Management is also keen to improve cross-selling between its ticketing and accommodation businesses. The company enjoys superior margins as it has access to big user bases that enable it to acquire customers at a relatively lower cost. It is the biggest online travel agency by monthly active users in China, offering mainly air, train and bus tickets as well as hotel bookings. Tongcheng-Elong ( 00780) has Tencent and as its two largest shareholders. “We see high growth potential for Chacha, as the highly fragmented industry presents a consolidation opportunity for a focused, vertically integrated player with a solid brand portfolio,” they say.
This reflects its stringent quality control in its production line and supply chain. So which stocks do fund managers think are set to benefit? Small-cap ChinaĪberdeen Standard's Adrian Lim and Pruksa Iamthongthong, who managed the Bronze-rated Asia Dragon investment trust ( DGN), believe in two small cap ideas, which they think are unlikely to be impacted by the current regulatory push that is focused on the large caps.Ĭhacha Food ( 002557) is among China’s leading nut producers with well-established brands, including the largest roasted seeds brand locally. “Ultimately, this is a story where growth looks a little lower in China, but it’s more sustainable and it’s more inclusive, and that’s no bad thing for equity investors.” “Therefore they’ll err on the side of caution when considering how future changes will be viewed by the international investment community,” Gimber says. According to Hugh Gimber, global market strategist at JP Morgan Asset Management, policymakers still view some industries and companies to be misaligned with long-term social goals, making more intervention likely – and he thinks the financial sector and other sides of the technology space could be up next.Īttracting foreign capital is however another long-term objective for the country’s leadership. New regulations covering education, healthcare and property sectors should increase disposable household income, which will in turn lead to increased spending on consumption and services and thereby rebalance the economy in that direction.” More Regulation to ComeĬhinese markets do not seem to be out of the woods just jet though. “However, the reforms should drive long-term gains. There will be growing pains in the short term, Paras Anand, chief investment officer of Asia Pacific at Fidelity International, notes. The policies support a shift towards a goal of ‘common prosperity’, modernising the economy and ensuring equal access of opportunities and resources across the country, meaning the playing field is levelling out for rising-star companies. Several fund managers believe the current environment is providing opportunities for the innovation and consumer sectors, with plenty of investment prospects. But where there is flux there is opportunity.