Eight Ways to Invest in Aging Asia

8 Ways to Invest in Aging Asia

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Asia, home to some of the world's fastest-growing economies, is also aging fast.

According to a United Nations estimate, 62 percent of the population in the Asia Pacific region will be 60 years and above by 2050. More research from the U.S.-based East-West Center forecasts Asia's average age will increase to 40 years in 2050 from 29 in 2000.

The world's third-largest economy, Japan, is getting older at the fastest pace. By 2025, nearly 30 percent of its population will be 60 and above, according to the UN. The world's most populous country, China, will also have 250 million people over the age of 60 by 2025 — a 35 percent increase from 2009, according to government statistics.

Asia, which has played a major role in powering global growth over the past few decades, is undergoing a major demographic change that presents both challenges and opportunities.

From a boom in healthcare services and insurance products to changing dynamics in labor markets, we map the emerging trends resulting from this dramatic demographic shift. Click ahead for eight ways investors can tap into this "gray" market.

By Rajeshni Naidu-Ghelani Posted: Oct. 25, 2012.

Bet on New Manufacturing Hubs

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As China's population ages and wages rise, the cost of manufacturing goods in the "workshop of the world" has become more expensive. The Chinese government has targeted minimum annual wage growth of about 13 percent until 2015 in an attempt to boost consumption. But the cost is increasing manufacturing costs. This situation has brought to the forefront other countries in the region like Vietnam and Indonesia which boast younger and cheaper labor forces.

These countries have been able to attract investments in manufacturing at the cost of China. For example, Apple supplier Foxconn, in the news recently for labor unrest at its Chinese factories, announced in August that it would invest $10 billion in Indonesia to tap into one of the cheapest labor forces in Asia. Wage costs in Indonesia are estimated to be less than half China's. Meanwhile Vietnam has emerged as a major alternate destination over the past decade, manufacturing everything from footwear to computer parts. Some big firms that recently announced plans to set up factories in Vietnam include Finnish mobile phone maker Nokia and Japanese tire manufacturer Bridgestone.

A recent survey by the American Chamber of Commerce in Singapore of senior executives at American companies showed that more than 20 percent of them planned to reduce reliance on China by moving operations to Southeast Asia over the next two years. The Philippines and Malaysia ranked as the top choices for expansion, picked by 27 percent of the respondents, followed by Vietnam, Thailand and Indonesia.

Pictured left: Garment factory in Hanoi, Vietnam.

Robots Replace Workers

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Demand for robots is set to rise. In China, for example, the shift toward more automated factories has already started.

China's industrial sector has begun spending heavily on machines to increase productivity and improve quality to compete globally. From car plants to microchip manufacturers, factory floor automation is growing at a fast pace. Chinese car maker Great Wall Motors has Swiss robots and other machinery to weld together car frames, while Apple supplierFoxconn plans to put a million robots in its factories in China by 2014.

Companies set to gain from this trend include makers of sensors, frequency converters, conveyor belts, and pneumatic systems, all used in factory production lines. Japan's Mitsubishi Electric, which supplies such devices to China, expects sales to rise from $762 million in 2011 to $1.3 billion by 2015. Other major suppliers to China like Switzerland's ABB and Japan's Fanuc — two of the world's biggest robot makers — are also expected to see a boost in sales.

China's manufacturing investment in 2011 hit $1.6 trillion, nearly 32 percent higher than 2010, with much of the spending resulting in more modern and automated factories.

Pictured left: Robots weld bodies of a vehicle at Central Motor's Miyagi plant in Japan.

Boom in Healthcare

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The region's healthcare sector will expand to keep the elderly healthy.

Rising incomes and a growing middle class are boosting demand for better healthcare services in the region. Drug makers, healthcare providers and medical parts makers are some key businesses that will see rapid growth in Asia over the next decade.

Malaysia's IHH Healthcare, which raised $2.1 billion in July in the world's third-largest IPO so far this year, posted a more than five-fold jump in second quarter profit to $130 million. The firm has expanded rapidly in the last few years to employ 24,000 people in 30 hospitals across Malaysia, Singapore, India, and Turkey. It is also looking for growth opportunities in China and Hong Kong.

The Carlyle Group, a U.S. buyout fund, recently acquired a 13.5 percent stake in China's Meinian Onehealth Healthcare Group to tap into the country's $6.3 billion preventive healthcare industry, growing at about 15 percent annually. Meinian Onehealth, which provides services like medical examinations and traditional Chinese health treatments, plans to open 20 clinics by the end of the year, taking its total to about 83.

With the Chinese government announcing in September it will invest $63 billion in the healthcare system by 2020, the market for medical devices is also set to boom. U.S.-based medical parts maker Covidien opened a $45 million research and development facility in Shanghai in August to create products for China and other emerging markets.

Property Developers Profit

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Even though the elderly in Asia traditionally live with their children, that trend is fast changing with more elderly people turning to retirement homes. Urbanization, a shift toward nuclear families and rising costs of hiring a caretaker make it difficult for families to care for the elderly.

The demand for retirement homes will jump in a relatively untapped market as baby boomers get set to retire. In China, for example, the government-run Beijing No. 1 Social Welfare Home, where a bed costs $110 to $570 a month, had a waiting list of more than 9,000 in July, according to China Economic Weekly. Local reports also say the Chinese government has set aside large areas of land for the care of the elderly.

Australia's Aviid Third-Age Living, which invests in and runs retirement villages, is looking to import the Australian retirement village model to Singapore, Malaysia and Japan, according to local media reports.

Over the past decade there has been a surge in the number of retirement homes in Australia. Today, it has 1,850 retirement villages accommodating about 138,000 people, according to the country's Retirement Villages Association. These villages provide apartments with emergency health services and recreational facilities.

There is a growing interest in the market for "senior living" in Asia; in October Hong Kong hosted a conference titled "Retirement Communities World Asia" organized by conference operator Terrapinn for property developers, retirement home operators, and investors.

Tourism for Seniors

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Travel companies that cater to the elderly will see increased growth as more Asians start to enjoy their retirement savings.

The cruising industry has long been a favorite. In March, the world's biggest cruise operator Carnival announced that it will enter the Japanese market in 2013 offering nine separate cruise plans. Japan, with 25 percent of its people over 65, saw its outbound travel market hit a 12-year high in the first half of this year with more than 8.9 million people traveling abroad — a jump of 17.5 percent over last year, according to its Ministry of Justice.

Besides Japan, China has also seen a surge in travel among its elderly. People over the age of 60 accounted for about 20 percent of the more than 70 million outbound Chinese tourists in 2011, according to state-owned travel operator China International Travel Service. Looking at these numbers, Florida-based Royal Caribbean International boosted its operations in China this year with the launch of 50 voyages. It also plans to launch the "Mariner of the Seas" cruise ship next year, which can carry 3,114 passengers. According to the China International Travel Service, senior citizens also fall into the big spender category, spending up to $2,000 per trip abroad as they are more willing to buy things not just for themselves, but their children and grandchildren as well.

Purchasing Power of Elderly Women

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Consumer goods firms are increasingly targeting elderly women.

The fact that many well-known older women have modeled for top fashion designers is evidence of their growing clout as consumers. In July, former American professional dancer Jacqueline Murdock, 82, modeled for French fashion house Lanvin, while Malaysian-born shoe designer Jimmy Choo named a shoe after 91-year-old American model Iris Apfel this year.

According to research firm Wealth-X, over 80 percent of women with a net worth of more than $30 million are 40 and above in Asia. And 23 percent of these women are already in their sixties, the firm said, adding that these women are spending more on luxury cars, yachts and art. This presents a huge opportunity for luxury goods marketers in Asia.

Insurance Business Growth

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The region's aging population provides a huge opportunity for the insurance industry as more and more look for social security and benefits in old age.

In large parts of Asia there is inadequate public healthcare support and pension benefits. This coupled with one of the highest savings rates in the world opens a market for insurance companies to sell medical insurance and post-retirement income plans in the region.

Some insurance giants in Asia are already the biggest in the world — China Life, for example, is the largest insurer in the world by market capitalization, and has more than 70 million policy holders. China's Ping An, the world's second-biggest insurer by market value, announced plans in August to team up with Chinese internet firms Alibaba and Tencent to form a joint venture company to sell insurance products online after the company reported a nearly 10 percent rise in profits in the first half of the year.

Hong Kong-based insurance company AIA, a former unit of U.S. insurer AIG, has been quickly moving to expand its reach in the region. In July, AIA reported that the value of its new business jumped 28 percent to $512 million in the first half of this year. The insurer also bought Dutch insurer in October in a deal worth $1.7 billion. Insurer's like Canada's Manulife are also launching products to cater to elderly customers in Singapore.

Pictured left: Offices of Ping An Insurance in Shanghai, China.

Tech Products, Services for Elderly

Photo: Yoshikazu Tsuno | AFP | Getty Images

Companies are offering technology products and services designed for seniors as the market for innovative tools to help elderly consumers grows.

From senior-friendly cell phones, online shopping and delivery apps to oversized TV remotes with light-up buttons, tech products that allow the older generation to stay independent are being introduced by some of the world's biggest tech firms. Japan's largest wireless carrier NTT DoCoMo launched a new smartphone in August targeting seniors (pictured). The smartphone has larger fonts and icons with simplified steps for sending email and taking pictures.

Japanese retailers have also been offering a range of online services for the elderly. Rakuten, Japan's biggest e-commerce company, has set up an online shopping website for seniors, while convenience store 7-Eleven targets the elderly with free home delivery. People and older accounted for 35 percent of customers in the convenience store industry in 2011, according to Japanese media reports.