In late 2013, Deloitte Access Economics identified five "super-growth" sectors to lead Australia's economy over the next 20 years. Among the sectors chosen was wealth management.
The report estimated three billion people in Asia would join the world's middle-class population by 2050. It also estimated, "by 2050 the region will account for more than half of the world's financial assets."
Clearly, this is an economic trend which all of Australia's financial institutions would love to tap into and some are already positioning themselves to benefit.
Macquarie Group Ltd (ASX: MQG) is our largest investment bank and leveraged to Asia's rising prosperity. In FY14 it derived 13% of its income from Asia and has recorded consecutive growth from the region since 2012. It recently completed the acquisition of ING Investment Management Korea, a top 10 asset manager which had approximately $24 billion under management, at 31 December 2013.
Australia and New Zealand Banking Group (ASX: ANZ) is also making inroads into Asia's middle-class population by growing its branch network, holding stakes in established institutions and being open to acquisitions. Led by the International and Institutional Banking division (IIB), ANZ hopes to derive between 25% and 30% of group revenues from the region by 2017. In the first half of FY14 it derived over 19% of cash profit from Asia, the Pacific, Europe and Americas markets.
Westpac Banking Corp (ASX: WBC) is, like ANZ, focused on growing its exposure to Asian business banking and trade flows. Last year, Westpac and ANZ were the first two Australian banks licensed to directly convert Australian dollars to Chinese renminbi (yuan). This simplified process took away the costly hassle of converting into US dollars before making trades for many businesses that deal with China.
Buy, Hold or Sell?
All of these banks present as viable ways for investors to benefit from the rise of Asia's middle-class population. However in current market conditions and at today's prices, I do not believe any of these three stocks present compelling opportunities and advise investors to adopt a wait-and-see approach or look for better ideas on the ASX.
