CLSA chairman Slone highlights tech, healthcare, domestic consumption, aerospace as China’s key drivers

Hong Kong brokerage strategist Christopher Wood says Trump presidency ‘might not be really so bad for China and Hong Kong longer term’

PUBLISHED : Monday, 19 September, 2016, 3:18pm
UPDATED : Monday, 19 September, 2016, 11:00pm

The chairman and chief executive of CLSA, the Hong Kong brokerage owned by Citic Securities, is tipping four sectors – technology, healthcare, domestic consumption and aerospace – as the key growth drivers of the Chinese economy.

Speaking at the annual CLSA Investor’s Forum, Jonathan Slone said he is still bullish on the economy, despite slow growth of the mainland’s manufacturing and older traditional industry sectors.

The annual forum is attended by over 1,400 clients, including some of the world’s biggest fund managers and institutional investors.

“If you look at the export or manufacturing sector in China, the figures are not good. But look at growth of middle class restaurants in Chongqing or high-technology sector companies in Shenzhen, and the rate is huge,” he said on Monday, kicking off the five-day gathering.

“I am bullish on China’s economy outlook. Sectors that need low use of labour and have high efficiency of production will be the winners.

“These include technology, domestic consumption and aerospace. The healthcare sector will also have a positive outlook, as the country is developing a multi-generational population that will need a lot of healthcare services, long term,” he said.

I am bullish on China’s economy outlook. Sectors that need low use of labour and have high efficiency of production will be the winners
Jonathan Slone, chairman and chief executive, CLSA

Slone added stocks market have become accurate reflections of how the new economy sectors are now taking the lead, with Alibaba, the e-commerce giant that owns the South China Morning Post, becoming Asia’s largest listed company in terms of market value after it’s Friday market close, followed by another mainland internet major Tencent, with China Mobile ranked third.

He also said the overall global economic outlook is positive.

“Brexit has so far proven a less severe shock for the world economy than markets had feared and weak US growth has not had the negative effects we expected on global commodity prices,” Slone said.

“We forecast that commodity-exporting emerging markets will emerge from recession in the first half of next year, accelerating world trade growth from around the middle of next year.

“US employment growth also remains strong suggesting that when the US oil-price-driven investment pause comes to an end, growth will quickly return above trend,” Slone said.

CLSA’s equity strategist Christopher Wood, cautioned, however, that political risks could haunt Hong Kong and mainland China in the short term.

He highlighted the conflict among lawmakers and the upcoming chief executive elections as adding uncertainty in Hong Kong which may have a negative impact on the city’s economy.

He said if Donald Trump wins the US presidential election in November, it will also have a knock-on effect on Hong Kong and the mainland.

“There will be shock in the markets initially if Trump were to win, because people would assume he would act on all the crazy things he had said,” Wood said.

But he added Trump has never been “anti-trade”.

“I believe he would just renegotiate with trading partners if he won, so maybe a win might not be really so bad for China and Hong Kong longer term.”