Asia Now on B Y Jon R Ei N F U Rt Ill U Strati

RT U F N EI Y JON R B Asia ON strati U Now ILL 2016 IN THIS ISSUE 3 Action! 5 Pakistan Film Industry Defies Extremists 6 Portrait of Wealth: Hong Kong Becomes a Key Player in the Global Art Market 7 Dogged Pursuits 8 Fries with that? Fast Food Appeal Catching on Quickly 9 Ready for Takeoff 10 Vietnam Advances to the Fore as a Golf Destination 10 Playing on the World Stage 11 Feel the Burn 12 China’s Goal: Soccer Superstardom 13 Korea: Electronic Gaming as a Spectator Sport 14 The Dark Side of Leisure The Leisure & Entertainment Issue Newly affluent Asians are looking for diversions. Businesses that can answer the demand stand to prosper. hus for the first time since his creation man will be faced with “This real, his permanent problem—how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.” John Maynard Keynes, Economic Possibilities for our Grandchildren (1930) Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Fixed income investments are subject to additional risks, including, but not limited to, interest rate, credit and inflation risks. In addition, single-country and sector strategies may be subject to a higher degree of market risk than diversified strategies because of concentration in a specific industry, sector or geographic location. Investing in small- and mid-size companies is more risky than investing in large companies as they may be more volatile and less liquid than large companies. Conventional wisdom has caricatured Asia as a region consumers spend, the costs of doing business and what it of low-wage exporters, yet simple data suggests that Asia’s takes to create a moat around a business. Companies are no economies have long been driven by domestic demand. longer competing to offer the lowest-cost product but the That demand has increased as productivity has risen due to most satisfying, the most convenient, the most luxurious hard work, better education, better markets and corporate or the most unique. organization. Productivity gains have raised wages across Governments will have to adapt. Education systems will the region, and today, many Asians stand on the cusp of need to change to impart the skills needed to produce new having their basic economic problems solved, as Keynes types of goods and services. There are questions about the described it—leaving them to enjoy the fruits of their labor readiness of governments to allow “nationally sensitive” in more creative consumption. industries, such as broadcast media and telecommunica- What does this mean in concrete terms for investors? tions, to become more independent of political influence It’s unlikely that people will spend more time on leisure, to adapt to consumer demands. Already, new businesses but quite likely they will spend more money on leisure. are starting to emerge and grow—restaurant chains, main And that gives businesses an opportunity. street health care, tourism, gambling, musical and televi- In Beijing in the 1980s, everyone dressed the same sion content providers. What are the characteristics of way—in Mao jackets or military surplus. Now, fashion is these industries? Which present the best opportunities and a big part of life in some of China’s major cities, enabling which might be traps for the investor? purveyors to charge higher margins—they’re no longer just With Asia’s middle class set to make up two-thirds of selling clothes, but rather style and individuality. global middle-class spending by the year 2050, under- Cultural and sporting heroes, too, are emerging across standing these issues is crucial to developing a sensible the region, creating opportunities for the media to broad- long-term strategy for the region. If one thing has proven cast more entertaining content to capture people’s imagina- true over the past few decades in Asia, it is that people’s tion. Will we soon see privately run media conglomerates lifestyles continue to change rapidly. The probability of akin to those in the West? And how is online technology earning good investment returns may well depend on changing people’s access to leisure and entertainment? understanding how the region’s middle-class household What does this mean for search engines, social media and decides to spend its money over the next decade. retailers? These changes will have a big impact on how RETAIL THERAPY A high-end shop in Shanghai. With basic needs having been met, Asia’s newly affluent look for new ways to spend their money and time. 2 ASIANOW | The Leisure & Entertainment Issue For Institutional/Investment Professional Use Only Action! A bourgeoning market of moviegoers is driving growth of homegrown film production industries. DRAMATIC GROWTH A Bollywood poster in Agra. India’s box office take has tripled since 2004, as the film industry has become more disciplined. HOllyWOOD HAS LONG DEPENDED on overseas markets Hollywood. Since 2004, Bollywood’s gross receipts as a hedge against box office bombs. If a costly movie have nearly tripled to an expected US$4.5 billion in doesn’t do well domestically, the thinking goes, inter- 2016, with about 10% of that coming from abroad. national audiences could help make up the gross reve- India’s film industry dates back to the 1890s. Yet nues—especially in Asia, which has historically seemed through most of its history it was fraught with risk, to have a big appetite for blockbusters. with no standards and processes for developing proj- Asia is still a critical market, perhaps more so today ects, nonexistent production schedules, shifting power than ever, but U.S. film producers now face stron- between studios and stars, and infusions of financing ger competition from Asia’s domestic film industries. from questionable sources. That began to change in the Film production is not a new industry in countries like early 2000s when the government granted “official indus- China, Japan or India. But with a growing middle class try status” to Indian cinema. Since then, the industry has and rising discretionary incomes, the audience is bigger, been subject to more rigorous corporate discipline and demand is stronger and distribution has spread beyond an investment mentality, with standardized processes for traditional movie houses to television and mobile devices. development, production, marketing and distribution that reduce uncertainty. Growth has created opportuni- The “Corporatization” of Bollywood ties for more art, niche and indie films with low budgets Once a term of derision, “Bollywood” has become and high return potential. Indian studios have entered one of endearment as India’s formerly freewheeling into more international joint production ventures, while film industry has attained a global following. The pluck Bollywood stars have begun finding fame in Hollywood and charm of Indian cinema, however, mask an indus- movies and television shows. The industry has also try with enormous economic impact, whose annual driven growth of ancillary businesses such as computer- output of about 1,000 films is around double that of generated imagery (CGI) studios that produce special For Institutional/Investment Professional Use Only ASIANOW | The Leisure & Entertainment Issue 3 effects for both domestic and overseas productions. government statistics, the Chinese box office grew 49% Yet despite its prolific production, Bollywood generates in 2015 to US$6.78 billion. Chinese films accounted for only about one-fifth of North America’s box office gross, more than 60% of that take. China is second only to the less than one-third of China’s and even less than Japan’s. U.S. in film revenues, and some analysts believe it could In the world’s second most populous country, that suggests be number one before 2020. a lot of room for continued growth. Like many industries in China, the movie business has not been immune from allegations of fraud and corrup- China Takes On Hollywood tion. The Xinhua news agency recently reported that the “Coming November 2016.” Picture those words on distributor of the martial arts movie “Ip Man 3,” featur- the final frame of a movie trailer. That is the projected ing U.S. boxer Mike Tyson, artificially inflated ticket sales, U.S. launch date of “The Great Wall,” the largest Chinese- possibly to placate financiers. Irregularities in the industry American joint production to date and, at a reported have prompted a crackdown by the State Administration of budget of US$150 million, one of the most expensive Press, Publication, Radio, Film and Television (SAPPRFT). movies ever shot in China. Despite these questions, however, the industry appears With an international ensemble cast led by Matt to be growing at a rapid rate. Hollywood is taking notice, Damon, the forthcoming feature is emblematic of China’s and apparently catering more overtly to China’s audi- global cinematic aspirations. International deals, though, ences. Or perhaps it’s only coincidence that in another are only part of the picture. A growing domestic audience Matt Damon picture, “The Martian,” (spoiler alert!) the is fueling China’s homegrown film industry. According to Chinese play a heroic role in the film’s denouement. STAR POWER Matt Damon joins director Zhang Yimou (center) and fellow cast members of “The Great Wall,” the largest Chinese-American co-production in history, scheduled to open in late 2016. 4 ASIANOW | The Leisure & Entertainment Issue For Institutional/Investment Professional Use Only BOX OFFICE BOOSTERS Top-Grossing Theatrical Releases in China, 2015, in US$ Millions Seven of the top 10 grossing lms in China last year were homegrown productions, accounting for around 65% of the combined box ofce.

Load more