Playing Asia’s Growing Wealth

One of the more important subthemes of the emerging thesis is that of the nation's new found wealth. As an assortment of issues, such as high unemployment, household balance sheet reduction and anemic economic growth has hindered consumerism and wealth creation in the developed world, the opposite is holding true in the developing world. Improving personal finances and strong economic growth have created the tailwinds of a major surge in shopper activity. Perhaps this trend is the most prevalent in Asia. Two recent reports from a pair of Swiss investment banks have helped underscore this trend and why investors need to have exposure to it.

Rapid Wealth Creation
Strong economic growth across a variety of Asian nations is building the consumers of tomorrow. Increased commodity prices and exporting power has finally started to lift millions of the regions citizens out of poverty. Dueling Swiss banks, Credit Suisse (NYSE:CS) and Julius Baer (OTCBB:JBAXY) have recently come out with Global Wealth forecasts, and reports that show the prowess of Asian dragons. Overall, the two banks found that over the next five years, wealth in Asian emerging economies will "leapfrog" those in the developed world including the United States. Overall, the Asia-Pacific region has been the key contributor of global wealth growth over the last decade, accounting for 36% of all global wealth creation since 2000, and more than 54% since January 2010. Total household wealth in the Pacific increased 23% from January 2010 to June 2011. This compares to total wealth growth of just 9.2 and 4.8% in North America and Europe, respectively.

While the current figures are certainly impressive, the future looks rosy for Asia's citizens. Julius Baer forecasts that 2011 and 2012, both China and India, together, will contribute over 40% of global growth alone, and that the number of high net-worth individuals (HNWI) in Asia will more than double to 2.82 million citizens, with a combined wealth total of $15.81 trillion by 2015. Credit Suisse shows that total wealth in China is currently around $20 trillion, or equivalent to that of the USA in the late 1960s. However, over the next five years, Chinese wealth will reach $39 trillion, a level that the United States took 22 years to achieve. Over the next decade, India's middle class, alone, will be larger than the U.S. and Europe's combined. (For a closer economic perspective on these kinds of economies, read What Is An Emerging Market Economy?)

Playing the Asia Wealth Machine
For investors, this trend of wealth creation could be one of the best ways to grow your own portfolio. Funds like the EGShares India Consumer (ARCA:INCO) and Global X China Consumer ETF (ARCA:CHIQ), offer targeted exposure to consumer plays in the main wealth creators in the region. In addition, Julius Baer's report contained a new Lifestyle Index, which is based on a basket of 20 luxury goods and services firms that represent discretionary purchases of HNWI in the region. The Index is up about 11.7% over the last year. The iShares S&P Global Consumer Discretionary (NYSE:RXI) features many of the firms in the index, including LVMH Moet Hennessy Louis Vuitton (OTCBB:LVMUY) and Coach (NYSE:COH).

Asia's new found wealth is creating a new love affair with gambling. Recent year-over-year revenue growth for China's Macau casinos is in excess of 50%, and should finish 2011 with more than five times the revenue of casinos in Las Vegas. Both Wynn Resorts (NASDAQ:WYNN) and Las Vegas Sands (NYSE:LVS) operate some of best casinos in the new gambling center. In addition, the Market Vectors Gaming ETF (ARCA:BJK) offers exposure to a variety of gambling equipment makers. (Read how investing and gambling go together in a different way with Going All-In: Comparing Investing And Gambling.)

The Bottom Line
The recent and projected growth in Asian wealth is staggering. For investors, this multi-decade trend of new found consumerism offers a great long-term play. The previous picks along with Asian banking specialist HSBC (NYSE:HBC) make ideal selections in adding exposure to this trend.

At the time of writing, Aaron Levitt did not own shares in any of the companies mentioned in this article.

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