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Business Times
2 days ago
- Business
- Business Times
Fidelity sees deep value in ‘boring' China sectors like beer and machinery
[HONG KONG] There is 'undoubtedly' value in Chinese equities, and within Asia, China is where asset management giant Fidelity International sees some of the best opportunities. In particular, the best value can be found in 'some of the more boring areas', such as beer producers in the consumer staples space and machine-tooling companies in the industrials sector. Making these points was Stuart Rumble, head of investment directing for the Asia-Pacific at Fidelity, in an interview with The Business Times. He was speaking to reporters in Hong Kong on Jul 4, the day after the asset management firm's Asia-Pacific Media Investment Conference. On a historical basis, Chinese equities are trading at valuations that are well below long-term averages, and investors are heavily underweight on their allocations there, he noted. Part of this reticence could stem from the 'really important caveat' that there has been 'a lot of dispersion' in earnings. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up He said: 'You've seen earnings revisions – up for the tech companies, e-commerce companies; (and) you've seen it go down for areas like property, energy and, to an extent, utilities.' Sectoral picks Some of Rumble's investment picks on a sectoral basis include beer producers, some of which are trading at 'really cheap' valuations. China's top beer producers include Tsingtao Brewery, maker of the eponymous lager, and China Resources Beer, which produces the Snow brand. 'Some of these consumer staple products are (those) with pricing power – they have been around for a long time, (and) people will continue to buy them,' he explained. Chinese sportswear is another 'interesting' investment category 'for the long term', as it is a business that is benefiting from different consumption patterns and there are counters at 'reasonable' valuations. 'Companies like Anta and Li-Ning have had a period of strong growth, and then a little bit of a pullback in this period of weaker consumer spending,' he noted. 'But they are getting a better control on their costs and optimising their store and product mix, and they're benefiting from things like (Chinese consumers) buying local brands.' The Chinese sportswear sector is also 'hugely unpenetrated' compared to developed markets, noted Fidelity investment analyst Alex Dong in a separate briefing on Jul 3. For instance, mainland Chinese spending on sportswear stands at less than US$50 per capita, compared with almost US$300 per capita in Hong Kong. 'Basically, you get six times upside for the consumption', though this could take 'a very, very long time to realise', said Dong. Chinese consumers are also pursuing a 'much healthier' lifestyle post-pandemic, and the total number of sports shoes sold in China in 2024 totalled some 400 million pairs, less than a third of the country's population of 1.4 billion people. On the industrial front, there is still a lot of potential for automation within factories in China, noted Rumble – which means opportunities for machine toolers. While a Western company is still the dominant market player in that space, some Chinese brands are already taking market share, he said, 'because they can deliver products just as good; their manufacturing is now market-leading; they're doing it for a cheaper cost; and they're localised'. On investment picks, Rumble and Dong did not name firms, in line with company policy. Pop Mart's outperformance But one counter that was brought up during the interview was Labubu-maker Pop Mart, a company whose share price has shot up more than 180 per cent year to date. The Hong Kong-listed toymaker has been a hot topic within the firm internally because of its outperformance, but it is fundamentally 'a stock of a product that kind of divides opinion'. Said Rumble: 'At the moment, it's popular with some segments of the consumer, but certainly not all.' Toy characters also go in and out of favour, even for globally recognised icons such as Hello Kitty, which has had moments of lower popularity, he said. 'The tricky thing is, although (Pop Mart is growing its) business and its addressable market certainly can still grow, you're paying a lot of money for that future growth,' he added. 'We're watching it, and we're waiting to see.'
Business Times
06-07-2025
- Business
- Business Times
Gold, pesos and lasers: What's on Fidelity's investment radar
[HONG KONG] A weakening US dollar and volatile equity markets were among the hotly discussed themes at Fidelity International's Asia-Pacific Media Investment Conference in Hong Kong on Thursday (Jul 3). Speaking at the event, the firm's portfolio managers and analysts – who collectively manage US$900.7 billion in assets – outlined investment opportunities they are eyeing across currencies, commodities, and emerging markets. Here are some of the key picks: 1. Betting against the greenback The US dollar could continue to weaken, said Matthew Quaife, global head of multi asset, who favours the euro and yen. 'If I were to shut my eyes and say: 'Will the dollar be weaker or stronger in a year's time?' I think it would be weaker against the euro and yen,' he said. The greenback has fallen 11.65 per cent and 8 per cent year to date against the euro and yen, respectively, as at Friday's close. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up A weaker dollar means that investments in euro- or yen-denominated assets – such as equities or bonds – would deliver higher returns when converted back to US dollars. 2. Gold still glitters 'We continue to like gold; we've liked gold for a while, so obviously that's been a good trade,' said Quaife. 'It's likely going higher, even though it's gone a long way.' Spot gold prices have climbed 27.11 per cent year to date, fuelled by safe-haven demand amid US dollar weakness. While the metal has already 'run some distance', it could rise further if investors rotate out of US Treasuries, Quaife added: 'If even a small amount of US Treasury money goes chasing (after) gold, it can really run.' 3. Long on Philippine government bonds Philippine central bankers may cut rates again amid sluggish growth, said portfolio manager Terrence Pang, making local currency government bonds an attractive bet. 'We certainly see potential to cut (interest rates) twice, if the growth continues to be sluggish,' he said. The Bangko Sentral ng Pilipinas last trimmed its policy rate to 5.25 per cent in June, its lowest in two-and-a-half years. With bond prices typically rising when interest rates fall, Pang sees upside in this space. He also flagged the currency angle: while most Asian currencies have rebounded to pre-conflict levels after the Israel-Iran war, the peso has lagged by '1-and-a-bit' per cent – offering what he called a 'currency kicker'. 4. Chinese lidar on the rise Lidar sensor adoption in Chinese cars is accelerating fast, with 15 to 20 per cent of cars sold this year expected to come fitted with lidar, said portfolio manager Dale Nicholls. 'That's up from 5 to 10 per cent in 2024, and 1 to 2 per cent in 2023, so the growth is exponential,' he said. Used in autonomous vehicles and self-driving functions, lidar – or light detection and ranging – is also expanding into robotics applications, such as autonomous vacuum cleaners. Nicholls did not name specific stocks, citing company policy, though China's top players in the space include Hesai Group and RoboSense Technology.
