Despite China’s 2015 economic growth forecast of 7% representing a 0.5% drop on the 2014 figure, Julian Pick, manager of Polen’s Global Growth Fund, believes that rising consumer spending fused with the possibilities of 4G could see online trading become the next big thing.
“There is pent-up demand for consumer goods,” he said.
“Whether or not the Chinese economy grows one or two points faster or slower will not affect the rate of people going to mobile internet.”
To back up this conviction, Pick cited the rate at which the Chinese population has established an online presence – particularly since the introduction of 4G.
“You might argue that about half of the population is online [as an indication of an imminent surge in ‘e-commerce’],” he explained. “But the more compelling statistic is the number of people that have access to 4G. Coming out of last year it was around 100 million, out of a country with 1.35 billion people.
“The Chinese political system means that when the country needs infrastructure work, it can happen very quickly. In the space of around 18 months, China went from almost zero to leap-frogging Europe in terms of 4G infrastructure.”
He continued: “People are just starting to have that experience of high-speed internet on mobile phones that the West has taken for granted for the past four or five years. China is just waking up to everything that can be done with high-speed and quality access to online services.
“A lot of people in China, and other emerging markets too, are going to embrace internet access via their mobile phones in the same way they embraced mobiles before the internet.”
Medieval business model, modern times
So how does this confidence translate into Pick’s portfolio?
The biggest sector weighting in the Global Growth Fund is information technology, which accounts for 36.35%, while the second-largest is consumer discretionary at 19.98%. It has a 8.33% overweight in China against the MSCI All Countries World Index average of 1.66%.
In order to capitalise on the 4G trend, Pick said: “We have added to our position in Alibaba Group since December. Operating a marketplace and collecting tolls on transactions has been good business since medieval times – it will be good business 500 years from now.
“Buyers want to be there because that is where the sellers are, sellers want to be where the buyers are, and Alibaba has already become the dominant marketplace for Chinese consumers. Not only is benefitting from the consumer economy in China, it is driving it forward.”
