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China’s Changing Priorities May Offer Opportunities in Select Businesses

Investors may look selectively to businesses supported by China’s emphasis on health and wellness, domestic brands, and higher-value manufacturing.

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September 2021

China’s recent regulatory moves have rattled many investors who have exited Chinese names, fearing policy changes would cap future gains. But opportunities in China, while undoubtedly complex and necessitating careful consideration, are too compelling to ignore, explained Sands Capital Sr. Portfolio Manager Ashraf Haque in a recent radio interview (starts at 11:07) for Bloomberg Markets.

While the range of punitive regulations imposed on Chinese companies, ranging from after-school tutors to large ecommerce platforms, has created uncertainty, there are many areas, such as the consumer sector, that may benefit from China’s evolving priorities.

Haque said he does not believe Chinese regulators are trying to stifle capitalism or punish the wealthy. Rather, he sees China’s moves as aimed at reducing inequality, expanding access to healthcare, encouraging better health and wellness, and supporting higher-value manufacturing industries.

Chinese regulators are grappling with many of the same issues as their U.S. counterparts in dealing with technology companies that have attained near-monopolistic status, Haque explained. The key difference, he said, is that China has the ability to regulate these companies much more effectively. “I don’t think they are trying to destroy the Tencents and Alibabas; rather, they want to ensure fair competition,” Haque concluded.

Disclosures:

References to portfolio companies provided for illustrative purposes only to describe China’s evolving regulatory focus on various industries. Tencent, Alibaba, and Anta Sports Products are holdings in various strategies managed by Sands Capital Management.

This material is not intended as a forecast, a guarantee of future results, investment recommendations, or an offer to buy or sell any securities. The views expressed by Sands Capital Management and the information contained herein are current as of the date indicated and are subject to change. This material may contain forward-looking statements, which are subject to uncertainty and contingencies outside of Sands Capital’s control. Readers should not place undue reliance upon these forward-looking statements. There is no guarantee that Sands Capital will meet its stated goals. Past performance is not indicative of future results. A company’s fundamentals or earnings growth is no guarantee that its share price will increase. Characteristics, sector exposure and holdings information are subject to change, and should not be considered as recommendations. References to companies provided for illustrative purposes only. The specific portfolio holdings identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. There is no assurance that any securities discussed will remain in the portfolio or that securities sold have not been repurchased. You should not assume that any investment is or will be profitable. GIPS® Reports and additional disclosures for the related composites may be found at Sands Capital Annual Disclosure Presentation. This site may contain links to other websites, including links to the websites of companies that provide related information, products, and services. Such external internet addresses contain information created, published, maintained, or otherwise posted by institutions or organizations independent of Sands Capital. These links are solely for the convenience of visitors to this site, and the inclusion of such links does not imply an affiliation, sponsorship, or endorsement.

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