How To Invest In China 2018

china
valueinvesting

#1

China is an absolutely enormous opportunity in the long-term (even if China looks fairly dangerous in the short-term!!!)

The Chinese Middle Class
The new Chinese middle class is expected to grow from 430 million today to a staggering 870 million by the mid 2020s…Even though the Chinese are only developing, in some second-tier cities the Chinese are living similar on a similar budget to people in the poorest parts of the US…

Living standards in the bigger cities are now on par with the best the US has to offer!

The growth of the Chinese middle class has truly exploded in recent years. McKinsey estimates that only 4% of the population could have been considered middle class in 2000. This figure grew to 68% in 2012…McKinsey estimates that more than 75% of China’s consumers will earn $9,000 to $34,000…

Finding The Opportunity
There are a few limits to investing in China:

• Local stock markets are completely off-limits. You can invest in Chinese companies through Hong-Kong, but not Chinese A-Shares themselves…

• Western companies don’t understand Chinese markets. Chinese markets are very particular. For example, almost all urban Chinese use an app called WeChat for everything essentially. If you don’t understand WeChat, you will struggle to even survive! The best showcase of this in action, is their reluctance to allow big tech to set-up in China. FAANG stocks are essentially forbidden to trade there…

There is a solution though:

Invest in a solid western company which knows China. Which brings me to my idea:

Burberry
Burberry is hugely popular in China amongst the wealthy. The brand has an affiliation with Britishness that the Chinese are drawn to…

This has been demonstrated in Burberry’s success in China. China accounts for a 1/4 of Burberry’s sales in recent years. The company is a marketing powerhouse and in China they have found a way to connect with the urban Chinese - an impressive feat since global retailers are struggling to get grips with social media in their own markets.

When Burberry advertised their the DK88 bag on WeChat in China, the users on their app increased three-fold. None of Burberries competitors have had this level of success with WeChat in China - according to Ken Odeluga - analyst for City Index.

I this makes Burberry an excellent way to play China’s growing middle class. If Burberry can become a staple of Chinese consumers culture, it may be the next Nike, or Coke - two true Buffett stocks with enormous and lasting brand value…

Financials
Burberry’s financials look solid.

It has typically returned 35% on capital in the last ten years…

The company has zero debt, is sitting on $900m in cash and has very positive cash flows:

Health Of Company
The overall health of Burberry is also very positive. Although it’s a little expensive at the moment, I think it would be an absolutely bargain if it was bought at a lower price…

I see Burberry as a long-term play on the Chinese middle class All the fundamentals are there for it to turn into a proper Buffett stock!


#2

I am Chinese located in Wuhan, center China. I can help you invest in China, for example buying Chinese stocks or real estate if you like. More, I can help you open market with WeChat platform and websites. If you want to enter China, feel free to contact me, tarvos21@gmail.com, call me Bing.