It’s not difficult to see why – the world’s most populous nation has grown at a rate of over 6.5% every year for the last 28 years. Since the 2008 Global Financial Crisis (GFC), it has overtaken Japan as the world’s second-largest economy (since 2011), and is now poised to overtake the United States as the world’s largest economy within the next decade.
China has also been able to adapt to its growing position among the world’s superpowers. Initially focusing on urbanising its population, building up its cities and playing the role of “factory of the world”, China has made the leap to be at the forefront of technological advancements in Artificial Intelligence (A.I.), data analytics, cloud computing, social media, e-commerce and payment services.
As China continues to develop into first-world status, its businesses will be able to capitalise on a visible long-term growth path. This includes access to its increasingly affluent middle-income population providing stability in domestic demand and being at the frontiers of high-growth cutting-edge technology infiltrating diverse business sectors.
To provide investors with exposure to China’s exciting growth prospects, the Aviva Navigator platform offers a diverse array of funds you can invest in, with numerous China-focused funds on its platform. Here are some of the leading companies that are regular features in the top 10 largest shareholdings in various China-focused funds.
1. Tencent Holdings
Listed on the Hong Kong Stock Exchange, Tencent Holdings has a market capitalisation of HK$3.4 trillion (US$430 billion), making it one of the most valuable companies in China. However, beyond having heard of it, many investors may not know what the company really does.
Co-founded by one of China’s most prominent entrepreneurs, Pony Ma, in 1998, Tencent Holdings has businesses mainly in the social networking, mobile gaming and online payment services space.
To those that are more informed, you would know that Tencent Holding’s centrepiece is its WeChat messaging app, which has over 1 billion monthly users. Via WeChat, the company delivers a host of services, including:
a. Messaging (text, voice and video)
b. Calls (voice and video)
c. Social media (sharing content with friends)
d. Ride hailing
e. Booking appointments, including hospitals, hotels and various other locations
f. Payment service and mobile wallet
Outside of WeChat, Tencent is also the largest gaming company in the world, with games including Fortnite, League of Legends, Clash of Clans, Call of Duty and many others under its belt. More recently, it has also signed a letter of intent to create a strategic alliance with Square Enix, potentially adding game titles like Final Fantasy and Tomb Raider within its collection.
In addition, it has also grown its advertising business, which has increased over 7 times since 2014 to nearly RMB60 billion (US$8.9 billion) in 2018, separately listed Tencent Music Entertainment, with over 700 million active users, on the New York Stock Exchange (NYSE), as well as made waves in the cloud, Fintech, artificial intelligence and machine learning business segments.
Outside of its business units, the internet giant has also been actively making strategic investments in over 700 companies, of which over 100 are valued at over US$1 billion, and 60 that has gone public since its investment.
2. Alibaba Group
Jack Ma’s Alibaba Group is one of the most well-known Chinese companies worldwide. When it was listed on the New York Stock Exchange in 2014, the group became the largest US Initial Public Offering (IPO) in history.
Since its IPO at US$68, the company’s share price has risen to nearly US$182 today, expanding its market capitalisation to over US$471 billion. This has been on the back of growing revenue, which has increased close to 5-folds from RMB52.5 billion (US$7.8 billion) in 2014 to RMB250.3 billion (US$37.2 billion) in 2018.
Alibaba Group’s business empire comprises retail and wholesale e-commerce, logistics services, cloud computing, digital media and entertainment and innovation initiatives, as well as payment and financial services via its 33% stake in Ant Financial.
For Alibaba Group, while retail and wholesale e-commerce revenue has increased at a stable pace, by close to two-folds, to RMB184 billion (US$27.4 billion), in the past three years, its international retail e-commerce has been the bright spark, rising 6 times over the same period of time to RMB14.2 billion (US$2.1 billion). Similarly, its non-core businesses, in cloud computing and digital media and entertainment, has seen rapid growth of nearly four times, to RMB13 billion (US$1.9 billion), and five times, to RMB20 billion (US$3.0 billion), respectively.
3. Taiwan Semiconductor Manufacturing Company
Taiwan Semiconductor Manufacturing Company (TSMC) is listed on the Taiwan Stock Exchange and has a market capitalisation of NT$6.3 trillion (US$200 billion).
What many investors may not know about TSMC is that it is the world’s largest chipmaker, producing 9,920 unique products for over 465 different customers. Its chips are used in diverse business segments, including computers, information appliances, consumer electronics, such as digital TVs, game consoles and digital cameras, and for industrial use.
Some of its customers include major smartphone brands Apple, Huawei Technologies, Xiaomi, Qualcomm and Broadcom, as well as graphics, emerging technologies and Artificial Intelligence companies AMD, Nvidia, Xilinx, MediaTek and others.
TSMC’s large scale and diverse customers has allowed it to grow stably over the years. From 2013 to 2017, its revenue has grown at a pace of 13% per annum to NT$977 billion (US$31.7 billion). Similarly, TSMC has grown its bottomline by 16% per annum to NT$343 billion (11.1 billion).
4. China Construction Bank Corporation
Headquartered in Beijing, China Construction Bank is the second largest bank in China, and part of the “big four” state-owned banks in the country, with a market capitalisation of HK$1.7 trillion (US$220 billion). It was listed on the Hong Kong stock exchange in 2005, and the Shanghai Stock Exchange in 2007.
Unlike the three other companies on this list, China Construction Bank Corporation is the only one that is not a technology-focused company. However, the bank is entrenched in its services, dating back to 1954, and covering diverse banking functions, including asset management, financial leasing, trust, life insurance, property & casualty insurance, investment banking, futures and pension.
In addition, China Construction Bank also has a global footprint spanning, Japan, Vietnam, South Korea, Singapore, Malaysia, Hong Kong, Australia, New Zealand, Germany, Spain, London, the U.S. and South Africa.
Ranked 2nd largest bank in the world, by assets, China Construction Bank has close to 15,000 branches and employs over 350,000 people worldwide, and has hundreds of millions of clients. In its latest results, China Construction Bank delivered a 5.1% increase in profit.
Diversifying your investments
For those of you just starting out on your investing journey, you can tap on the Aviva Navigator platform to start building your investment portfolio or picking specific funds to gain a larger exposure to the Chinese economy.
Even if you don’t have a large sum of money to start investing with, you can make use of regular savings plans to invest as little as $200 each month or quarter to grow your investing portfolio, while gaining valuable knowledge and confidence.
If you’re already investing on your own, you could use the funds offered to diversify your investments into markets that you are less familiar with, such as China, U.S., India, Japan, Asia-Pacific, Europe and other global markets.
* Currency conversions were done at the following prices
US$1 : HK$7.84 (Hong Kong Dollar)
US$1 : RMB6.72 (Chinese Renminbi)
US$1: NT30.84 (New Taiwan Dollar)
* Where no currencies were highlighted, figures are in Singapore Dollars.