Climate change, anxious societies, infrastructure, technology, the silver economy and millennials offer strong investment opportunities and will continue to shape the direction of future investment decisions in Asia, Credit Suisse says.

In its search for added value, the Swiss bank has updated its long-term thematic equity investing framework, which covers a wide range of topics from climate change and demographics to infrastructure and technology.

Five years after their introduction, Credit Suisse says, its Supertrends continue to focus on long-term and multi-year social developments that highlight prospective business opportunities.

And while Russia’s invasion of Ukraine has led to greater volatility in financial markets, this has not significantly affected the Swiss bank’s long-term belief across all its Supertrends, though some short-term events have favoured certain trends over others.

For example, the Supertrends of infrastructure and climate change have benefited from solid tailwinds in 2021 due to large-scale infrastructure projects, as well as political support for climate change action at key events such as COP26 in Glasgow.

Crucial issues

For Asia, with its significant structural and societal changes such as ageing populations, a booming middle class and a huge generational transfer of wealth, the Supertrends are highly relevant.

Climate change is a crucial one for the Asia-Pacific region. The World Bank estimates that a rise of one metre in sea levels could displace up to 37 million people, of which 23 million would be in China alone. A three-metre sea level rise would hit about 90 million people in the region, including 52 million in China.

Commenting on such an outcome, John Woods, Credit Suisse chief investment officer for Asia-Pacific, says: “We are fast running out of time to contain climate change’s extent and consequent impact. A key determinant will undoubtedly be China and its seriousness about implementing its ambitious carbon neutrality targets.”

For 2022, the long-term equity investment themes include anxious societies, infrastructure, technology, the silver economy, millennials and climate change.

Looking at short-term developments around climate change, Credit Suisse says the recent increase in energy prices should act as a catalyst to cut the world’s dependence on fossil fuels for electricity production and transportation. In China, for example, energy transition and related infrastructure are being fast-tracked in China’s long-term development plan.

The country’s commitment to energy transition should keep business opportunities in solar, wind and electric vehicle sectors well supported in the coming years.

The global food system is also undergoing a reduction in its carbon footprint and offers long-term opportunities for a broad range of industries.

Inflation challenge

For the anxious societies theme, the bank says that while the Covid-19 pandemic remains a worry for many people, it now ranks below concerns about poverty, social inequality and unemployment. The recent inflation surge is also going to test affordability, especially for housing and food, opening opportunities for companies that can confront this challenge.

The world’s senior population will double to more than two billion by 2050, creating demand from the silver economy in areas such as healthcare, insurance, consumer and property markets, alongside areas like cardiovascular disease, oncology and neurology. The silver economy also has exposure to financial companies, which should benefit from the rising interest rate environment.

In 2022, Infrastructure looks set to be on the cusp of a multi-year boom as government spending for new infrastructure programmes begins in the United States and Europe, with most of the spending slated to go to transportation, energy transition and communications infrastructure.

On technology, the digital revolution still has a long runway to use, with new sparks such as the metaverse giving momentum to this trend. Therefore, Credit Suisse says, investments in digital marketing, production, and sales and distribution in the metaverse should increase as the population of this virtual world expands.

Connected to technology, millennials are set to integrate simulated digital environments into their everyday activities.

Millennials are also very concerned about the environment and are motivated to drive change by adopting more sustainable lifestyles, especially in emerging markets where a majority of them live. Sustainability now also plays a core purpose for the younger generations in their daily consumption habits. Businesses and financial institutions who address these growing concerns should benefit.