Investing Lessons From Katie Melua

Katie Melua once sang about the nine million bicycles in Beijing. Perhaps her next ballad should be about the 200 million automobiles in China.

What is even more remarkable is that the number of cars in China is growing at around 10% a year. That’s an extraordinary rate of growth. What we are witnessing is consumerism at work. It is transforming the world’s second-largest economy, right before our very eyes.

Just recently, China reported, what some considered were, disappointing economic numbers. It showed that retail sales gained 11.8%; industrial output rose 8.6% and government spending on infrastructure increased 17.9%. These numbers covered the first two months of the calendar year.

Economist – 13 of them – who had predicted higher numbers, were, it seems, not impressed. One even labelled the figures a “complete mess” and called on the government to put in policies to spur growth. Probably what the economist really meant to say was that if the government had spurred growth then his forecasts would have been correct. But as it stands, his numbers were not right.

China is growing. It won’t grow in a straight line, but it will grow. As Premier Li Keqiang indicated at the close of the National People’s Congress: “The country met its target last year and there is no reason why it can’t do so again this year”.

Over the next couple of decades, we are likely to witness further urbanisation in China. At the moment, half the population lives in cities. But over the next 20 years, some three-quarters of the population will live in urban areas. That would be equivalent to creating 40 new Singapores.

Currently, a number of Singapore companies are exposed to China. These include ComfortDelGro (SGX: C52), which runs nearly as many taxis in China as it does in Singapore. CapitaMalls Asia (SGX: JS8) also has operations in China. It owns 62 malls in 37 cities that include Chongqing, Chengdu and Xian.

For BreadTalk (SGX: 5DA), China is a rapidly growing market. In 2008, it generated S$75m from the country. Last year, it accounted for S$173m. That equates to a growth rate of 18%. Hutchison Port Holdings (SGX: NS8U) is another company that is exposed to China. Over half the company’s revenues come from Mainland China.

China’s growth is likely to come under close scrutiny from experts who will undoubtedly wag a finger at any signs of a slowdown in growth. That will happen from time to time. It might even send shockwaves through the market.

Interestingly, bad news could be good news for investors. It could provide just the opportunity to buy the shares that we wanted to buy but couldn’t because they were too expensive.

So draw up a watch-list of shares that you are interested in and wait for the right opportunity to arrive. The moment will come – you just have to be patient. Or to borrow another line from Katie Melua, investing can be like waiting for “a slow train climbing up a hill”.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.