One of the biggest risks of such investment is dominated by geopolitics (possible conflicts of China with the United States, Japan and South Korea), fluctuations of the Renminbi, security concerns (e.g. terrorism), changes in preferences of Chinese consumers and regulatory risks.
The tourism sector in the Asian region has great potential for long-term growth, which, however, it is possible to sharp fluctuations both up and down. In addition to the growing middle class in China and increasing disposable income, among the key drivers in this market is possible to distinguish the reduction of visa barriers for citizens of the PRC and improving air service.
Investments in this sector, however, require a structured approach. We give a negative Outlook on the shares of airlines and airports, and neutral on the sector of accommodation and positive medical tourism, online travel agencies, resorts and theme parks amusement and also associated with the tourism sector retail trade.
The domination of artificial intelligence
The digitalization and the proliferation of digital technologies are affecting every aspect of our lives. We see great potential in projects related to automation and robotics, cloud technologies and artificial intelligence (AI), cybersecurity, online Commerce, digital content and financial technology sector.
Julius Baer’s analysts expect that artificial intelligence (AI) will be the driver of the next technological cycle and a new phase of the digital revolution. The most promising solution is cognitive AI built into cloud-based systems and products. This direction will receive the largest share of IT costs and will increase productivity. Various sectors associated with artificial intelligence, will grow at compound annual rates of around 50%, far outperforming the market for cloud technologies. The cost of AI in the world will increase from $2 billion in 2015 to $127 billion in 2025.
It should be noted that today the field of AI somewhat overheated, because its application is still limited to a small set of technologies. However, in the long run you may find that the shares of companies-developers of artificial intelligence have been undervalued, so investors should closely monitor their dynamics.
Artificial intelligence will change not only the IT sector but also other sectors of the economy including transport, health, retail, manufacturing, and financial services. In the race for informed leadership in this sector, we see great potential in companies developing technology and projects for collecting large amounts of data with significant competitive advantages in the market.
In the sector of digital payments will be dominated by three trends: the increase in the volume of transactions, introduction of breakthrough technologies and industry consolidation. Net commissions in the industry of digital payments by 2026 could reach $200 billion, and the average annual growth rate over 10 years reached 9.2 percent. Drivers sector will make the digital globalization of trade, changing consumer behavior and sellers, as well as changing regulation. The development of new payment systems may lead to crowding out of traditional players, including acquirers and issuers of payment cards classic.
The transition to “green” energy
In the energy sector is a structural transition from fossil fuels to new energy sources. Dependence on hydrocarbons, the high price of oil and gas in recent decades, climate change and environmental pollution are just some of the reasons for the increasing investments in new technologies and innovation in the industry.
According to estimates Julius Baer, the world economy is undergoing significant changes that will meet the growing energy needs without further exploitation of hydrocarbons. The main investment ideas in this area are related to green energy, shale sector, projects of new transportation and environmental programs in the PRC.
The transport sector is at the beginning of a new era. Electric cars and Autonomous vehicles can solve problems of congestion and air pollution. The growth of the middle class in China, urbanisation and the failure of households of owning a car are the main trends, which investors need to watch. They will have a big impact on the traditional automakers, for which today there are more risks than opportunities, and lead to the formation of new centers of value creation and new industry leaders.
Will form the new field of transport services. Among the beneficiaries of the transformation will be technology providers. We suggest a target tactical investments and draw investors ‘ attention to the fact that financial markets always look to the future, but often do not see the structural changes that occur not so fast.
Most growing companies have a good market evaluation, with concerns about peak demand for oil is currently almost finished. It should be noted that any breach in sector development batteries will accelerate the transition to electric transport. In this area the main element of uncertainty will be the development of technology, while the regulation will act more positive.
The population growth and food shortages
According to expert estimates, by 2050 the world population will increase by 2.4 billion people will reach 9 billion and food Production must almost be doubled to meet all the needs of humanity, declare to the UN. This creates significant challenges.
The most interesting areas for investment, according to Julius Baer, are the production of agricultural fertilizers, veterinary medicine, the production of meat or its substitutes, the development of trade in agricultural products, as well as solving problems of access to drinking water.
Modern agriculture has a big impact on the environment. Meat production is responsible for 15% of all greenhouse gas emissions and about 60-70% of the ammonia emissions. The production of one kilogram of beef requires 20,000 to 40,000 liters of water.
Industrial fishing has exceeded the capacity of its natural reproduction, but meat and fish remain the main sources of protein for most of the world’s population. Business is gradually coming to the fact that entomophagy (use human food insects) will be the solution to the problem of deficiency of proteins.
Population aging in many countries will exert increasing pressure on the global economy. The number and proportion of older persons growing faster than any other age group, and over the next decades in the world there will be over 1 billion of These demographic changes bring risks for the economy and open new opportunities for business.
Understanding companies needs and desires of the elderly will bring success in the long term. Attractive for investment are projects in telemedicine, genomics (including new methods of diagnosis and treatment of cancer), global projects in education and health care.
In developed countries people over 60 spend on their own health more than any other age group. As a result, companies from the health sector in the broadest sense, including, for example, technological projects, creating robots that help solve everyday problems of the elderly, or the manufacturers of the systems to improve hearing, as well as traditional pharmaceutical corporations will experience increasing demand for its products and services.
On the other hand, in comparison with young people, older people in Western countries spend a lot on housing, recreation and travel. Long-term investments in this sector have large growth potential.