When investing in any emerging market, looking beyond immediate uncertainty can be challenging. However, with a total population of over 1.4 billion, China’s scope for long-term structural growth remains appealing, especially in sectors such as healthcare, technology and consumption. These areas are capitalising on the country’s transition to a more consumer-driven economy.
Since mid-January, Covid-19 has changed the landscape, at least temporarily. The situation is highly uncertain and still may worsen before it improves. Nonetheless, the fact that the Chinese government has mobilised its resources comprehensively and quickly suggests that the impact on consumption and business confidence may be cyclical rather than structural. So as long-term investors we continue to be positioned to benefit from the secular growth in emerging-market consumption.
Millennial momentum
Driving this shift in consumption patterns is the country’s growing millennial population, which stands at around 400 million. This is more than the total working population of Europe.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
In China, this age group is more educated than previous generations. Over 90% of them have access to a smartphone. This has had a profound impact on the technology and e-commerce sectors and China is now the world’s number-one retail market. Here are some of the “New China” companies that we believe offer exposure to China’s transformation to a consumer-orientated economy.
Bilibili (Nasdaq: BILI) is a Chinese video-sharing platform centred upon animation, comics and games, similar to the app TikTok. It is a prime example of a company benefiting from the changing consumption patterns of a new generation.
Highlighting the exceptional levels of daily user activity on its platform, Bilibili reported total net revenues of $260m last year, approximately $83m more than the net sales of TikTok, which made around $177m worldwide the same year.
China’s Deliveroo will deliver
Another company tapping into this demographic’s growing demand for convenience is China’s multi-level technology service platform Meituan Dianping (Hong Kong: 3690) – the Chinese equivalent of Deliveroo. As the country’s leading website for local food-delivery services, consumer products and retail services, Meituan Dianping is enjoying accelerated growth in its user base.
The company, whose unique selling point is its ability to have fresh food delivered in 30 minutes within a three-kilometre radius, reported an increase from 382.3 million users in 2018 to 435.8 million last year.
Profiting from rising incomes
Ping An Insurance (Hong Kong: 2318), China’s biggest insurance group, is another of our long-term holdings and a further example of a company tapping into the country’s growing consumer culture. As expendable income grows and salaries rise, there is an increased demand for personal and business insurance. Ping An Insurance is a key beneficiary of this trend. Throw in growth in its banking division and the group’s long-term prospects remain auspicious.
-
Halifax: House price slump continues as prices slide for the sixth consecutive monthUK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
-
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
-
Pension savers turn to gold investmentsInvestors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
-
Where to find the best returns from student accommodationStudent accommodation can be a lucrative investment if you know where to look.
-
Best investing appsLooking for an easy-to-use app to help you start investing, keep track of your portfolio or make trades on the go? We round up the best investing apps
-
The world’s best bargain stocksSearching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
-
Revealed: the cheapest cities to own a home in BritainNew research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
-
UK recession: How to protect your portfolioAs the UK recession is confirmed, we look at ways to protect your wealth.
