China Leads the Durian Global Demand Increase — Is There an Investment Opportunity?

Key takeaways

• Durian fruit exports have increased 400% year-on-year, according to a new HSBC report
• The trend is led by China’s increased cultural importance for the expensive fruit
• Thailand is responsible for 99% of all durian fruit exports

Sometimes, the heart wants what the heart wants — and that’s the durian fruit, also known as the world’s stinkiest plant. The so-called King of Fruits has seen a sharp increase in popularity, led by China’s cultural traditions, which begs the question — is there an investment opportunity?

Let’s dive into the world of the durian fruit, why it’s grown in popularity in China and how you might be able to capitalize on the commodity.

Why is Durian fruit so popular?

To some, it smells overly sweet; to others, it’s the pungent aroma of socks. But chances are, you’ve probably not been around one yourself. The durian fruit grows mainly in Thailand, Malaysia and Indonesia.

Banking giant HSBC confirmed demand for the smelly fruit had grown 400% year-on-year, boosted by a “craze” in China for the expensive fruit. According to the report, China has imported $6 billion worth of durians over the past two years, accounting for 91% of global demand.

Why is it such a desirable item in China? Cultural consumption. The durian fruit fetches up to $10 a kilo, making the pungent plant a status symbol for wealth in the country. Durian fruits are also popular as customary gifts to friends and family when a couple gets engaged.

Is there an investment opportunity?

What if we wanted to capitalize on the durian fruit craze in China? Well, roughly 90% of durians are grown in the ten-member Association of Southeast Nations (ASEAN) bloc, which is up from 60% seven years ago.

And the bloc is keen to consolidate its dominance in the durian fruit industry. The 15-nation Regional Comprehensive Economic Partnership (RCEP) free trade deal, which involves the ASEAN countries and China, Japan, South Korea, Australia and New Zealand, has lowered taxes and made customs procedures simpler since it took effect last year.

Unfortunately, there’s no direct way to invest in this opportunity, though given 99% of durian exports are from Thailand, it may be worth considering something like the iShares MSCI Thailand ETF or the Franklin FTSE Thailand ETF to get potential indirect exposure to the trend.

In the report, HSBC’s ASEAN Economist Aris Dacanay wrote, “The market in China is so large that there is plenty of room for other ASEAN nations to jump right in and compete — a durian ‘rush’ of sort”. That implies we could see other countries getting in on the action — and more long-term investment opportunities popping up along the way.

The bottom line

We definitely didn’t expect to see a sharp increase in popularity for the world’s smelliest fruit, but given the high price a durian fruit fetches and its subsequent status symbol in China, the King of Fruits is a hot commodity.

Unfortunately, it’s too young of an industry to invest in as an outsider right now. But that doesn’t mean there won’t be opportunities in the future to take advantage of, especially if the Chinese trend persists.