as part of our
China's slowdown looks to have bottomed out, at least for now.
grew by 7.4%
, the lowest rate in three years, but in line with what economists
But most encouraging was the news that Chinese retail sales
saw growth that was nearly double that figure at 14.4%.
I'm not the biggest fan of China's "managed capitalism," and,
eventually, I believe that this model will reach the end of its
road. In one critical aspect, it already has. China's leaders have
stated it is their goal to make China's economy more "balanced,"
meaning less dependent on exports and investment and more focused
on domestic consumer spending.
But whether Beijing desires it or not, I believe this
transformation would be happening anyway. As China's middle classes
expand and adopt acquisitive Western lifestyles, it is inevitable
that their economic clout will be felt.
Ah, the elusive Chinese consumer. Just hearing him mentioned is
enough to trigger a Pavlovian dog response in investors. But
getting real access to him has proved to be difficult.
Consider that familiar consumer staple we know and love: beer. I
have been a consistent advocate of global "Big Beer" as a play on
rising consumer incomes.
is a favored long-term holding of my Covestor Sizemore
Investment Letter portfolio , and I have also written favorably
Anheuser-Busch InBev ($ BUD)
. Both of these megabrewers have excellent exposure to the growing
- and beer swilling - emerging market middle class.
But what about Chinese brewer
Tsingtao Brewery (
? It is, after all, the best pure play on Chinese beer consumption.
Unfortunately, it is also too expensive to be taken seriously.
Investors wanting access to Chinese beer drinkers have bid the
shares up to 25 times earnings and to a dividend yield of less than
1% (as of 10/22).
Chinese Web browser
Baidu ($ BIDU)
is also a bit on the pricey side at 29 times earnings, a valuation
I might have expected to see 12 years ago.
China Mobile ($ CHL)
remains attractively priced and pays a respectable 3.5% in dividend
yield (as of 10/22).
Otherwise, it is a real struggle to find Chinese stocks with
decent liquidity that cater to the country's domestic
Instead, I continue to be a fan of the indirect approach,
finding American and European companies with high exposure to
China. Luxury goods stocks have been a good fit, and most have sold
off, or at least traded sideways, in recent months due to fears
that China's slowdown would hit sales.
With China looking to be turning a corner, luxury firms will
likely have a nice finish to 2012. One that I particularly like is
. Burberry lost a quarter of its value last month on fears that its
sales in China were slowing worse than expected. Shares have
recovered about half of those losses in the weeks that followed,
but expectations for the company are mixed.
Should Chinese luxury spending recover even slightly - and I
expect that it will do much better than that - I expect Burberry to
enjoy a nice multi-month rally.
This article first appeared on MarketWatch.
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