Eastern promise: China’s love of luxury could spice up your portfolio 

If you want a guide to the latest trends in China’s stock market, the must-have items for stylish and moneyed young women provide some of the best clues.

Chinese fashionistas are luxe-brand enthusiasts who still love Louis Vuitton bags.

They also favour trainers from Li-Ning, the upmarket Chinese sportswear line founded by the Olympic gymnast of the same name. The company’s shares have doubled since March.

Land of opportunity: But taking a bet on China is a strategy best suited to those who can be phlegmatic about geo-political tensions and can afford to take some risk and a long-term view

Land of opportunity: But taking a bet on China is a strategy best suited to those who can be phlegmatic about geo-political tensions and can afford to take some risk and a long-term view

Land of opportunity: But taking a bet on China is a strategy best suited to those who can be phlegmatic about geo-political tensions and can afford to take some risk and a long-term view

Electric cars from Nio – whose founder William Li is known as China’s Elon Musk – are another status symbol. Kweichow Moutai is the chic supplier of spirits, while Nongfu Spring is the expensively hip mineral water.

Nongfu Spring shares soared on their stock market debut earlier this month. 

Since March, Kweichou Moutai shares have risen by 64 per cent, while Nio’s US-listed shares have advanced from less than $2 to $18, driven by the rush to benefit from the changing tastes of the more prosperous members of China’s 1.4bn population.

This mini-cultural revolution has been accompanied by other shifts.

Catherine Yeung, investment director at Fidelity International, which runs the China Special Situations trust and the China Consumer Fund, says: ‘Households which ordered all their lockdown meals from Meituan Dianping, a delivery service, have carried on doing so.’ Meituan’s shares, which were HK$72 in March, are now HK$232.

But should UK investors back these trends by moving into funds that invest in such businesses, and also have stakes in Chinese internet giants? 

Such is the confidence in enterprises that the Witan Pacific Trust, now managed by Baillie Gifford, is having a makeover. 

The Baillie Gifford China Growth Trust is to focus solely on listed and unlisted Chinese shares.

However, taking a bet on China is a strategy best suited to those who can be phlegmatic about geo-political tensions and can afford to take some risk and a long-term view. 

This month, China’s retail sales – which have lagged behind the recovery of the wider economy – returned to growth for the first time since the coronavirus outbreak. At the same time, the trade war between the US and China is intensifying.

With the US election 39 days away, a row is raging over Tik Tok, the Chinese video app which faces a US ban over security concerns. 

Chinese fashionistas are luxe-brand enthusiasts who still love Louis Vuitton bags (pictured)

Chinese fashionistas are luxe-brand enthusiasts who still love Louis Vuitton bags (pictured)

Chinese fashionistas are luxe-brand enthusiasts who still love Louis Vuitton bags (pictured)

This may be averted if tech group Oracle and supermarket giant Walmart acquire a holding in Tik Tok. But the Chinese press has decried the deal and Bytedance, Tik Tok’s owner, is not happy.

Also facing White House disapproval are the internet titans, the $698billion Alibaba and Tencent, worth $616billion. 

The latter holds data on US citizens through its gaming arm which has bought into businesses like Epic, creator of Fortnite. And, of course there is the row over Huawei, the Chinese telecoms behemoth.

The US stance on China will remain hardline if Joe Biden wins the election, especially in areas such the alleged abuses towards Uyghur Muslims in the Xinjiang province. 

But these concerns have not much held back Tencent, whose shares have jumped from $42 to $65 since March.

Alibaba’s price has increased from $176 to $270, thanks in part to the imminent stock market debut of Ant, the payments business.

Jian Shi Cortesi, manager of GAM’s China Evolution fund, says: ‘When the world goes back to normal post Covid-19, a large part of these changes will be here to stay. Chinese consumers will again go to London and Paris to buy global luxury brands.’

Darius McDermott of FundCalibre says: ‘If you invest in China, you are investing in a multi-decade story in which people move from villages into cities and start acquiring things like fridges. In the second phase, they acquire more luxury goods. It’s a trend that is likely to continue.’

Profiting from this may require patience, which is a Chinese virtue. 

The likes of Alibaba and Tencent make up a mere 5 per cent of the world’s stock markets. The US accounts for about 54 per cent. The story may just be beginning.

Popular Shares – Ferguson

After losing roughly half their value in the month to late March, when investors were panicking about the coronavirus, shares in plumbers’ merchant Ferguson have rallied by an impressive 80 per cent.

Counter-intuitively, that is due in no small part to its huge dependence on the US market – where it gets 90 per cent of its revenues. 

For while America has suffered one of the worst virus death tolls in the world, positive indicators such as rising numbers of permits for new houses have emerged and boosted the firm’s prospects.

How the company has actually performed will be revealed when it reports full-year results on Tuesday.

Analysts have also predicted that as countries began to open up over the summer, the firm and its plumbing rivals will have benefited from demand for their services.

Attention will also focus, however, on what the company has done to cut its costs and weather the storm – and how that has impacted profits.

This will affect whether Ferguson decides to bring back the dividend, which it cancelled in April because of the pandemic. 

Most analysts expect it to declare a payout of about 112p per share, a potentially bright piece of news.

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