Here are 3 key investment themes in China for 2014
Reforms to be implemented by 2020.
According to CCB International Securities, China’s leadership has released an ambitious blueprint for reforms to be completed by 2020.
ROE outperformers. We tend to prefer leading players in sectors with greater potential for ROE improvement, notably household appliances, entertainment and leisure, automobiles, software and IT services, oil and gas, healthcare and IT hardware.
Cyclical earnings recovery for certain sectors in 2014F, due to improving demand-and-supply dynamics and stronger pricing power at leading firms. Cement, solar, chemicals and certain sub-segments of the consumer discretionary sector could all be part of the same potential turnaround story.
Beneficiaries of reform. We recommend a basket of stocks under a broad environmental theme, comprising leading companies in gas, oil services, wind, solar and public transportation.
Accumulate the beneficiaries of financial reform including the Chinese banks we have selected below, brokerages and insurers.
Also consider milk, child products, home appliances, healthcare and other consumer sub-sectors positioned to reap the benefits of urbanization and changes to the one-child policy.