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Global brokerage firm CLSA believes that companies that have a presence in the digital space or have a laser focus on Gen Z (born between 1995-2009) will benefit in the long run.

By the time the last millennials and most of Gen Z would reach peak earnings capacity in 2030, the per capita consumer expenditure in Asia is expected to be around $5,832, up from $3,268 in 2020.

“China and India dominate in both numbers and spending growth,” CLSA said.

CLSA portfolio

Considering all the expectations, the financial services firm selected 23 stocks from Asia to play the Gen Z theme. From the Indian equity market, the portfolio has four stocks — Asian Paints, FMCG players Dabur and Hindustan Unilever and QSR major Jubilant FoodWorks.

From the other markets, it believes that players like China Feihe, AllHome, Domino’s, Fast Retailing, Flight Centre, Jollibee, Kobe Bussan, LG H&H, Li Ning, Shiseido, Smoore International, Zozo an Unicharm may benefit from long-term Asia consumption growth.

“We put greater weight on China and India because the future consumption boom will have the largest absolute impact there. We do include several investment ideas outside of these markets to tap into local trends, notably in Japan and Korea,” CLSA said in a report.

Strong consumer growth

CLSA added that the past 10 years have seen very strong demand translate into excellent results for consumer companies in Asia. Sales have grown 83% and operating profit 123%, as operating profit margins reached 10.8%. PE multiples have risen from 20x to 30x and compounding operating profit growth remains crucial.

Shares of Asian Paints have soared 862% to Rs 2795.20 during the past 10 years till May 20, 2021. On the other hand, Dabur India, Hindustan Unilever and Jubilant FoodWorks have advanced 420%, 656% and 740%, respectively. The benchmark BSE Sensex has gained 170% during the same period.

“Gen Z are more affluent and better educated than older demographic groups. Unlike previous generations, who are more likely to sacrifice present consumption for the future, Gen Z appear to emulate millennials. With climate change and social, political and economic uncertainty on the horizon, they prefer to focus on the present and live life to the fullest.” Gen Z said

It further added that this drives them to want to buy new things, try new experiences and experiment with new ways of living. Having a more flexible and experimental life may be a unique feature of Gen Z. As this group moves from their 20s into their 30s as time marches towards 2030, rising incomes will spearhead a $10.3 trillion increase in consumption for China, India, Indonesia, Japan and South Korea.