Asia is entering the next phase of its development – one extending far beyond the well-documented transition from manufacturing to service-led value chains. The secular forces shaping markets 10 years ago have been replaced by new paradigms. 
Where population growth and country development previously benefitted financials and infrastructure, going forward, ageing populations, increasing consumption power, trade and environmental issues are likely to drive investment in technology and services.
With more than 30 years of experience investing in the region, I have learned the need to evolve with markets and be inquisitive, always looking for new opportunities, especially among smaller companies. Given patience, it has been possible to generate significant alpha this way, as smaller companies tend to be less well researched, entrepreneurial and at the forefront of innovation.
Below are five major forces likely to shape the next decade of investing in this fast-moving region.
Healthcare 2.0
As the global population ages, healthcare expenditure is on the increase – in China, it is forecast to grow 9-10 per cent per annum for the foreseeable future. The Chinese healthcare system is under enormous pressure. Currently, the average wait time to see a doctor in China is three to four hours. Only 8 per cent of hospitals are classified in the top tier, however, they account for 50 per cent of medical visits, as patients seek out the best doctors at the top hospitals for ailments as innocuous as the common cold.
Ping An Healthcare and Technology has responded to the shortage of appropriate care with its online platform Good Doctor, which can be consulted within a matter of minutes. Once collected, the data is passed on to a doctor to make the final diagnosis and prescribe treatment. For the country’s rural population, this saves much time and travel. Moreover, the Ping An online platform uses artificial intelligence to continually learn, thus improving the accuracy of the preliminary diagnosis. The Chinese authorities are supportive of online healthcare, which is easing pressure on the medical system.
Exponential growth of data
Global data usage is forecast to triple by 2021 and, next year, there will be a staggering 40 times more bytes of data than stars in the observable universe. Global internet penetration, which currently stands at 57 per cent, is set to increase in emerging markets, with the rise of the middle class and more affordable smartphones.
The advent of 5G will enhance the speed and interactive capabilities of robots and factory automation, enabling IoT (Internet of Things) to evolve. In countries like China, where the working population has peaked, automation is becoming increasingly important. Companies that should benefit from this long-term trend are Megaport, a global leader in cloud connectivity, and Keppel DC REIT, which operates physical data centres in Singapore, Europe and Australia.
Reshaping regional interactions
The rise of China and how the nation interacts with the West, as well as other nations in the region, will continue to evolve. In terms of trade and the civil unrest in Hong Kong, it is unlikely there will be a quick fix, although an initial trade deal could be forged in the coming weeks. However, a shift in manufacturing and supply chains away from China to other countries in the region has already begun. China is looking to source high-end components from Asia rather than the West in order to become less reliant on Western supply chains. Moreover, ‘Made in China 2025’ aims to establish China as a manufacturer of higher value-added products and services. This is likely to benefit Asian technology companies such as Taiwan Semiconductor Manufacturing Company and Samsung.
With scrutiny heightening around US-listed Chinese companies, other companies could follow Alibaba, which has announced a secondary listing in Hong Kong. Hong Kong Stock Exchange could be a beneficiary of this. The Shanghai and Shenzhen-Hong Kong Stock Connects, as well as the recent inclusion of domestic China A-shares into broader indices, should further increase capital flows in the region. Therefore, regional indices are likely to look vastly different in 10 years.
Sophistication of services
The modernisation of supply chains in China and India is leading to industry consolidation, formalisation of business channels and increasingly sophisticated technology. One company at the heart of this transition is Indian online classifieds ads firm Info Edge, with dedicated websites for recruitment, property sales, matchmaking and education.
Premiumisation is another trend in China, with consumers aspiring to buy higher quality products. They are also becoming more discerning and adopting local brands, as well as established foreign brands. Hangzhou-based JNBY should benefit from this through its multi-designer brand strategy.
With a mere 8-9 per cent of Chinese holding passports, growth in travel should continue for the next decade. Singapore-based SATS is well-positioned to benefit from this long-term trend, as the caterer for Singapore Airlines and other regional carriers.
Environmental awakening
Given the extraordinary pace of development in the region – especially in China – both air and water pollution have become a public issue – often illustrated by images of smog-filled cities and people wearing surgical masks.
Governments have responded, notably the Chinese authorities, by shutting down heavily polluting cement and coal plants and imposing stringent requirements on new factories. Sunny Friend Environmental specialises in industrial waste clearance, landfill, incineration and biomedical waste treatment in China and Taiwan.
Jane Andrews is founder and chief investment officer of BambuBlack Asset Management – a BennBridge boutique. The views expressed above are her own and should not be taken as investment advice.