When Maslow's hierarchy of needs is applied to the increasing GDP per capita in
In fact this investment opportunity has existed as early as June 1993 when the first H share company was listed in Hong Kong, and that company was Tsingtao Beer (HK: 0168, TSGTY). Even for non-Chinese this name shall not be too unfamiliar to you as Tsingtao is available in some 95% of Chinese restaurants in the
Now the Chinese beer market is very competitive and it may be too late to invest in
When investing in
To control population growth in
Any family violated this policy and raise more than 1 child is subject to heavy penalty imposed by the government.
As this policy applies to all families regardless of their income level, it is easy to imagine that wealthier parents will devote whatever they can afford to their only child in the family. Applying this fact to Maslow’s theory, milk and food juice shall have a very promising domestic market potential.
Huiyuan Juice (HK: 1886) was just listed on HK Stock Exchange last Friday (23 Feb 2007), its stock price went up by 79% in just 2 days. With P/E of 66x and 84x respectively, it may be irrational to invest in Mengniu and Huiyuan now regardless of how those sell side analysts present the rosy growth stories.
What if there is a company with a historical P/E of 25 and still have a high exposure to the Chinese beverage market? The answer is Groupe Danone (ADR: DA)
Groupe Danone is a French food company that primarily produces dairy products, biscuits and cereal products. The Company's portfolio of brands and products include Danone, a brand of fresh dairy products; Evian and Volvic for bottled still water. It has also a well executed
It also owns 22.18% of Huiyuan Juice, the red hot stock just listed in
With 14% of operating income generated from Asia in 2005,
One added advantage investing in Danone is that it can provide a comparatively better reporting transparency, something those Chinese firms are lacking.