If beggars in China are accepting electronic payments instead of cash, then something must be going on in the global payment scene. Indeed, China is now the world’s top market for e-payments and also claims top spot for a few other innovations. It is the world’s largest drone manufacturer, robot supplier and online shopping market.
China is stepping into a new era. Over the decades, it has leaped frog the developed world and is no longer just a cheap manufacturing hub for global companies.
Source: International Federation of Robotics, 2017, PWC Total Retail 2017, South China Morning Post, Going cash free: why China is light years ahead in the online payment revolution
Behind this bold transition lies a series of government reforms aimed at boosting consumer demand and supporting new economy industries like consumer, healthcare and internet services.
How can investors be part of China’s new era?
Look to the UBS (Lux) Equity Fund – China Opportunity (USD) Fund.
This Fund invests in companies where the Chinese are spending heavily on – premium products, healthcare, education, insurance, and internet services.
Spotlight on healthcare sector
Why is healthcare an exciting sector in China? The segment is still in the early stages of growth and has excellent long-term potential. As incomes rise and demand for better living standards in China increase, consumers will focus more on their well-being. At the moment, spending on health-related matters is still low compared to developed countries.
Healthcare spending in China is still low compared to developed markets
Source: World Health Organization 2015, China Daily 2018, Bain & Company: China Healthcare Outlook, UBS Asset Management
Strong growth potential in China’s health
Source: China Daily, December 2017
The Fund focuses on leaders within this segment. These top quality companies have invested in research and development and have a strong pipeline of innovative drugs that help them not only to compete domestically but also globally.
An example of this stock is CSPC Pharmaceutical. It manufactures drugs to treat strokes, hypertension and cancer. It has a strong pipeline which is likely to drive the company's long-term growth.
Source: CSPC, Newswire , 19 March 2018; China Pharmaceutical Sector, DBS 16 February 2017. This information should not be considered a recommendation to purchase or sell any security.
While the sector may experience some volatility due to policy uncertainty, we are not overly worried given the growth potential and the quality of our invested companies.
Chinese consumers are upgrading their lifestyles
Chinese consumers are trading up – accepting higher prices and buying premium, value-added, products across a whole range of categories. This premiumisation trend is visible across the sale of automobiles, personal care and goods.
For example, premium Baijiu brands, a customary drink at banquets and business meals, have seen their growth surpass their mass market peers significantly. We see the same trends in top beer brands as well.
Source: Bloomberg (end Dec 2017), Euromonitor, CSCI Research, UBS Asset Management (end Dec 2016)
Source: Bernstein, 31 Jan 2018
Our portfolio is less sensitive to the impact of the US/China trade war
UBS Asset Management is paying close attention to this topic, but the negotiation path is hard to predict.
A prolonged period of uncertainty could have a negative impact on production and investment sentiments. But we still think there's a chance for a compromise.
Ultimately, both sides will get hurt by a trade war, so we think it is in both sides' best interest to seek a solution.
At the company level, companies in the export industry with high exposure to the United States will be affected.
However, as we look at our investment strategies, our portfolio is less sensitive to the trade tension as we are focused on the domestic growth story within China and domestic consumption-related stocks.
Tap into opportunities in China’s new economy with the UBS (Lux) Equity Fund – China Opportunity (USD) P-acc, exclusively offered in US Dollar currency in Thailand only by Citigold. Citigold is the only global wealth advisor in Thailand that lets you invest directly in up to 180 mutual funds from 16 leading onshore and offshore fund managers.
Speak to Citigold about opportunities in China today
Lean on the award winning franchise at UBS Asset Management. Speak to a Citigold relationship manager about these solutions today. Please call 02-081-0999 or visit https://citi.asia/THDcgCHO for more information.
