UBS sees Chinese going-global groups as good investments

China’s companies with going-global strategies are likely to present good investment opportunities and will be one of the major investment themes in the second half of 2016, according to Gao Ting, head of China strategy at UBS Securities.

Sharing his outlook for the second half of 2016 on Wednesday, Gao said: “Generally speaking foreign investments in China and China’s investments in other countries are at a similar level, which shows that the size of China’s overseas investments is getting greater.”

Differing from previous investments of Chinese enterprises that focused on resources and energies, recent programs by private enterprises mainly focus on consumption-driven sectors, such as tourism, which will meet the demands of fast-growing numbers of outbound tourists. They also now emphasize internet-based technologies with a great number of domestic users, according to research data of UBS Securities.

Disclosure of information from A-share listed companies shows that the combined size of their outbound investments through mergers or acquisitions in the first half of 2016 has surpassed that of all of 2015 in many sectors, including healthcare, pharmaceuticals, entertainment and electrical home appliances, according to data from Shanghaibased Wind Information Co Ltd, a financial information services provider.

“The point of these going-global programs, be they through mergers, acquisitions or other vehicles, is to meet the enterprises’ demands in the domestic market, which will have positive effects on these companies’ longterm development,” said Gao.

Another two major themes for investment are infrastructure and the large-and-medium-cap enterprises that will benefit from the ShenzhenHong Kong Stock Connect when it starts running in the second half of 2016.

The point of these going-global programs ... is to meet the enterprises’ demands in the domestic market.” head of China strategy at UBS Securities

Gao Ting,

Gaoalso said investment opportunities may emerge in three sectors, namely electrical home appliances, foods and beverages, and biopharmaceuticals.

The electronic home appliances and food and beverage sectors have shown “turning points” in terms of sales revenue amid recovering market consumption of these products. The steadily growing pharmaceutical sector will attract more capital in the long run and will win investors’ optimistic sentiments, he said.