Veteran investor Mark Mobius is expecting karaoke to emerge as a surprise growth market in China after witnessing a huge increase in the penetration of the music industry.
In his latest investment update, Mobius, who runs several emerging market funds at Franklin Templeton, said he has seen this explosion in interest first-hand.
‘Walking down the streets of the various Chinese cities I have visited, I’ve spotted a number of karaoke parlours, a testament to its growing popularity,’ said Mobius.
Mobius said, while the US has a music industry magazine Billboard, which evaluates popularity of artists and makes lists of top songs, numerous charts are playing this role in China.
He said one Chinese music video streaming site is reaching for leadership by joining forces with Billboard to list weekly Chinese pop-music statistics on its website.
‘The music industry globally is taking notice of the growing influence of the Chinese consumer. For example, the US rock band Bon Jovi recently recorded a popular song in Mandarin,’ said Mobius.
He said the Chinese music market is still small, with revenues of only US$91 million in 2014. Another difficulty, he said, is the unwillingness of online listeners to pay for music, although some fans are spending money on make their music preferences known on the internet.
Elsewhere, Mobius said another prospective growth area is the cosmetics sector. Mobius said annual sales growth of beauty and personal care products in China bypassed global cosmetic sales growth.
‘Most of China’s cosmetics and skin care market is dominated by foreign brands, so local firms have a lot of catching up to do,’ said Mobius. ‘South Korea has been a major influence in this area, as a quarter of its cosmetics exports land in China.’
Asking for more iron ore
In the meantime, China’s energy and metal consumption is more likely to increase rather than decrease over the long term, according to the veteran investor.
Mobius said such sustained demand will be backed by tremendous growth in infrastructure which is still needed in China compared with developed countries.
Mobius said the demand for iron ore is especially significant for China, which holds 50% of the world’s share of crude steel production.
‘China currently has become so influential that the global benchmark price of iron ore - which used to be determined in Japan - is now based on the price on delivery at Chinese ports,’ said Mobius.
However the veteran fund manager expects the share of it to decrease in China, as it becomes more consumer-oriented and less dependent on infrastructure for growth, which is still the case in India.
The fund manager also said the Chinese government has enacted policies to cope with overcapacity in the steel-making area, shifting some production from Hebei province to the coastal areas.
‘Recycling of steel is also expected to increase in China, which could impact long-term trends in production, pollution - and prices,’ said Mobius.