A Journey to China | Capital Group

Insights

June 2017

A Journey to China

An on-the-ground look at what's happening in Asia and the opportunities for investors around the world.

Video

Transcript

Stephen Green: To try and figure out what’s going on in Asia, you need to be running around, meeting people and seeing things with your own eyes.

Warren Howe: Capital’s presence in Asia is extensive. We have investment professionals in Tokyo, Beijing, Singapore as well as Hong Kong.

Steve Watson: This is central Hong Kong, where our Capital offices are and this is the main business district.

Julie Wang Chou: It’s really important to be local, to be able to have a relationship with the management team so that you understand how they are likely to behave under different circumstances. In China and in Taiwan, management teams in these countries are still much more comfortable speaking in their native language, which is Mandarin. You just get so much more out of the meeting when you don’t need a translator.

Warren Howe: I think there’s tremendous investment potential in Asia.

Steve Watson: Asia is a fascinating and dynamic place.

Andrew Dougherty: Asia is a huge part of the global economy. More than half of the global economy. It has the fastest growth rates in terms of the large economies in the world.

Nicholas Whyatt: The Change in China over the last 30 years would probably equate to the economic shift and growth we saw in America over a 150-year period.

Lawrence Gong: There’s a lot of vibe in the culture. People are smart and they work really hard.

Ben Lin: Under globalization, Asia is becoming a very important market for a lot of multinationals as well.

Matthew Wolf: You’re seeing much of the world’s growth is actually coming from Asia, largely driven by China, but also lots of other parts of Asia.

Warren Howe: But I think as an investor, you know it’s important to have a global perspective.

Johnny Chan: There are many, many investment opportunities in Asia because of the sheer population size.

Lawrence Gong: I think (the) Internet is a very good symbol of what’s happening in China, in terms of the economy and the power of the population.

Andrew Dougherty: China is the largest Internet user base in the world. Five or ten years ago, it was nothing on the radar.

Julie Wang Chou: There is much more growth, fundamental growth coming out of this region than in developed markets because these are emerging economies where there are still ample opportunities for people to improve their standards of living, to innovate in ways that maybe the more developed markets have already done.

Matthew Wolf: And much of the sort of middle class luxuries or middle class needs of daily life that we take for granted in a lot of the developed markets are still being built for many people in Asia, and so that creates huge opportunities.

Renaud Samyn: On a variety of matrixes, the Asian consumer is really under-consuming if you will relative to the purchasing power. You see that in China but you also see that in India.

Stephen Green: The challenging thing for investors in Asia is that the data is not so good and the policy is much less transparent than in Europe in the U.S. So that means there’s a huge advantage to having people on the ground.

Warren Howe: So I’m at Lok Fu estate, it’s a shopping center. And we happen to be in the wet market here, where local Hong Kong consumers come and shop for their daily necessities.  Part of the reason why we go out on these field trips is to really get a sense of the health of the economy and the underlying consumer. And although this is a mall which is oriented towards very much nondiscretionary spend, so daily necessities, I think you can still get a pulse of what people are buying, the general environment, and really how business conditions are.

Julie Wang Chou: Today I’m in the mall checking out some of the stores and the store traffic, as well as previewing the new collections that have just hit the shelves. Right now I’m in the Gucci store in the IFC Mall in Hong Kong. What I love about luxury is that there is a very practical component to running a business but often the numbers are driven by something very abstract. And it’s very difficult to say whether or not you will like this blue hat and whether or not this blue hat will sell well. So the challenge then, as a luxury analyst, you have to be able to combine an understanding of what consumer preferences are likely to be like and also the quantitative or practical component of the business.  

Ben Lin: So we’re in Dongguan in China. The reason we’re here is that part of my investment research is to basically do due diligence on these companies. And factory tour is part of my job. I think it’s a very important part of my job because it allows us to learn about how these products are made, and what are the key drivers at least from a manufacturing perspective. You get a good feel of what the company culture is like, whether morale is high or low, because that can impact the company’s progress.

Aditi Puri: At Capital, we really try to emphasize a collaborative teamwork culture and we really operate as a global firm.

Steve Watson: We have trading desks here in Hong Kong. We have one in Singapore. We have one in London. We trade all around the world and it’s great to have those traders who are extremely skilled and experienced, on the ground here very focused in real-time on the markets.

Warren Howe: One of the areas I’m really excited about at the moment is the trend of travel in Asia, particularly Chinese tourists exploring the rest of the world, which we think is a multi-decade trend.

Lawrence Gong: There are only 60 million passport holders in China. I look at my father and mother. They’ve never traveled to any country outside of China until the age of 60.

Johnny Chan: The other category which I’m quite excited about is that, while smartphone penetration has already matured, you can see that there are still many, many new technologies coming through in the smartphone area. And as a result, that creates a lot of dollar content opportunities for multiple companies in the supply chain.

Matthew Wolf: I think a lot of global growth that we’re going to see in the future is going to be coming from Asia, as frankly it has been for the last bunch of years.

Ben Lin: I think Asia is probably the best place to invest for the long term. There is a huge amount of energy here.

Johnny Chan: So even though you can be bearish on the Chinese economy, there’s always something going on, something new.

Warren Howe: I think Capital has a unique advantage in being able to invest and do well in Asia. We have very talented individuals with a lot of experience and we also have a global infrastructure of research which enables us to really leverage off to the benefit of what we’re doing in Asia. I think that’s really powerful compared to our competitors.


 

This communication is intended for advisers and professional investors only, and should not be relied upon by retail investors. Past results are not a guarantee of future results. This information is neither an offer nor a solicitation to buy or sell any securities or to provide any investment service. Statements attributed to an individual represent the opinions of that individual as of the date published and may not necessarily reflect the view of Capital Group or its affiliates.While Capital Group uses reasonable efforts to obtain information from sources which it believes to be reliable, Capital Group makes no representation or warranty as to the accuracy, reliability or completeness of the information. This communication is not intended to be comprehensive or to provide investment, tax or other advice. It has been prepared for multiple distributions and does not take account of the specific investment objectives of individual recipients and it may not be appropriate in all circumstances.The information provided in this communication is of a general nature and does not take into account your objectives, financial situation or needs. It has not been reviewed by any regulator. Before acting on any of the information you should consider its appropriateness, having regard to your own objectives, financial situation and needs.

This communication has been prepared by Capital International, Inc., a member of Capital Group, a company incorporated in California, United States of America. The liability of members is limited.

In Australia, this communication is issued by Capital Group Investment Management Limited (ACN 164 174 501 AFSL No. 443 118), a member of Capital Group, located at Level 18, 56 Pitt Street, Sydney NSW 2000 Australia.

All Capital Group trademarks are owned by The Capital Group Companies, Inc. or an affiliated company in the U.S., Australia and other countries. All other company and product names mentioned are the trademarks or registered trademarks of their respective companies.

© 2017 Capital Group. All rights reserved.