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Hedge fund managers back the China story

As Bridgewater Associates founder Ray Dalio told the Sohn Hearts & Minds conference on Friday, there are only two big horses in the world economy — the US and China.
Glenda Korporaal
The Australian
Nov 23, 2019

As Bridgewater Associates founder Ray Dalio told the Sohn Hearts & Minds conference on Friday, there are only two big horses in the world economy — the US and China.

He said China had seen big in- creases in per capita income while its role in the world economy had become significantly larger.

Its poverty rate had fallen and life expectancy had increased by 10 years, while the country was a centre for innovation and entrepreneurialism.

The rising role of China was a key theme of this year’s Sohn conference.

“There is no more competitive place in the world in terms of new technology and new innovation than China,” Mr Dalio said.

There was no competition from Europe whose economy was “dead in the water”.

Oaktree Capital’s Howard Marks described China as the “teenager” of the world economy.

“Europe and Japan are economic senior citizens. The US is a mature adult and China is a teenager. Like a teenager it will have good days and bad days but its best decades are ahead of it.”

He said China’s economic growth prospects meant investors should look at putting money into the country over the long term.

“For the long term, you want to have some significant investment there,” he said.

Tribeca Investment Partners, fund manager Jun Bei Liu tipped the A2 Milk company for its exposure to the growing infant formula market in China. Liu, whose stock tip last year of English language teaching company New Oriental Education & Technology was one of the top performing recommendations of the 2018 Sohn conference, returned to the theme of the buying power of the Chinese consumer with this year’s recommendation.

She said A2 had a big potential for sales in China’s mother-and-baby store market as well as its sales offline.

“A2 is in a unique position to take advantage of the market in China,” she said.

She said its products were al- ready among the top 10 selling brands online in China.

“It is building a premium brand in a competitive market,” she said. “Where others have failed, A2 has done it incredibly well.”

She said A2 had a strong competitive edge in the China market as it already had a licence to sell into bricks-and-mortar stores.

Ms Liu said A2’s share price was not expensive when one considered its potential in the Chinese infant formula market. “Some may say A2 looks expensive on traditional measurements but it is not (expensive) for growth.”

Beeneet Kothari of Tekne Capital Management recommended another Chinese-based stock, Nasdaq listed GDS Holdings. The company, which began as an IT service provider, is a data centre group with operations in major cities including Shanghai, Beijing, Chengdu and Shenzhen.

It has a client base of more 600 companies in China including e- commerce giants Alibaba and Tencent.

This article was originally posted on The Australian here.

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