In the Philippines, consumer spending is brisk among the young. 
 
SINGAPORE — Brisk domestic demand and low dependence on China have made the so-called new VIPs of Vietnam, India and the Philippines standouts among emerging markets, with investors looking to them as defensive picks in a decelerating global economy.
 
Consumption boom
Shopping centers of Philippine developer SM Prime Holdings enjoy steady foot traffic even late at night. The company’s net profit jumped 54% to 28.3 billion pesos ($613 million) for 2015. Six more malls are slated to open this year.
 
“This is a reflection of the overall expansion of the economy that continues to be driven by the 6.2% growth in household consumption,” President Hans Sy said when SM Prime released earnings in February. “We believe we could sustain this growth in 2016.”
 
A number of Vietnamese companies have also risen to prominence on the back of domestic demand, including Vietnam Dairy Products, also known as Vinamilk, and real estate giant Vingroup. The country’s economy will likely keep accelerating given high education levels and economic policies that have reined in inflation, said Bill Stoops, chief investment officer at Vietnam-focused investment firm Dragon Capital.
 
In India, by far the largest of the trio, hopes are high for earnings growth in the automotive and motorcycle industries, including such automakers as Maruti Suzuki India.
 
Vietnam’s benchmark VN Index, India’s BSE Sensex index and the Philippines’ PSEi composite index advanced nearly 20% on average over the past three years. In the past year alone, despite economic slowdowns in Asia and worldwide, Vinamilk gained more than 50%, Vingroup over 20% and SM Prime nearly 20%.
 
Prospering independently
The term “new VIPs” was coined by Glenn Maguire, chief Asia-Pacific economist at ANZ Singapore, at a briefing for investors last year in Vietnam. Strong internal demand differentiates the three countries from other emerging markets weakened by sluggish trade, Maguire stressed.
 
India is home to roughly 1.3 billion people, and the Philippines and Vietnam around 100 million each, with the United Nations expecting further growth for the decades to come. Their populations skew young, averaging 24 years old in the Philippines, 26 in India and 30 in Vietnam, compared with 46 in Japan and 38 in the U.S. Analysts expect an expanding middle class to support domestic demand.
 
The new VIPs rely relatively little on China, which accounts for just 10% or so of their exports, data from the Mizuho Research Institute shows. This figure drops to roughly 4% for India alone, which has deep economic ties to the Middle East and Europe. In comparison, about 20% of Japanese and South Korean exports are bound for China.
 
“With China’s economy slowing, stocks in countries seen as less dependent on it tend to rise,” said Satoshi Okagawa, senior global markets analyst at Sumitomo Mitsui Banking Corp. in Singapore.
 
And the VIPs are not major resource exporters — a positive in the current environment. This characteristic sets them apart from the likes of Brazil and Russia, which have been hit hard by low oil prices.
 
The Philippines and India, in particular, rely on oil imports. So crude’s plunge since the latter half of 2014 has helped bring inflation under control, bolstering consumer spending. It has also given the duo’s central banks more room to loosen monetary policy. The Reserve Bank of India cut interest rates four times in 2015 and once this year.
 
But fortunes can change rapidly. A surge of enthusiasm for promising markets can vanish into thin air. The BRICs, VISTA and the Next 11 are among the once-favored groups of emerging countries that have fallen by the wayside.
 
Goldman Sachs Group — which had once trumpeted Brazil, Russia, India and China — informed the U.S. Securities and Exchange Commission last September that it would merge its BRICs fund with a broader emerging-market fund. The B-word is apparently rarely heard at the company now. Indonesia, a resource exporter that formed part of the old VIP group, fell out of favor with the commodities market crash.
 
To sustain market hopes, the new VIPs will need to look beyond their home turf and plan for the future, relaxing investment regulations and working on necessary infrastructure.