Christmas has come early for the bank’s shareholders with the decision to slightly increase the 2024 dividend – despite a single-digit decline in the net profit and cash earnings.
Beating the market benchmark is never easy, with 72 per cent of Australian actively managed global equity general funds trailing the S&P World Index in the six months to June 30, 2024. Domestic equity funds performed slightly better, albeit against a significantly lower bar set by the S&P/ASX 200 Index.
This cohort is set to take over the Baby Boomer mantle
VanEck’s Vectors China New Economy ETF (ASX: CNEW) has been among the top performers in recent months. It takes investing to a whole new level by investing in companies with the best growth prospects tied to a specific demographic.
Russell Chesler, head of investments at VanEck, recently presented “ETFs and the next generation” to advisers. Chesler sees the Baby Boomer era as being the most influential, wealthiest, and most successful generation, that drove the global economy for decades. He says “This group has driven the US economy for decades and it still today makes up 50% of the wealth of the US. Consider the rise of the consumer during this time and how markets responded to Baby Boomers.” Companies such as McDonalds, Nike and Starbucks were created and became highly successful by following one simple business concept: ‘Sell a good or service that is needed and wanted by a big population group.’
Chesler then applies this simple formula to the world as it is today, and finds a group he is confident will be the most influential to drive markets forward. He says, “we think Chinese Millennials are the Baby Boomers of the future.” According to the World Bank, Chinese GDP will surpass that of the US, driven by a growing middle class that is young and have similar characteristics to the Baby Boomers. The Baby Boomers at the same age shared similar behaviour and attitude; both loved to spend money on entertainment and shopped as a source of entertainment. Both aspire to home ownership: in-fact according to HSBC, 70% of Chinese millennials own their own home compared to 30% in Australia.
The ‘New boomers’ or Chinese millennials have much greater economic clout than their Western peers in the US or Australia. In most western economies such as Australia, the vast majority of spending power remains with the Boomers, making them the core consumers that move markets. In China, there is a stark contrast and massive generational gap.
Chinese millennials were born into a world that is immeasurably different from the world their parents grew up in. This kind of generational gap doesn’t exist with western millennials and their parents. They are a generation unlike their predecessors. Those born during China’s “one-child policy” were at the centre of the universe when they grew up. Often privileged, they have largely enjoyed a good life unlike the hardships their parents and grandparents endured. They are oblivious to the hardships of older generations.
In their eyes, life has been good and will only get better. This is what makes them free spenders, like the Baby boomers. They have no real mortgage debt or student loans because their parents have paid for both, Chinese millennials are the first to experience mobility and economic opportunity like never before. According to McKinsey & Co, Chinese consumers are set to contribute almost two-thirds of global growth in luxury spending heading into 2025. Chinese millennials buy luxury items to show off success and individualism.
Chesler points out the fact that “There are 350 million Chinese Millennials. This the is new generation that will drive markets and by number there is more of them than the 75 million US Baby Boomers in what became the world’s biggest economy. The numbers are amazing.” And servicing the Chinese millennial cohort are massive Chinese companies that need to cater to the sheer size of this group.
For example, alcohol beverage company Baiju, “accounts for 35% of the world’s spirit production and 99% of it is consumed in China,” says Chesler. Fashion, it’s the same. And so on. By 2024, the Chinese economy will have eclipsed the US in terms of GDP and will rank as the world’s largest economy over time. And diving this massive growth engine, are the New Boomers, the young Chinese consumers that are optimistic on the economy and confidently splurge on luxury and high-end goods without worry. Much like the Baby boomers of Australia did at the same age.
