The psychopath asks the FBI agent a question in the 1991 classic The Silence Of The Lambs: ‘How do we begin to covet?’ The answer: We begin by coveting what we see every day.
“If you see it on TV, that people have fewer children, that they are more successful, that their kids go to school, they look nicer, that they take care of themselves, then they will do the same,” says Jose Martins Soares, head of emerging markets research at Espirito Santo Investment Bank who evoked Anthony Hopkins to drive his point home about how access to information is empowering women.
In rural India, for example, research shows the onset of cable TV reduced preference for a son (desire of having a boy instead of a girl), fertility and the reported acceptability of beating while increasing women’s autonomy and school enrolment. Other changes such as the spread of smartphones and formal education have helped narrow the gap between the position of women in emerging and developed markets. The accompanying transfer of wealth presents a significant investment theme predicated on equality for women.
In an interview with DNA’s Sachin P Mampatta, he explained how this works. Edited excerpts.
What led to the theme to develop?
Investors have already played to the emerging market growth story. The China growth story has already been played out. The consumption growth story, to a certain extent, has already been played out. But the female-driven consumption story is growing faster than any of these three and it hasn’t been properly approached.
A hundred years ago, women couldn’t vote – it doesn’t seem so long ago. Today in the US, for example, 50% of the wealth is in the hands of women and 57% of the university graduates are women. So, equality has been achieved in very significant ways and in a very reduced amount of time in historical terms.
What we’ve seen in the US is being seen elsewhere. It is the inexorable march of progress. In emerging markets, with or without some obstacles in the way, women are overcoming these hurdles. And they are going to do exactly the same in emerging markets as is happening in developed markets.
That in our view is an amazing investment opportunity. Assuming that consumption patterns don’t change much, there is a $4.6 trillion opportunity to play this theme globally in the next five years.
How do you distinguish between a company which is part of the consumption theme from one which fits the female consumption theme?
One thing that was interesting is that across all markets, not just emerging markets, between 60-80% of all consumption decisions are made by females. So, the companies that cater well to that decision maker will have a great future. Whether the product in itself is for them or for someone else, it is the decision maker that counts.
Nielsen did this very interesting study, that came to the conclusion that the number one priority for developed market women is where they go on holiday, the next vacation. Whereas for emerging market women, it is their children’s education, clothes, and food.
That’s how we came up with the key sectors to look at, as a consequence on the companies to look at. It may not necessarily be a company that caters specifically to women.
How does India stack up?
India was the country, out of the 13 that we analysed here, where recently we have seen the quickest progress. It is on a lower base, true at levels of education and school attendance, but it is the one that has risen the fastest.
I think there are two factors which contributed to that. One was the access to information with smartphones and internet and the introduction of pay TV.
Pay TV was introduced in India region-by-region because of all the approvals. If you look at fertility rates, incidents of domestic violence and use of hygiene... the effect of Pay TV in 6-7 months later... it is amazing how quick it was.
In Brazil, it was the case of the eight o’ clock soap operas. For me, the next level is access to university and tertiary education. To me, the next step in India is going to be exactly that one. As fertility rates go down, women can go to school, go to work... so they join the student base and the labour force. It is this that will lead to older mothers, more educated mothers, smarter mothers and wealthier mothers.
TV makes the rest of the world visible to rural India. If you see it on TV, that people have fewer children, that they are more successful, that their kids go to school they look nicer, that they take care of themselves, then they will do the same, they tend to adopt the same. And rural India is converging very fast.
Do cultural differences affect how this kind of story plays out?
In sub-Saharan Africa, women don’t go to school. The only part of the world where we have not seen progress in terms of access to tertiary education has been sub-Saharan Africa. Other than that, every single region of the globe is converging to a point where they are actually surpassing the university attendance of men.
A generation ago, my grandfather was a pioneer because he had four children of which three were daughters, and he made a point that all of them would go to school. That was my grandfather. That was Portugal, that was Europe. Today, it is unacceptable that my sons or daughters don’t have the same opportunity that I do. To a certain extent, emerging markets will leap-frog what we’ve seen in the US. It would be a lot faster.
The United Arab Emirates already has more women going to university than men. So, the fact that women can’t drive in Saudi Arabia will change. In India, I was really surprised by how quickly the literacy rate improved over the last 10 years. Ratio of girls to boys in 1991 was 67% and in 2010, it’s 95%. It was lower than Turkey in 1991 and now is the same as any developed country.
The biggest headwind in these companies is that they are overvalued. Consumer stocks in South Africa are super overvalued. In Brazil, we found a way around it. We recommended Klabin, which does Cardboard. And shoes come in carboard boxes. It’s a lot cheaper. In the same way in Brazil, we recommend Porto Seguro which means ‘safe harbour’. It is an insurance company with exposure to the auto sector.
As more women learn how to drive, they have less accidents than men. In many, many markets, they pay less insurance premium than men because they have fewer accidents.
Sometimes there aren’t any pure plays. But the trend is there and the trend is absolutely visible. The companies that understand that do well.