In 2005, scientists discovered a 4,000 year old bowl of noodles- the earliest example ever found. This quintessentially Chinese dish has been the staple ingredient in the Chinese diet for millennia, but have the Chinese finally fallen out of love with the noodle? Last year, instant noodle sales were down 6.8% versus the previous year despite several years of growth prior to this. While it would take big chopsticks to forecast the end of the noodle, does this indicate a more subtle change in Chinese tastes?
With growing wealth comes choice and we are beginning to see across a variety of consumer products that Chinese tastes are moving away from staples (even cheap beer sales were down 3.5% YOY last year) to more discretionary spending on products and services such as sportswear and cinema. In fact, China is now the most important market for Nike and Adidas outside the US. You also need somewhere to show off your new trainers and last year the Chinese box office grew over 48% to be worth a huge US$6.8bn.
Rising incomes in China have also led to a shift of low end manufacturing to other countries in the region such as Vietnam. Here, the rise in Foreign Direct Investment (FDI) as companies invest in more capacity has driven an increase in living standards and associated consumption. Our stocks such as Vinamilk (dairy products) and Masan (fish sauce) are well positioned to benefit. With 15% in Vietnam, our Asia Fund has the highest allocation to the Vietnam growth story amongst our peers.
So while noodles will still be on the menu across Asia, you are increasingly likely to see the Chinese reaching for popcorn with their chopsticks whilst wearing 3D glasses.
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