From superpower to Chinese debt and environmental leadership, there are exciting investment opportunities in the Year of the Dog. What are the key themes to look out for in the canine-related year?
Strategist Michael Power and portfolio managers Greg Kuhnert and Archie Hart from Investec Asset Management highlight five China-related themes:
1. Growing Environmental Leadership
Whilst President Donald Trump withdrew from the Paris climate accord, President Xi Jinping spoke at the World Economic Forum in Davos, Switzerland – an important first, and a milestone at which Xi reiterated his support for the Paris climate deal. China is stepping up to fill gaps left by what appears to be an increasingly isolationist American policy. China is already home to eight of the world’s top 10 solar panel module manufacturers, four of the world’s top 10 wind turbine manufacturers and four of the world’s top eight electric vehicle battery manufacturers.
In September 2017 we joined the Asian Corporate Governance Associations delegation to China (Beijing, Shanghai and Shenzhen). We met with Chinese regulators and stock exchanges, domestic institutional investors, listed companies, business associations, and corporate governance experts and learned that there is a live governance debate ongoing in China. Certainly, stock exchanges are evolving their approach to governance. Considerable policy efforts can be seen around environmental issues, including for example the green finance agenda and a five-year economic and social development plan.
As these reforms will inevitably come at a cost to polluters, attention is increasingly being directed towards managing these issues. These trends look set to accelerate, in our view.
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