Coal producers and insurers, both poised to profit from China's energy-hungry but aging population, are among the best potential China plays for global investors, a Mirae Asset fund manager said.
But the country's big banks and oil companies should be approached with caution, given their less impressive profit outlook, Li Cong of Mirae Asset China Solomon Fund, said. "With the banking sector, I think the growth will be very high for the next few years. But I more prefer the medium-sized banks like China Merchants Bank," he said during the Reuters China Century Summit in HK. "Markets leaders like ICBC or CCB, fundamentally they are very good, but in terms of the stock performance, you need smaller banks where growth might be higher." The China Solomon Fund, held mainly by the country's retail investors, has returned 72%since its launch in Mar '06, compared with a 65.9% rise in its benchmark, the MSCI China Index. Li said he was more attracted to the insurance sector's long-term outlook. "The penetration rate is very low per capita compared with other countries ... and the growth rate of the sector is very high," he said. "(You have) high growth, low penetration and also the insurance sector will benefit most from asset (market) formation in China." Another favourite is the coal sector, where his holdings include producer China Coal Energy. In China, the world's largest producer and consumer of coal, demand has nearly doubled in the past 5 years. Coal accounts for about 70% of primary energy consumption. Li noted that government policy has allowed for both consolidation in the sector and more market-oriented pricing, which should ultimately fuel profit growth. "In the medium term, the coal price will continue to go up, let's say by 5% every year ... because of the Chinese government's policy to improve energy efficiency and encourage people to use less coal per unit of GDP," he said. "The industry consolidation theme will keep the growth of the bigger players higher than the overall industry." By contrast, he said output or volume growth at the country's major oil producers was relatively flat and significant discoveries were needed to boost reserves. "In the near term, I don't think the sector will make much of a positive contribution," he said. "The oil price is already high. And also the production costs are rising going forward, so the margin will not be as high." China is likely to surpass Japan by 2015 as the Asian country with the highest number of wealthy individuals, an executive with management consultancy Bain and Company said. But many global financial firms, including private banks who cater exclusively to the wealthy, are underestimating the difficulty of winning a profitable piece of the booming market, said Johnson Chng, head of the firm's Greater China financial services practice. "Outside, from afar, China looks attractive, but from the inside it's a lot more complex ... You need to get in early in order to learn the market, because the customer behaviour is very different," he told the Reuters China Century Summit, held at the Reuters office in HK. "The early years may be more about just getting up the learning curve, rather than making a profit out of it. Then when 2015 comes, or whichever year the market is ready, you are also ready." Japan was home to 1.4 m high-net-worth individuals - people with more than US$1 m in financial assets excluding their homes - worth a combined US$3.5 t in '05, according to report by Merrill and consultants Capgemini. By comparison, mainland China was home to 320,000 of these wealthy individuals, together worth about US$1.59 t. But since the start of '06, Chinese stocks have risen more than fourfold, powered by double-digit economic growth. "One would expect that China will continue to grow at 10 to 12% for the next 5 to 10 years. And that kind of economy is going to create a lot of million or billionaires," said Chng. "You can start to imagine the number of billionaires being created from the stock market. The other market is property." That has also boosted the ranks of the "mass affluent" worth between 200,000 yuan and 8 m yuan, who are estimated to number more than 1.1 m. China's domestic stock market, already at a record high, is likely to rise more than 10% by year-end with the Shanghai Composite Index hitting 6,000, Atlantis Investment Management's top China fund manager said. Yang Liu also said at the Reuters China Century Summit that the China Enterprises index of H shares was likely to challenge the 20,000 level next year. The H-share index hit an intraday record of 14,606.21 on last Wed and would need to rise another 37% to reach 20,000. But corporate earnings growth, combined with the appreciation of China's currency, should fuel gains, Liu said. "It's likely we're going to challenge the 20,000 level, and this is about 15 or 16x '08 earnings," she said at the summit. "That range does not look demanding given the China fundamentals." In fact, some Chinese investors are looking at 8,000 for the Shanghai Composite Index. Chinese stocks may keep rallying through to '09 thanks to the hosting of the '08 Beijing Olympic Games, according to UBS AG. In the past 11 Olympics, the host country's benchmark stock index rose an average 25% in the year before the event, wrote UBS analysts Louis Shan and Edmond Huang in a note. In the Games year, benchmarks rose in 3 of the past 4 Olympics and gained in the year following in all 4cases. "If history repeats itself, we would likely continue to see a positive stock market return for China in both '08 and '09,'' wrote Shan and Huang. Property developers, retailers, food and beverage and tourism-related companies will be the biggest winners, the strategists wrote. They recommended Shanghai-listed China CYTS Tours, China Sports Industry Group Co., which organizes sports events and manufactures sports goods, and Air China Ltd., the country's largest airline. Phillip Yeo of DBS Asset Management in Singapore, is buying tourism-related stocks, betting the Games will spur demand for hotels and airline flights. "The chief beneficiaries of the Beijing Olympics will be consumption and tourism-related stocks,'' said Yeo. In the past year he's bought shares in Hongkong & Shanghai Hotels, which operates a hotel in Beijing, and China Sports International, a sports-shoes manufacturer. Spain, which hosted the '92 Games in Barcelona, saw its stock benchmark climb 19% in the 12 months prior to the sporting event, while Greece's main index rose 27% in the year before Athens held the Olympics in '04, according to UBS. "Airlines and hotels will likely benefit from an increase in rates ahead of the Olympics,'' said Winson Fong, head of greater China equities at SG Asset Management. "Sports-related stocks such as Li Ning would be one of the beneficiaries'' from the increased interest in sports brought on by the Olympics. Air China will increase the frequency of flights to Britain, France, Russia and the U.S. as the '08 Olympic Games fuel demand for travel to its hub. UBS estimates that hosting the Olympic Games will help sustain Beijing's economic growth rate at over 12% from '07 to '10, and create 745,000 new jobs from '04 to '09. Investors need to keep in mind that economic factors and market valuations differ during each Olympics period, the UBS analysts wrote. The Olympics' impact on China's economy is likely to be minimal, they said. Beijing makes up only 1.1% of the total Chinese population and accounts for less than 3% of GDP, the report said. Hans Kunnen of Colonial First State Global Asset Management in Sydney, doubts the Olympics investment theme. "It's like a flea bite on an elephant; there's so much else going on,'' said Kunnen. "It is swamped by everything else and I wouldn't be buying or selling anything based on the Olympics.'' Investments based on demand generated by the Olympics may suffer when the event ends. South Korea saw its benchmark Kospi surge sixfold in 5 years before peaking 6 months after the '88 Seoul Games. By Aug '92, the measure had shed more than half its value. "With all the retail investors taking out loans to jump into the market, the aftermath was quite severe,'' said Kang Shin Woo of Korea Investment Trust Management Co. "It's hard to say what will happen in China but there probably will be some fallout after the event.'' Jack Cowok wrote: > > Perhatikan index China. > Trading tetap hati-hati. > > Dow sudah tidak ada momentum yg terlalu mengkawatirkan. > > Salam > JACK Kunjungi situs http://www.info-saham.com untuk informasi seputar saham. DILARANG KERAS MEMOSTING OPINI PRIBADI TENTANG POLITIK DI MILIS INI. Silahkan lakukan itu di milis [EMAIL PROTECTED] [EMAIL PROTECTED] untuk berhenti dari milis saham [EMAIL PROTECTED] untuk bergabung ke milis saham Yahoo! Groups Links <*> To visit your group on the web, go to: http://groups.yahoo.com/group/saham/ <*> Your email settings: Individual Email | Traditional <*> To change settings online go to: http://groups.yahoo.com/group/saham/join (Yahoo! ID required) <*> To change settings via email: mailto:[EMAIL PROTECTED] mailto:[EMAIL PROTECTED] <*> To unsubscribe from this group, send an email to: [EMAIL PROTECTED] <*> Your use of Yahoo! Groups is subject to: http://docs.yahoo.com/info/terms/
