Chinese equities to outperform in the long-term

22 February 2021

Chinese stocks are expected to outperform in a long-term period as China has emerged from COVID-19 stronger than major western economies, with fiscal and government debt intact, according to Antipodes Partners.

Additionally, investors should pay attention to the fact that without excessive monetary support there was a strong private sector recovery across the region, which should not be ignored, and money creation in the western world far outpaced Asia over the past twelve months and this was a stark contrast to the post-Global Financial Crisis years when China went on a debt binge.

“We’re quite excited now given the economic backdrop and the number of companies in the Asia region that are leading the way in terms of innovation and growth,” Antipodes Asia Fund portfolio manager, Sunny Bangia, said.

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According to Bangia, the major growth areas where investors could find opportunities in businesses was exposure to advertising and social commerce and rising domestic consumption.

“COVID has given a boost to digital businesses but I think it’s important to remember where China is today in its penetration of advertising spend as a percentage of gross domestic product. China is still way behind western markets, but we think the market is poised to grow at over 20% per annum over the next five-to-six-year period, catching up to the US by the end half of the decade,” he said.

Bangia highlighted JD.com and Tencent as compelling investment ideas and, at the same time, ecommerce giant JD.com and premium alcohol manufacturer Wuliangye were also examples of Chinese equities that can help provide that exposure.

“The premium class of Chinese consumers are approximately the same population pool as the US and their incomes are growing very fast at a compound annual growth rate of around 15%. This part of the economy is very vibrant and is becoming very large, it’s another area investors should ensure they have exposure to,” he said.




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