Asia is evolving rapidly, which has implications for investors globally. As 'Old Asia' evolves into 'New Asia', investors need to consider where growth will come from in the future. At Nikko Asset Management, we have identified four key themes for tomorrow's Asia. Taking into consideration demographics, wage growth and a burgeoning middle class that is resulting in changes in patterns of consumption, we view Healthcare, Tourism, Insurance and the Environment as the major investment themes for Asia.

1. Healthcare: An enduring theme

The ageing demographics of certain Asian countries, such as China and Korea, are well-known. To give some idea of the opportunities that the Healthcare sector offers, it currently represents less than 6% of Chinese GDP. This means that the coming decades will require increased availability of healthcare in a region which, according to the World Health Organization, currently has one of the lowest health spends as a percentage of GDP (see chart 1). Although healthcare spending in the region is currently low, it is growing, with urbanisation driving increased access to medicines.

At the same time, the growing middle class means that people have more money to spend on healthcare. In India, medical infrastructure and facilities are lacking in many areas, but a government campaign is underway to focus on medical investment and improvement of services in rural areas. The government is also starting to privatise hospitals as demand for better healthcare increases, which will underpin growth.

Chart 1: Total expenditure on health as a percentage of GDP

Total expenditure on health as a percentage of GDP

Source: World Health Organization

Another key growth driver for healthcare is medical tourism, with five of the top 10 destinations in Asia, according to Patients Beyond Borders. With surgeries in Asia costing a fraction of the price of the same procedure in the US, visitors from developed countries are increasingly looking to the region for more affordable alternatives. Some might be sceptical about the quality of the healthcare that Asian countries might provide, but in fact, according to the Medical Travel Quality Alliance, in 2013 Asian medical destinations offered more and better medical procedures and care than most other medical destinations1. According to Patients Beyond Borders, the global medical tourism market will reach approximately USD 47 billion by the end of 2014. If countries in the region continue to invest in healthcare infrastructure and medical professionals, Asia stands to benefit considerably from this growing market.

In our view, Healthcare currently provides some of the best investment opportunities in Asia and we expect huge spending over the next two decades due to low penetration and ageing populations.

2. Tourism: Significant arrivals into Asian region

International tourism has recovered to exceed pre-crisis levels. Although Europe still receives the largest number of arrivals at 44.5% of total tourism arrivals worldwide, Asia-Pacific receives the second-largest number at 28.4%2. In 2011, 283.9 million arrivals were recorded, an increase of 21.5 million from 2010, up 8%. This netted the region USD 362.6 billion in inbound tourism expenditure, equal to 28.9% of the total global inbound expenditure, with Europe at 40%. With ageing populations in many developed countries, most of whom have seen their incomes rise, tourism is likely to continue to be a growth area for Asia-Pacific, particularly given the increasingly large volumes of Chinese tourists. The number of outbound Chinese tourists has doubled in the past four years and we expect it to double again over the next five years.

3. Insurance: Wide disparity in insurance coverage across Asia

Another area that is tied to both age and income is insurance. Developed markets have seen their growth years in this sector, but Asia's share of total global premiums is set to grow strongly, both in terms of life and non-life insurance. According to a report by insurer, Swiss Re, ageing populations will boost demand for life insurance products in emerging markets, while non-life insurance will profit from increasing urbanisation, an expanding middle class and rising economic wealth3. As chart 2 shows, Asia's share in insurance premiums has been growing as Western Europe and North America have been declining and this is forecast to continue.

Chart 2: Premiums written in life and non-life by regions (1962-2023)

Premiums written in life and non-life by regions (1962-2023)

Source: Swiss Re Economic Research & Consulting

While there is currently a wide disparity in insurance coverage across Asia, we expect to see greater penetration in most regions, particularly less developed countries.

4. Environment: Asia has a problem that it has only just begun to tackle

Any frequent traveller to Asia will understand the problem of pollution, which is particularly acute in major Chinese cities, such as Beijing. The Chinese government is starting to act on this and this is highlighted by the recent, unexpected deal with the US to tackle climate change. The agreement includes new targets for carbon dioxide emissions, with China for the first time announcing its emissions will peak in 2030 and the US stating that it would emit up to 28% less carbon dioxide in 2025 than in 2005. China has pledged that it will ensure clean energy sources, such as solar power, will account for 20% of the country's total energy production by the 2030 deadline. With such a deal struck between the world's top two carbon polluters, it is likely to be only a matter of time before the same issue takes centre stage in the rest of Asia, much of which is suffering similar pollution issues. This will provide many good investment opportunities for global providers of pollution control equipment and clean energy sources.

'Old Asia' to 'New Asia': Don't look backwards

Asia is evolving rapidly, which has implications for investors globally. It should no longer be viewed as just a cheap manufacturing hub but a region with high value-added industries catering to an increasingly wealthy middle class. Investors have for some time looked at Asia as a straight growth story, but that isn't the case anymore. In our view, it is the quality of growth that matters – as 'Old Asia' evolves into 'New Asia', investors need to consider where growth will come from in the future. Taking into consideration demographics, wage growth and a burgeoning middle class, Healthcare, Tourism, Insurance and the Environment are the areas that we believe will drive equity market re-ratings.


  1. Source: Medical Travel Quality Alliance.
  2. Source: UN Economic and Social Commission for Asia Pacific Statistical Yearbook 2013, UN World Tourism Organization
  3. Source: Swiss Re sigma Study on World Insurance 2012