Have you eaten rice today? Or steak?
It’s not just the Russian drought that is turning our eyes to agriculture. John Baron in The Investors Chronicle, a local stock market mag, writes:
The global population is set to increase from around 6.6 billion at present to 9 billion by 2050, and food demand will grow with it. But the relationship between population growth and increased food demand will not be linear. As living standards improve for hundreds of millions of people in the emerging economies, they are eating more protein. Meat is replacing vegetables. The massive shift we are presently seeing toward urbanisation, particularly in China, is also supporting this change in diet.
Michael Kurtz of Macquarie Securities writes with cautious optimism about China:
With July’s start to a new investment quarter (and half), a bit of portfolio rotation into an under-performing market such as China H-shares was inevitable. Still, Beyond the Bund believes the H-share risk-return profile has undergone a substantial rethink over the past month, as shown by relative sector performance: July turned the second quarter’s pattern on its head, with 2Q underperformers (mostly cyclicals) becoming the outperformers.
With Beijing’s administrative property tightening apparently over, domestic liquidity conditions having improved, and renminbi flexibility offering some needed relief from trade frictions, we believe the balance of risks on HK-listed China equities has gone from negative back to symmetrical – leaving room for multiples to expand further from current still-discounted levels.Equity buy-back should continue…for now.
Elevated portfolio cash balances at a time of ultra-low returns to cash, plus the possibility of additional short covering by absolute-return managers, could drive another leg up for Hong Kong listed China stocks. A view to additional upside also jibes with the results of our latest quarterly China Macro Sentiment Survey, which revealed a shift in China investor appetite toward beaten-down cyclical names, the double-dipper next door.
At the fundamental level, a fairly conservative earnings consensus ahead of H-shares’ just-begun 1H10 semi-annual results season could help sustain buying interest in the weeks ahead by leaving room for positive surprises. Market expectations are for “just” 16.8% YoY and 19.1% HoH earnings growth, respectively — well below recent-years.
Meanwhile Thai stocks are in a formal bull market and are the biggest gainer in Asian major markets. The SET index is now up 20% from its level in May when our then contributor Paul Renaud and I told you to buy Thai. That is the definition of a bull market. Bangkok rose for 9 consecutive days and is now back to the level of May 23, 2008.
More for paid subscribers follows including a sexy update on our newest stock pick, the resolution of a confusion day trying to make out what happened to one of our British shares, news of sorts from Hong Kong and Holland, real news from Canada, and of course more gloating about Thailand.
