- China's healthcare system has been opened up to foreigners as the public system cannot deal with the demand. Medical and Architectural Firms well positioned should benefit.
- The Chinese middle class is growing rapidly so the automobile industry should grow substantially from here.
- If you follow the money flows and invest with the trend, it is easier to win in investing.
In times of economic uncertainty, investors scour different markets and asset classes in order to get a return on their money. The US bond market has done well in the last few years and I believe this is due to hedge funds and big corporations constant search for low risk investments. A lot of banks have never recovered from the crash of 2008 and where as before bank deposits were seen as safe, nowadays they find it much more difficult to attract capital. This is why I believe the bond market has flourished in the US recently. Firms and investors believe they are guaranteed their money back even if the return on their investment may be minuscule at best and sometimes negative. Nevertheless there are other opportunities at present where I believe you can get a better return on your investment. Lets go through 2 possibilities.
The first place you could put your money is a specific sector in China. There is no doubt that China is going through some difficult times at the moment but there are individual sectors where we should see fantastic growth. One sector is the health system. The public system has not been able to meet the demands of the population so the Chinese government has been left with no other option but to open the market up to foreign firms and build up the private sector. The move is expected to increase the amount of private hospitals in China and also bolster insurance policies as prices should drop with more supply of hospitals. Treatment in the public system at the moment is very expensive especially if you have a serious disease. As an investor, there are many ways you can play the upsurge in hospital construction over the next 10 years in China. You can invest in the contractors, architectural firms or also you could invest directly in the private medical firms who will run these hospitals. AECOM Technology Corp (NYSE:ACM) is well positioned to take advantage of the health sector reform in China from the architectural side. They have already designed a vast amount of medical facilities in china and now with more than 20,000 more hospitals to be built between now and 2020, they should be in prime position to win architectural contracts going forward.
The second area in China where positive money flows are increasing at a rapid rate is the auto industry. Earlier this year state owned auto company Dongfeng motor invested close to $1.1 billion into the struggling Peugeot-Citroen group. This in only one of many deals that has been done in recent years. The automobile industry in China has gone from strength to strength since 2010 when Chinese car manufacturer Geely bought Volvo from Ford. This partnership has continued to develop with now both Ford and Geely developing a new compact car for the Chinese market together. It will be only a matter of time before Chinese car manufacturers will have the same technology in their cars as the west as they now have the buying power (to either buy the technology or do their own research) to compete with western manufacturers
The market will become so big in China so there will be sufficient market share for both national manufacturers and foreign manufacturers. The Chinese middle class is growing at a very fast rate and car manufactures predict that by 2020, 51% of Chinese families could have increased disposable income of between $17000 and $37000 per year. Economists believe this is turn will lead to millions more cars being sold annually. Both Ford and Mercedes Benz are increasing their numbers of Chinese dealerships at a rapid rate in anticipation of this new richer middle class. Also the Chinese government is growing its road network at 20% per year. China now has the 2nd biggest highway network in the world but will definitely overtake the US before 2020. All this adds up is definitely more people driving cars in China in the future. I would play this trend by investing in either platinum or palladium through these ETF's (NYSEARCA:PPLT) & (NYSEARCA:PALL)
The above examples are sectors that are receiving substantial money flows presently and should continue to do for the foreseeable future. Money flows have served the US stock market well over the last 5 years but continuing tapering and uncertainty might put pressure on the US stock markets going forward so sectors like the ones above may be better choices in the long run.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.