Budweiser Asia this year tells a powerful story. It illustrates how sectors and companies that plunged out of favour when Covid-19 lockdowns struck regained momentum (and investor confidence) as Asia began to feel its way in out of the pandemic. 
Its sales were down 40 per cent in the first quarter as countries locked down, recovered to down 15 per cent in the second quarter, then resumed year-on-year growth in the third quarter – as people started to revisit bars and restaurants. This neatly maps the story of consumption in Asia in 2020.
Even in India, which did not handle the pandemic as deftly as other Asian countries, growth has rebounded. Broker JM Financial covers 160 Indian companies in its research and reported recently that the vast majority had returned to growth. Compared with the 30 per cent decline in aggregate revenues in the quarter to the end of June 2020, the revenue fall was limited to 5 per cent in the quarter ended September. Once the oil & gas sector was taken out of the equation, revenue for the quarter was 1 per cent, with growth momentum expected to continue through the end of this year into next.
Beyond ‘snacks and supermarkets’
It is important not to view the whole of Asia as an extension of the big cities of Beijing, Hong Kong and Singapore. In many parts of the region there is still a great deal of aspiration. There, Starbucks and the Budweiser portfolio are premium brands. And while there may be local champions catering to distinct national or regional appetites, large multi-national companies still have a huge role to play.
On saying that, as their incomes rise, consumers in Asia are becoming more sophisticated. A decade ago, any strategy following the Asian consumer story (including this one) would hold a lot of food producers and supermarkets, so consumer staples. Today there are several more themes to tap into – including digital adoption, health and wellness, and the formalisation of finance.
While businesses like Budweiser Asia were suffering in the first half of the year, others were thriving. Restrictions on freedom of movement during the worst months of the pandemic accelerated trends already in motion, such as shopping online. The three largest tech companies in China – JD.com, Alibaba and Tencent – which together make up circa 21 per cent of my fund, have seen double- or even triple-digit share price growth since the start of the year.
Recent encouraging news surrounding Covid-19 vaccines suggests the time may be right to explore potential recovery stocks – malls and travel companies, for example. But over the long term, digital adoption is not going to reverse, so I remain confident in Asia’s tech giants.
Bolstered eastern trading bloc
Meanwhile, I watched the recent trade agreement between all 10 Association of South East Asian Nations (ASEAN), alongside Australia, China, Japan, New Zealand, and South Korea, with interest. Following eight years of negotiations, this Regional Comprehensive Economic Partnership reveals the intent of these nations to pull together and demonstrate their might. After all, between them they have half of the world’s population and one-third of its spending power.
A greater reduction in tariffs between these 15 Asia-Pacific countries (there are already zero tariff agreements among ASEAN) should encourage more inter-regional trading – likely to the detriment of Europe and the US. There may be no way of telling how (or if) the US-China trade war will be conducted under a different US president, but clearly the foundations have already been laid by President Xi to establish an ever-stronger Asian trading bloc.
Much-needed reform
Another development I have been keeping a close eye on is the labour market reform in India and Indonesia. Both countries have used the disruption caused by Covid-19 as an opportunity to put in place reforms that have been sorely lacking for decades.
In Indonesia, inflexible labour laws made it very difficult for businesses to hire or fire employees. This has put some industries and companies off investing in the country altogether and means foreign direct investment has been relatively low considering the attractive fundamentals in the country.
Meanwhile, in India, prime minister Modi’s reform agenda continues apace. Policies such as his transformational Aadhaar biometric identification scheme and controversial demonetisation have served to formalise the economy and bring savings and investment into the financial system, to the benefit of leading private banks and insurance companies. His national goods and services tax has swept away reams of red tape, promoting inter-regional trade to the benefit of national leaders consolidating hitherto fragmented sectors – the types of winners we’re drawn to. Now he is targeting a tightening of the labour market too.
In short, we are currently seeing progress in three long-term ‘forces for good’ for Asian economies and companies as they lead the global recovery from Covid-19. I’m interested to see how these increasingly sophisticated consumers will continue to drive growth and investment opportunities beyond snacks and supermarkets – particularly in the digital realm for shopping, healthcare and insurance. It’s an exciting time to be investing in Asia.
Rory Dickson is investment adviser to the CC Asian Evolution fund. The views expressed above are his own and should not be taken as investment advice.