Resona Partners: Taking Advantage of China's Slowdown - If Anything, the Past Month has Shown That What Happens in China Most Definitely Does Not Stay in China
OSAKA, Japan, February 29, 2016 /PRNewswire/ --
According to strategists at Osaka-based investment boutique, Resona Partners there are several ways in which shrewd investors could identify and take advantage of attractive China-related plays existing outside the country that are eminently placed to benefit when - not if - the Chinese economy stabilizes.
"We've left scant to the imagination as far as our affinity for all things Japanese are concerned," said Michael Lambert, Senior V.P. with Resona Partners. He advocates acquiring stakes in companies that have substantial economic exposure to China which make them highly sensitive to economic upswings of any sort. Compounding the case for Japan is the fact that its equity market is among the cheapest in the world, with 60 percent of companies trading on its benchmark Nikkei 225 Average trading below replacement value.
Elsewhere, China's burgeoning middle classes are still in throes of helping the Chinese authorities in their quest to reorient the world's second biggest economy towards a greater reliance on domestic consumption. There's been little in the way of a dampening of demand from newly or recently-moneyed Chinese for European automobiles. Consequently, European auto parts makers are one intriguing way to ride the coat-tails of Chinese consumer spending without trying to catch a falling knife by trying to call a bottom in the market by purchasing Chinese companies themselves.
"European car parts are compelling because cars must have more efficient parts if they are to meet China's ambitious emissions reduction targets. European auto parts makers usually earn between 15 and 20 percent of their annual revenues from China," explained Michael Lambert.
Foreign carmakers selling into China don't make as compelling a case since new policies, including one that could allow dealers to sell vehicles from more than one manufacturer would lessen the manufacturer's leverage over dealerships. Furthermore, the quality of China's own cars has improved significantly over the last 10 years.
Resona Partners says it has compiled a list of Japanese companies with high exposure to China as well as auto-sector, solar power and automation stocks it believes are positioned to take advantage of resurgence in the Chinese economy.
In addition to Japan and the European car parts space, Resona Partners reminded investors that China's own fast-growing, consumer-oriented businesses like Internet giants Alibaba, Baidu and Tencent are becoming bellwether stocks and staples that reflect the overall health of the Chinese economy.
"Prices of stock in these companies have been beaten up in the recent market turmoil. The likes of Alibaba and Tencent stand to benefit from a major expansion of 4G LTE in the country that has brought ultra-high speed mobile internet speeds to more than 250 million users - that's more than 75% of the population of the United States," said Resona's Michael Lambert.
About Resona Partners:
At Resona Partners we offer competitive industry standard charges on all of our range of markets. You can take positions from major global indices and equities, to commodities and currencies. Our portfolio managers are equipped with the latest information from our award winning analysts department to keep you one step ahead of the market.
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