Covid-19 has changed the world in 360 degree. It has brought not just healthcare crisis, along with that it has brought Financial crisis as well. Lockdown and social distancing are new normal for the most part of the world. But it is not the same case for China which is Second largest economy in the world by GDP. Matter of fact Covid-19 is not just past for China; they are the only Economy in the world which are growing even in the year 2020.
Historically it is evident that money flies from uncertain environment to certain, predictable and stable Environment. Currently China is the only major country in the world which is offering that.
“China is, even at lower levels of growth, going to be the dominant, the super majority driver of growth (over the) next 10 years.”
SENIOR PORTFOLIO MANAGER AT INVESCO
Statement itself say that gives the opportunities that Chinese Economy is providing, and one can take advantage of it via investing in Chinese stocks.
We think that China has potential to become the biggest economy in the world, When we look at history investors are structurally underweight China. Because of historical access issues and liquidity issues, most benchmarks do not include as much China as they should. That tends to render A shares, or domestic Chinese stocks, “generally undervalued. This provide opportunities to create substantial Alpha.
China had its V-shaped recovery complete by Q2 this year and it is the only country we think will be back on track to its 2019 levels by year-end or latest by first quarter of 2021.
Now one may argue that upcoming US presidential election poses some risk to Chinese economy because of Trade war issues but important point to understand is that China has shifted to being a self-reliant economy. Over 50% of their GDP comes from consumption within China. It becomes less reliant on the rest of the world and that makes it more interesting in long term because correlations could remain extremely low for China and you have still got these higher growth rates to be expected.
If Biden wins the 2020 Election than US-Chinese tension will decelerate and that will be the big positive trigger for china. That is the biggest reason why we believe one should have Chinese stocks or the stocks which will benefits from growth in Chinese Economy.
Till now we have discussed about the general idea why to Invest in China, now let’s dive deep as which specific sectors in China we like and have strong growth in coming years.
As I mentioned earlier that 50% GDP is coming from their own consumption. Let us elaborate that point in detail. Every year almost 20-25 million Passenger Vehicle are sold in China. As we know world is moving towards EV and there is huge potential to grow. We like Xpeng Inc. (Pure Chinese EV play). Xpeng Motors more than doubled September and third-quarter sales. In September, Xpeng delivered 3,478 electric vehicles, up 31% from August and up 145% year over year. For the full third quarter, Xpeng delivered 8,578 electric cars, up 266%.