Travel megatrend, Asia’s AI drive, luxury’s lustre

Where are venture capital investors putting their money? Plus trade and clean energy, China’s overseas electric vehicle drive, and other key talking points from August 2024.

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WHAT HAPPENED THIS MONTH?

This month, we focused on the “travel megatrend”. That meant assessing the economic and environmental impact of a recovery in global tourism which appears to have been both fast and strong.

Elsewhere, we examined disruptive technology, exploring data centres, chipmakers, and artificial intelligence (among many other topics). We also investigated the outlook for trade during a recently challenging period.

So, what were the key talking points? Read on to find out…

Talking Point: How strong is the travel megatrend?

Theme: Future Consumer

The COVID-19 pandemic was a once-in-a-lifetime shock for the global travel industry. With borders closed, flights cancelled, and hotels shuttered, it seemed logical that the industry would take a very long time indeed to recover to pre-pandemic levels.

And yet, less than five years later, the sector has boomed. Some sources have even suggested that, in early 2024, Americans spent roughly 20% more on overseas travel than in 2019.

James Pomeroy and Yun Liu took a closer look at this “travel megatrend”, and identified a number of important drivers behind global tourism’s strong recovery:

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?? Higher wealth levels at the richer ends of society

?? Shifts in spending preferences

?? Social media advertising

??? An abundance of travel options

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The question is, just how strong is the travel megatrend, and what will its impact be?

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Our thoughts…

This looks like an unstoppable trend — with more demand for tourism across the world in the coming years. This could have wide reaching impacts across geographies and sectors of the global economy — both for better and for worse.

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For a closer look at the numbers behind the travel megatrend, clients of HSBC Global Research can read the dedicated report from the following link.

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FULL REPORT ?? https://www.research.hsbc.com/R/84/s7RF2FpXTl77QQ

Talking Point: Can Asia lead the AI drive?

Theme: Disruptive Technology

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We released a number of reports on AI in September, with data centres and chipmakers in full focus.

Why? Because, to understand whether Asia can lead the AI drive, you have to ask a few other (and smaller) questions first:

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?? Can ASEAN become a data storage leader? The data centre (DC) industry has experienced explosive growth over the past decade, and ASEAN has 1.8GW of installed DC capacity. But, just as the region is catching up with the rest of the world, AI and machine learning are set to transform the DC industry yet again. With power requirements for DCs growing exponentially, the availability and cost of power is becoming both a threat and an opportunity for the sector, putting secondary DC markets such as Malaysia centre stage.

? Has the AI rally run out of steam? After a fall in artificial intelligence stock prices across Asia, we are now witnessing cuts to consensus earnings and target prices. That said, 89% of all ratings are still ‘buys’. ?This comes after increased regulations and nervousness about actual demand for AI considering the big investments already made. It seems that the adjustment in AI stocks might have entered a new phase.

?? Where are Korean chip groups picking up market share? Korean chip equipment makers play a vital role in the production of today’s most advanced chips — whether they’re used to power AI or live in the latest smartphones. But there are some areas where Korean chip equipment makers are particularly strong, from hydrogen annealing to atomic-level inspections and laser-based dicing.

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Our thoughts…

We asked each of these questions in three separate reports. Thank you to 1) Joy Wang , Piyush Choudhary, CFA and Rahul Bhatia ; 2) Herald van der Linde , Prena Garg and Adam Qi; 3) Ricky Seo and Hankil Chang for producing the reports.

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Clients of HSBC Global Research can find out our view on AI in Asia by reading these three reports:

ASEAN NEXT ?? https://www.research.hsbc.com/R/84/r9wShHtXTl77QQ

Peak AI in Asia ?? https://www.research.hsbc.com/R/84/klQMKQGXTl77QQ

Korean Semiconductor Equipment ??https://www.research.hsbc.com/R/84/VTsDSCzXTl77QQ

Talking Point: Can luxury regain its lustre?

Theme: Future Consumer

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After another wave of earnings cuts across the board, we continue to expect some disappointment coming from the luxury sector. But momentum is key – news was not supportive and second half sales are unlikely to shine. And despite some (slight) sales reacceleration is on the cards, there are other reasons to remain cautious:

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?? European consumers have been adopting a wait-and-see attitude and likely victims of “greedflation”

?? American consumers seem priced out or at least impacted by inflationary pressures and a high interest rate environment

?? The all-important Chinese consumers are under pressure, holding back on spending despite solid savings

?? Movements in FX may affect groups who mostly produce in EUR but sell across the world

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Our thoughts?

This is the sixth worst year in the past 20-year period for the sector, and we continue to expect some disappointment coming. Will 2025 bring fairer winds? Aurelie Husson-Dumoutier , Anne-Laure Bismuth , Erwan Rambourg and Akshay Gupta, CFA explored this outlook further in their latest Global Luxury Goods not ‘Cruel Summer’.

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Clients of HSBC Global Research can find out why we think world trade seems to be holding up by reading the dedicated report from the following link:

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FULL REPORT ?? https://www.research.hsbc.com/R/84/N7HljghXTl77QQ

So, there you have it, the main thematic talking points for this month. But there’s still plenty more to discuss. Clients can see the rest of our talking points in our full report below.

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FULL REPORT ?? https://www.research.hsbc.com/R/84/nVll7s9XTl77QQ

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