Greater China equities: powering up on technology, localisation and globalisation

8 January 2025

Kai Kong Chay, Senior Portfolio Manager, Greater China Equities

Wenlin Li, Senior Portfolio Manager, Greater China Equities

Ben Yu, Head of Equities, Taiwan Region

In 2024, Greater China equities closed higher due to a series of stimulus measures which catalysed the underlying structural momentums and growth trends. In this 2025 outlook, the Greater China Equities team will elaborate on four reasons for more upside potential going into 2025 despite potential US tariff concerns and geopolitical headwinds, as well as investment opportunities based on the 4As positioning for Greater China equity markets.

1. New fiscal policy initiatives
2. Mainland China can navigate tariff situations via different methods
3. Mainland Chinese corporates are “valuing up”.
4. Mainland China/Hong Kong markets can re-rate with better fiscal policy execution

From a sector perspective, we believe that mainland China should benefit from the following key areas despite macro and geopolitical headwinds:

Our investment process: GCMV + catalyst

Our investment team uses the GCMV (growth, cash generation, management, valuation) + catalyst framework to conduct investment research. This framework is applied for all company analysis which helps identify companies with competitive advantage, strong financial profile, earnings catalysts, and management teams that have created value for shareholders.

4As positioning

We believe there are 4 megatrends (expressed via the 4As positioning) which present growth opportunities that the team invest in via the GCMV lens.

• 1^st A – Acceleration: Consumption may further improve on mainland China’s pro-growth policies
  

We favour service-oriented and niche consumption sectors, including Technology, media and telecommunications (TMT) and platform companies (e.g. food delivery, online music), education, tourism, and home appliances (e.g. smart appliances)

• 2^nd A – Aboard: Leading mainland Chinese companies are going abroad
  

We prefer leading companies with strong innovative capabilities and global footprints in the healthcare, and industrial and EV sectors.

• 3^rd A – Advancement: Advancement in tech in mainland China continues with new development e.g. Edge AI, VR glasses

In terms of investment opportunities, we favour AI wearable devices, AI smartphone supply chain and autonomous vehicles.

For Taiwan Region, we believe the next generation of AI development continues to present many structural opportunities across foundries, the next generation of AI, data centres, and HBM, etc. in the medium-to-long term.

• 4^th A – Automation: Automation for manufacturing of high value-added products such as EVs, IT products

We prefer strong, advanced manufacturing leaders with robust research and development capabilities. These companies benefit from the domestic growth recovery while at the same time riding on overseas market strength due to strong pricing and margins in overseas markets.

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