Three megatrends to profit from
SINCE leaving the world of investment banking and stockbroking four years ago to devote myself to philanthrophy, I have travelled the world extensively, covering close to 60 countries.
As I travel from one continent to another, it is quite apparent that the world is changing much faster than it did in the 1990s, when I first graduated and spent almost nine months backpacking around the world.
The great thing about travelling now is that I no longer need to worry about finances. The years of putting my money to work has given me steady cashflows for travelling and for re-investments into new asset classes, new megatrends and new places.
Given the ineluctable advancement of megatrends, it would seem investing now would be the best tip.
However, an astute investor has to understand that while megatrends may hold sway for a decade or two, positioning into winners can be a tricky process.
Take, for instance, the dot.com boom in 2000 - investors who had bought into the boom benefited, but investors who bought at the top of the boom were ruined.
However, it is really after a huge crash that megatrend investing tends to enjoy a longer period of steadier and sustainable growth. For example, the profitability of dot.com companies like Amazon has become steadier and more sustainable.
I think that the megatrends that will benefit investors in the current decade would be:
INVESTING IN PLACES WHERE A DEMOGRAPHIC BOOM RESULTS IN RAPID URBANISATION
The world's population has more than doubled in the past 40 years, to almost 6.5 billion. According to the United Nations, this is likely to increase to nine billion in the next 40 years.
This has driven urbanisation in many places like China, India, Africa and the American sub-continent.
Fifty years ago, only a third of the world's population lived in cities. Now, the figure is more than 50 per cent and is expected to rise to two thirds by 2030.
Increased urbanisation will drive an increased need for housing, transport, food and health care.
Thus, with the Shanghai Composite Index hovering at 2,000 points, just a few hundred points above the 10-year low, the current level presents a good opportunity for stock accumulation.
GROWING MIDDLE CLASS IN DEVELOPING COUNTRIES WILL DRIVE EARNINGS AND PRICES OF WINNING STOCKS
Developing countries will grow faster than developed ones. This will lead to a transfer of wealth to developing countries which will themselves evolve new clusters of the middle class, which is expected to almost triple to 5.8 billion in 2033, from two billion presently.
Asia's share of global spending is expected to surge from 26 per cent today to 70 per cent by 2033. This trend has great implications for corporate earnings and stock prices.
Take, for instance, Unilever, the seller of the ubiquitous Lipton Tea, Ben & Jerry's ice cream and Dove shampoo. Its listed Indonesian subsidiary took 80 years to chalk up a turnover of 1 billion euros (about S$1.7 billion), but only four years to double that turnover to 2 billion euros on the back of the strong Indonesian economy, which has grown by a compounded 6 per cent per annum for the past six years.
DANCING TO THE AFRICAN SAMBA, ESPECIALLY SIERRA LEONE'S
Of all the African countries that I have been to, Sierra Leone on the Western Coast catches my eye.
This 71,740 sq km country (about 101 times bigger than our red-dot Singapore) is rebuilding rapidly, after a decade-long civil war ended in 2002.
Its government, in its second term, is spending heavily on infrastructure and wooing investments from mining companies.
Sierra Leone is rich in diamonds, gold, iron ore and minerals. Its US$3-billion (S$3.8-billion) economy, which grew 21.3 per cent last year, is expected to grow by 15 per cent in 2015 and an average of 13 per cent per annum for the next three years.
Among the African economies like Rwanda, Burkina Faso, Ghana, Burundi, Senegal, Angola, Mozambique, Cote d'Ivoire and Nigeria that have improved substantially in the past decade, I would say that Sierra Leone holds the best promise.
Mr Gabriel Yap was an eminent stockbroker who retired from stockbroking in 2009 to devote himself to philanthropy. He is executive chairman of investment firm GCP Global.