Big spending by older consumers post-virus
Ageing-linked stocks offer investors opportunity
LONDON: The world’s emergence from the coronavirus pandemic is set to unleash a wave of spending by older consumers, with increasing opportunities for investors in ageing-linked stocks.
That’s the view of money managers who see huge pent-up demand from wealthy seniors for medical services and luxury goods. They also expect that the forced adoption of the internet by older people during lockdown will open up this demographic permanently to e-commerce companies and social networks.
The number of people aged 65 and over is projected to double to more than 1.5 billion by 2050, greatly increasing their economic impact.
The total spending power of the older population globally was about US$8.4 trillion (RM34.57 trillion) in 2020, according to World Data Lab. That’s expected to grow to US$14 trillion (RM57.62 trillion) over the next decade.
“The pandemic has accelerated many of the issues related to ageing populations and has highlighted the urgency of resolving them,” said Christopher Rossbach, chief investment officer at J Stern & Co. “We think they will be significant drivers for growth and investment.”
Underpinning the thesis are global fertility rates that are forecast to keep falling as life expectancy rises, even as the virus takes a staggering human toll.
China’s decision last month to allow threechild families may have only limited impact on the ageing trend in the most populous country.
Here are some key focuses of investors who argue that the aging theme will be even more important as economies move past the pandemic.
From cancer screening to hip replacements and cataract surgery, countless medical procedures have been postponed since the virus
took hold. As this changes, global health-care spending is projected to bounce back in 2021, rising 5.8% to US$8.8 trillion (RM36.22 trillion), according to IHS Markit.
Rossbach expects shares of medical device manufacturers to benefit and cited Thermo Fisher Scientific Inc, Medtronic Plc, Becton Dickinson & Co and Alcon Inc.
Shares of all four companies have underperformed
the global stock benchmark so far this year, with United States-listed Becton Dickinson down 3% versus the MSCI AC World Index’s 11% gain.
Mirabaud Asset Management Ltd also likes Medtronic, as well as Edwards Lifesciences Corp for exposure to the cardiovascular diseases sector, said global equities head Anu Narula. Hearing aids are another market hurt by fewer in-person consultations, with Morgan Stanley estimating sales will normalise this year, following a 15% decline in the market in 2020.
Among businesses in this field, it has an overweight recommendation on Copenhagenlisted GN Store Nord A/S and equal-weight on Demant A/S, which have both surged this year.
“The large contingent of developed countries that have universal health coverage is being joined by an increasing number of developing markets that are establishing and/ or expanding universal health-care systems, especially in emerging Asian markets,” said Mirabaud’s Narula.
As well as long-delayed holidays, the travel sector is poised to pick up with support from cashed-up seniors.
“Older or richer people tend to want to visit relatives more,” said Sanjiv Bhatia, founder of Pembroke Emerging Markets.
Rossbach also has his eye on a rebound in luxury spending, with LVMH and liquor makers Pernod Ricard SA and Diageo Plc among his preferred reopening bets.
“A general point is that as people age their purchasing power increases and they become more concerned with quality, not quantity, of their consumption,” he said.