China as the second largest economy in the world with Hong Kong and Taiwan as key regional markets offers interesting growth opportunities.
Dominant consumer franchises
We believe dominant consumer franchises and brands should benefit from rising incomes and the premiumisation trend, and can offer good growth potential over the long term.
Rise in healthcare spending
China’s per capita spend on healthcare is still relatively low and has room to grow. We believe that companies providing drugs and medical services should benefit from an increased focus on healthcare spending and wellbeing.
High quality financials
We believe banks and high quality financials should benefit from similar drivers as consumer businesses: demographics, rising incomes and urbanisation.
A more connected and automated world
We believe an increased focus on research and development should lead to technology champions in niche markets. Domestic component manufacturers could benefit from the trend towards localised production.
About the strategy
China is evolving, with the market developing and broadening out driven by increasing innovation; it is no longer just about state-owned companies.
Martin Lau, Managing Partner explains the key investment themes for the Greater China investment strategy.
Our investment philosophy
FSSA Investment Managers’ investment approach is centred on identifying quality companies, buying them at a sensible price and holding for the long term.
We look for founders and management teams that act with integrity and risk awareness; and dominant franchises that have the ability to deliver sustainable and predictable returns over the long term.
We are research-driven, bottom-up investors1, carrying out detailed fundamental analysis2 to identify high quality companies to invest in for the long term. We travel extensively to meet with companies to assess the quality of management and their track record of executing long-term strategies; and supplement this with a qualitative and quantitative analysis of the company’s ability to compound growth in excess of the cost of capital.
1. Bottom-up investing is an investment approach that focuses on the analysis of individual stocks and de-emphasizes the significance of macroeconomic cycles.
2. Fundamental analysis is a method of measuring a security's intrinsic value by examining related economic and financial factors.
Our approach to sustainability
Environmental, social and governance (ESG) analysis is fully integrated into our investment process.
Our approach to responsible investing has been shaped by an emphasis on stewardship and the belief that quality managers and good governance should ensure that environmental and social concerns are rightfully addressed.
To us, sustainability is not just a label, but a set of values by which we operate.
As a firm, we have been signatories to the Principles of Responsible Investment (PRI) since 2007 (we view it as a minimum standard) and are constantly striving to better understand how ESG and sustainability issues impact long-term investment performance.
Case study: Corporate governance
In 2007, a private equity buy-out effectively turned one of the largest drug companies in China into a private enterprise with an ownership structure that aligns management and shareholders.
FSSA Investment Managers has been a long-term shareholder of the company and, over time, we have engaged with management on a variety of issues such as broader distribution of compensation and attracting talent.
We also highlighted the benefits of having someone with multinational corporation (MNC) experience on the board; subsequently the company appointed Mr Chen Chuan, an ex-VP of another Pharmaceutical and Consumer company in China, as a director. Our engagement with the company highlighted that management is open-minded and willing to listen, which we see as a positive.
Disclaimer: Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same. All securities mentioned herein may or may not form part of the holdings of FSSA Investment Managers' portfolios at a certain point in time, and the holdings may change over time.
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Meet the managers