Simon’s weekly wrap: China’s investment case

This week MoneywebNOW looked at local bank valuations, the global pet care industry and retail stocks.
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Standard Bank came out with an early trading update that says Heps should be up some 40% at the mid-year. I spoke with FNB Wealth and Investment’s Chantal Marx on local bank valuations, and she says that they are very cheap. In many cases as cheap as they were at the lows of the 2008/9 crisis and definitely offer opportunity.

The other side of the coin is the excellent local retail results we’ve been seeing. But how much have they been boosted by extra grant payments locally, coupled with pet up demand and retrenchment packages being spent. Evan Walker from 36One Asset Management agrees results were ahead of expectations. But he is concerned about the next set of earnings as the extra money that boosted profits is no longer in the system as the extended grants have ended.

People love their pets and keeping them healthy, and feed is a huge global industry. I spoke with Andrew Dittberner from Old Mutual Wealth on the growth drivers in the industry as well as being largely recession and patent proof. We also touched on their preferred global stock in the space.

China is one of the world’s fastest growing economies while at the same time being the world’s second largest. Yet investors are often significantly underweight Chinese exposure. Independent Securities CEO Simon Fillmore busted some China myths and makes the argument for investing into the Asian country, either directly or via global stocks with a strong Chinese focus, such as Richemont.

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I can’t help but think of the Buffet-Munger commentary on ‘banks’ where they both basically said valuing financial institutions is near an impossible task without a really sound knowledge of accounting/finance.

Just a thought.

End of comments.

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