Aaron Armstrong

By Aaron Armstrong

China Week 2016: What’s Inside the Fortune Cookie?

Invented somewhere between San Francisco and Los Angeles, no western Chinese meal can end without the now ubiquitous fortune cookie. So far, we have shared why the Chinese economy will continue to grow and the sectors that will drive that growth. It’s now time for us to break open our fortune cookies and show you the best investment opportunities for the future.

 

Cookie 1: You will have a long and healthy life

A decade ago the Shanghai marathon struggled to get any entrants. Last year over 100,000 people entered the lottery for the 23,000 starter places[1]. At the same time, football attendances in the Chinese Super League have doubled[2]. A perfect score for Pou Sheng, a distributor for Nike and Adidas in mainland China. A good quality management team with excellent ESG (Environmental, Social and Governance) credentials, Pou Sheng has been in our Asia Fund since December 2015, delivering returns of 58% during that time.

 

Cookie 2: You will be famous

The big screen beckons for the Chinese as cinema screen numbers have grown from just over 2000 in 2004 to an estimated 45,000 by 2017[3].  This has not gone unnoticed, in particular by IMAX, the Canadian company behind the world famous premium cinema format. Their local subsidiary IMAX China, which listed on the Hong Kong stock exchange in 2015, benefits from strong western standard corporate governance including a good level of independence on the board of directors. Their latest laser-based, digital projection equipment uses less energy than traditional alternatives and they have excellent heath and safety policies covering installation staff. In our fund since November 2015, we’re in the box seat to take advantage of this blockbuster.

 

Cookie 3: You will travel to seek your fortune:

The changes in the Chinese economy presents great opportunities across the whole of Asia. We are already seeing the shift of low cost manufacturing activity to new growth hotspots like Vietnam and Indonesia. Our Asia Fund with over 30% in frontier Asia takes advantage of this trend to capture the second order effects from the rebalancing of the Chinese economy.

Honed over decades of investing in Asia, our investment process which incorporates material non-financial factors into the analysis, helps us to identify the winners before our peers. Whilst not quite fortune cookies, we’re confident our investments will leave a sweet taste in your mouth.

 

 

[1] https://www.ft.com/content/82d5a3aa-b2ce-11e5-8358-9a82b43f6b2f

[2] https://en.wikipedia.org/wiki/Chinese_Super_League#Season_averages

[3] https://www.weekinchina.com/2015/12/a-billion-bums-on-seats/

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