'Little Emperors' to drive China consumption (Reuters) Updated: 2005-11-24 17:28
China's Little Emperors, the pampered offspring of the country's one-child
policy, will underpin a domestic consumption boom in the next decade as they
mature, the securities arm of BNP Paribas said on Thursday.
BNP Paribas Peregrine expects the generation, doted upon since birth and
increasingly wealthy because of economic growth faster than 8 percent, will have
a greater propensity to consume and are more susceptible to advertising.
They are typically attracted to items that improve their standard of living
such as branded fashion, supermarket foods, insurance and electrical appliances,
and less to the more basic goods their parents desired.
To tap that consumption growth, BNP recommends buying shares in telecoms,
insurance, retail and home electronics companies.
"We're expecting a nationwide boom from 2005-2016, when the largest number of
single children become mature consumers," China Research head Erwin Sanft told
reporters.
In the hotly contested home electronics arena, BNP recommended newly listed
Paradise Electronics Retail Ltd., China's second-largest home appliance chain,
known also as Yongle.
BNP maintained a target stock price of HK$3.34 for Shanghai-based Paradise,
up 17 percent on its Thursday price, due to relatively higher margins and rising
economies of scale.
In insurance, BNP picked Ping An Insurance (Group) Co. of China Ltd. and
larger rival China Life Insurance Co.
Ping An should see its stock price grow 15 percent to HK$14.43, while China
Life's stock price was forecast to rise 19 percent to hit HK$6.83, BNP said.
It did not offer timeframes.
The insurance industry is expected to benefit as Beijing dismantles a
cradle-to-grave welfare system. Premiums of insurance firms in China hit $46.8
billion in the first nine months of 2005, up 13.1 percent from a year earlier,
state media have said.
BNP also picked Taiwanese snack food maker Want Want Holdings and Lianhua
Supermarket Holdings Co. Ltd., China's biggest supermarket operator, as
outperformers, with their stocks forecast to rise 41 percent and 32 percent,
respectively.
China's one child policy was introduced in 1977 to manage a population that
officially hit 1.3 billion this year.
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