Thinking of bulking up your exposure to Asian emerging markets? It’s not a bad idea in my book. Coronavirus fears might be stalking many firms focused on these countries right now. Cathay Pacific and Apple this week illustrated the massive disruption that the outbreak is causing to business by issuing profit warnings.
In the long term however, the investment potential of these markets is supreme. Population growth is mighty, and the number of affluent consumers in these territories is heading through the roof.
The economic boom
According to the boffins at Standard Chartered, China and India will be the world’s first- and second-largest economies by 2030 with gross domestic product of $64.2trn and $46.3trn respectively.
The bank says that GDP in China will grow 177% in the 13 years to 2030. It reckons that the Indian economy will balloon 387% in that time too. Compare that to the 60% rise that the US is expected to experience between 2017 and 2030. The Stateside economy will be worth $31trn by the end of the decade, putting it in third place on the list.
Indonesia and Turkey lock out the top five of the biggest economies expected in 2030. Standard Chartered predicts that Indonesian GDP will balloon 216% between 2017 and the close of the decade to $10.1trn. Turkish GDP is tipped to jump 314% to £9.1trn.
Two Footsie titans
My own personal stocks portfolio reflects the brilliant investment opportunities created by booming Asian economies. Among my holdings are household goods giant Unilever and financial services giant Prudential, two firms that already have formidable footholds on the continent.
Indeed, robust trading conditions have allowed earnings to grow each and every year (well, more or less) in recent times. And this has provided the bedrock for dependable annual dividend growth.
But what if you’re seeking to combine the gigantic potential of Asian markets with big dividends today? These stocks probably won’t get your engine revving: Unilever and Prudential’s 2020 yields sit at a decent-if-unspectacular 3.3% and 2.1% respectively.
My perfect Cussons
Fear not, though, as there are many large yields with splendid developing market exposure.
Take PZ Cussons (LSE: PZC), for instance. This is a great play on Asia, where its products can be found in Singapore, Thailand and Indonesia, as well as Africa where it trades in Ghana, Nigeria and Kenya. Now, Cussons is toiling under tough conditions in all of its territories right now. These caused group revenues to dip 3.1% in the six months to November.
But over the long term, I reckon its market-leading labels like Imperial Leather shower gels and St. Tropez sun creams — brands in which PZ Cussons is turbocharging investment — will allow it to ride the hot economic growth of the coming decade.
City analysts expect this FTSE 250 firm to suffer a 10% annual profits drop in the fiscal period to May 2020. It’s expected to get back on the right track with a 4% rise in financial 2021, though. And at current prices, PZ Cussons carries a mighty 4.5% forward dividend yield. Compare that with the average 3% yield that the UK’s mid-caps currently offer.