In the lap of luxury goods: SMH interviewed Kevin Yeoh on what companies to buy in China, as China moves from a fixed-asset investment led economy to a more consumption-focused economy.
”Super funds by their nature are very conservative; they’re always going to be big holders of Australian equities and fixed interest … it’s very hard to change that psychology, particularly after the global financial crisis,” a former Beijing-based fund manager with AMP Capital, Kevin Yeoh, says.
Yeoh warns that any sort of direct play requires research, but he has some handy tips. He says investors should look at what the Chinese will want to buy during the next decade. He also prefers established Western companies with a healthy exposure to China’s growth, notably luxury-goods companies.
”Generally, you would think that the corporate governance would be better for Western companies,” he says. ”There’s going to be more disclosure, and it’s a lot easier to understand a luxury-goods company generally than some sort of Chinese internet company.
”In terms of thematic investing, I would look at a luxury-goods company like Prada. If you look at its sales, China is already one of the largest markets in terms of the geographic breakdown.”
The benefit of a luxury-goods play is that it’s not just a play on brands, but also on the booming Chinese travel market. Chinese tourists often load up on luxury goods because they are cheaper than back home.
The downside is that the appeal of luxury brands can be fickle, and the saturation of brands could render them unpopular. ”[Shanghai women] always pride themselves as the most sophisticated and elegant and most open to the West,” Yeoh says. ”When they see the mistresses of the Shanxi coalminers wearing Louis Vuitton … they need to be wearing something else.”