As China enters the Year of the Rat this Saturday (25 January), Jasmine Kang, Portfolio Manager at Comgest, the independent, international asset management group focused on quality growth investing, believes that China\u2019s growth has become more sustainable but that high-quality companies
\nare still rare and strong stock selection is more important than ever in the Year of the Rat:<\/p>\n
\u201cThe rat might be a shrewd and unpopular creature in our culture but in China it stands for diligence,
\nintelligence, energy, determination and achieving goals, so it is appropriate that it gives its name to a year in
\nwhich China\u2019s growth model is becoming more sustainable and its equity markets more transparent and open
\nto foreign investors.<\/p>\n
\u201cAt least economically the gods have been kind to the country in recent years. The shift in the Chinese
\neconomy from credit and infrastructure-driven growth to innovation, services and consumer-oriented growth is
\nalmost complete and real incomes are growing steadily. The opening of the Shenzhen and Shanghai stock
\nmarkets is proceeding at a rapid pace and China\u2019s long-term potential as a financial centre is huge. Although
\nthe share of foreign investors in Chinese A shares is still low, foreign institutional investors\u2019 access to the
\nShanghai and Shenzhen stock markets will continue to advance in the coming years, promoting capital
\ninflows and professionalising the capital market. The improvement of transparency and ESG issues is still in
\nits infancy, but more companies are already reporting in accordance with international standards.<\/p>\n
\u201cDespite the positive changes in the general environment, China remains a challenging place for stock
\npicking. High-quality companies still seem few and far between. In China it is particularly important for minority
\nshareholders to be in the same boat as the company’s decision-makers and managers. Governance
\nstructures are of crucial importance for the success of long-term oriented quality growth investors. Investors
\nshould have a diligent rat-like squint at potential investments to see if their growth is underpinned by strong
\nand open governance structures.<\/p>\n
\u201cShandong Weigao Group Medical Polymer Co., Ltd is a prime example of how improvements in governance
\nstructure favour minority shareholders. The company has long been a strong brand in the market for medical
\nconsumables but its growth was below average for a long time. Equity investments were reserved for top
\nmanagement only and were not tradeable. Through the reform of the Chinese capital market, these shares
\nhave become tradeable and, thanks to employee participation programs, they have become an important
\ninstrument for long-term corporate management and a catalyst for accelerating growth. Earnings per share
\nand the company share price have doubled over the past three years.<\/p>\n
\u201cDespite being known for its high volatility, in the long term, the outlook for the Chinese equity market is
\npositive. Over the past 12 months, the IT and healthcare-heavy ‘China Shenzhen’ index, with 36% value
\ngrowth in USD terms, has been one of the best stock markets in the world and has even outperformed the
\nNasdaq. In the Year of the Rat, investors should keep a sense of proportion and not just chase after rising
\nprices, but rather invest in quality over the long term and be patient to achieve an optimal risk-return profile for
\ntheir Chinese investment.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
As China enters the Year of the Rat this Saturday (25 January), Jasmine Kang, Portfolio Manager at Comgest, the independent, international asset management group focused on quality growth investing, believes that China\u2019s growth has become more sustainable but that high-quality companies
\nare still rare…<\/p>\n","protected":false},"author":1,"featured_media":89119,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1480],"tags":[1663,1809,1655,2073,1657,1651,2087,2025,2068,2239],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/89121"}],"collection":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/comments?post=89121"}],"version-history":[{"count":0,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/89121\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/89119"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=89121"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=89121"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=89121"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}