For over 20 years, China has been seen as the waking giant; in large part due to its 1978 reforms that reduced government price control, encouraged the growth of private business, improved workforce education and invested in industrial production. In 2001 Goldman Sachs' Jim O’Neill’s BRIC thesis declared China as one of the fastest growing economies likely to overtake the developed nations by 2050. By 2007 China’s Equity Market had increased by 201%.
In April of this year, Goldman (GS) raised its forecast for China’s economic growth to 8.3 percent for 2009 and 10.9 percent for 2010. In May, Morgan Stanley (MS) raised its forecast to 7-8 percent for 2009.
Over the years, China’s challenges with Human Rights and Product Safety have fluctuated investor interest, while the recent Global recession has some shareholders cautiously looking to China for growth. But amidst some apprehension CCG’s Monday, May 18th, “China Rising Investment Conference“ was well attended.
The conference offered exposure to many Chinese companies with high growth potential that are addressing shareholder concerns with Transparency, Quality Control and World Class Financial Reporting.
In the breakfast session, Crocker Coulson, President of CCG Investor Relations noted that many of the companies in attendance have “Operating Margins and Returns on Invested capital that one would very rarely see in the US”; in part due to China’s “structural barriers to entry.”
He went on to say China has an “inverse picture” than that of the US offering “an underleveraged consumer, a solvent banking system, and a fully funded government stimulus plan that does not require assumption of large amount of debt or printing new currency to fund it.” This landscape may allow China to emerge from the Global downtown in a stronger position than the developed economies.
Coulson went on to caution that the rebound in China has been “quite uneven” playing out differently among various regions and industries.
Breakfast keynote speaker, Donald Straszheim, Managing Principal of Straszheim Global Advisors, Inc. believes “2009 will be the slowest growth rate year in China, somewhere in the 6-8 percent ” range, but went on to say “China didn’t do anything wrong, the slowdown in China is made in America.”
Straszheim believes that “China is going to continue to treat capital better than America.”
He stated, the “ongoing growth rate in China is faster there than here (in America). “This says a lot about asset allocation and investors focus on the opportunities.”
China Rising's lunch time panel consisted of Sell Side Analysts offering investment ideas:
(as of May 18th, 2009)
- Mark Tobin, Roth Capital recommended Jinpan International (JST)
- Adele L. Mao, China Diversified Growth recommended (CPBY) China Fire and Security (CFSG) and ATA Inc. (ATAI)
- Katherine Lu, Oppenheimer & Co. Inc. (OPY) recommended American Oriental Bioengineering (AOB) and 3SBio Inc. (SSRX)
- Hongbo Lu, Piper Jaffray recommended Shandong Weigao Group Medical Polymer Co. Ltd., WuXi PharmaTech (Cayman) Inc. (WX), Simcere Pharmaceutical Group (SCR) and 3SBio Inc.
- Hao Hong, Brean Murray, Carret & Co.recommended American Dairy (ADIY). Hong also voiced concern over China’s 4 Trillion Yuan Bailout that had received praise from other presenters. He raised questions over origins and allocation of the money. He went on to say that “investing in China is all about the money cycle…If you invest with valuation, it is going to make you very very poor.”
A Snapshot of the companies recommended by the analysts can be found here.
On Tuesday Morning, May 19th CCG partnered with IR Magazine and the New York Stock Exchange Euronext to host “China IR Best Practices Breakfast Seminar “. Industry professionals offered strategies for managing the relationship between the company and its investment base.
The panel consisted of Carl Yeung CFO, ATA, Crocker Coulson President, CCG Investor Relations, Jan Childress Director IR, Consolidated Edison, John Ma Director of China Research, Roth Capital Partners, Robert Wotczak Regional Head of Global Client Group, NYSE Euronext, Sandeep Mahindroo Senior Manager, IR, Infosys, Verrdun Edgtton, Corporate Governance Officer, The Bank of New York Mellon and was moderated by Neil Stewart Executive Editor, IR Magazine.
The panel discussed what makes Good Investor Relations. IR Magazine’s research showed there are 4 key areas:
The panel covered a lot territory. Some of the topics addressed were the importance of names for Listed Chinese companies, the Pros of Listing on a National Exchange as opposed to the Bulletin Board, the changes in Investor concerns amidst the Global Recession and evaluating the success of your IR Program.
Each panelist offered quality insight based on their industry experience.
Jan Childress shared details of the Performance Metrics used to measure the success of Consolidated Edison’s IR program which included meeting with a number of different types of investors from different regions. He said we “Put together a list of performance indicators that really go to the heart of our mission which is to get before the investor community.”
Verrdun Edgtton echoed the general tone of the panel which was “Good Corporate Governance is Good Business.”
The Chinese companies' presentations are available at CCG’s site.
Costs and Profit offers a Snapshot of the Attending Company’s and the Analyst Recommendations.
The “IR Breakfast Seminar” can be found here.
Disclaimer: Views or opinions expressed in this article may not be the views or opinions of the author.