No revenge spending in store for businesses from Hong Kong to Singapore as consumers tighten belt for rainy days, AIA survey shows

·3-min read

Consumers in Hong Kong, mainland China and major Southeast Asian economies are seeking to set aside more cash for rainy days even as the pandemic has eroded their income. That may be unpleasant news for retailers and restaurateurs seeking to revive their businesses.

Some 52 per cent of Hongkongers intend to boost their savings this year, according to a survey published by AIA Group. Almost half of them (46 per cent) aim to save 50 per cent more than in 2020. That mirrors the responses in mainland China and Singapore, the insurer added.

AIA surveyed 7,400 respondents in China and Southeast Asia including Singapore, Indonesia, Malaysia, Philippines, Thailand, and Vietnam in January. AIA is the world’s second most valuable insurer after Ping An Insurance (Group), according to Bloomberg data.

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The survey underscores belt-tightening measures amid income and job losses, dimming hopes for businesses seeking an uplift from pent-up demand or “revenge spending.” Recent efforts to reopen economies continue to be plagued by a resurgence in Covid-19 infection cases, the emergence of virus variants and relatively slow progress in vaccination programmes.

“As the spending pattern in mainland China has shown, it seems people have no big interest in revenge spending” at the moment, said Kenny Ng Lai-yin, a strategist at Everbright Sun Hung Kai Securities. “Consumers are still worried about economic uncertainties.”

Besides, the stock market wealth-effect has largely deserted many of the markets where the survey was conducted. While benchmarks in Singapore and Thailand rose more than 9 per cent, those in mainland China and Malaysia have declined.

The AIA results resonate with a separate survey published by Citigroup last month, in which more than 70 per cent of respondents would adopt a “pragmatic” view on consumption. This suggests they are unlikely to go on a shopping spree before the pandemic battle is won.

According to the AIA survey, two-thirds of respondents across the eight markets have suffered from lower income. In Hong Kong, that ratio is 62 per cent. The city’s jobless rate reached a 17-year high of 7.2 per cent between December and February, before easing in recent months.

“Uncertainty is understandably driving up allocation of funds to savings, with greater focus on liquidity for emergencies versus savings for typical life goals,” Stuart Spencer, group chief marketing officer of AIA, said in an email interview.

Stuart Spencer, group chief marketing officer at AIA in Hong Kong. Photo: Edmond So
Stuart Spencer, group chief marketing officer at AIA in Hong Kong. Photo: Edmond So

Across the surveyed markets, some 55 per cent of respondents plan to save more this year, while 29 per cent of them hope to maintain the same rate as in 2020 and 16 per cent expect to save less.

At 65 per cent, the Philippines has the highest proportion of customers planning to save more money this year, AIA said, while Thailand has the least at 45 per cent. Bank deposits remain the most popular choice of savings, with 90 per cent of respondents using them.

Sales of new life insurance policies in Hong Kong rose 16 per cent in the first quarter to HK$40.7 billion (US$5.25 billion), according to the Insurance Authority. Investment-linked policies, which allow holders to invest in several funds with higher returns, grew at an annual rate of 153 per cent to HK$6.3 billion.

“We have found increasing consumer confidence in using insurance as a savings tool, with 76 per cent agreeing that insurance can meet either their long-term or their short-term savings requirements,” Spencer said.

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