I’m sure most readers will be aware of the commentary surrounding China as an investment idea. It has put a rocket underneath some of the shares that are exposed to it in a direct or indirect way like a2 Milk Company Ltd (ASX: A2M) and Blackmores Limited (ASX: BKL).
However, arguably most of the market is aware of those two opportunities and we need to find better ways to play the Chinese growth story.
I think the Chinese growth story is worth looking into. Between 2009 and 2030, the country will add 850 million to its middle class. This should be a big boost to pretty much everything related to the Chinese middle class demands.
Here are two shares to take advantage of the Chinese opportunity:
UBS IQ Asia ETF or UBS IQ MSCI Asia APEX 50 Ethical ETF (ASX: UBP)
This is an exchange-traded fund (ETF) offered by UBS where around half of the index is allocated to China, 14.7% to Hong Kong, 12.3% to Taiwan, 18.8% to South Korea and 5.1% to Singapore. This ETF has the biggest 50 businesses in Asia, outside of Japan, that aren’t weapons or tobacco related as part of its holdings.
I like that over 50% of this ETF is allocated to information technology businesses like Tencent. Alibaba and Samsung are both holdings that more than 10% of this ETF is allocated to, with Tencent the highest allocation at 12.8%.
There are many potential problems facing Chinese businesses including trade wars, corporate governance issues and debt. However, it could be worthwhile having a small part of your portfolio allocated to these future potential Chinese stars for a management fee of only 0.45%.
Bellamy’s Australia Ltd (ASX: BAL)
The rollercoaster for shareholders continues with the share price getting closer to a 50% fall over the past four months.
Demand for its products still appears to be there, that’s why the business has recovered since the start of 2017. However, the CFDA registration continues to be a drag.
But, today’s share price could make up for the uncertainty. It’s trading at 25x FY19’s estimated earnings, which seems much more manageable than the A2 valuation.
If Chinese resident demand for its products keeps growing then Bellamy’s could be very nicely valued for market-beating returns over the long-term. A high-quality organic Australian product is attractive for Asian buyers.
Although there are a lot of risks attached to the UBS ETF, I’m attracted to its underlying holdings and the potential long-term growth. Now could be a decent time to buy it thanks to trade wars hurting the price.
Another share looking to profit from the Asian economic boom is this exciting ASX growth share.
It's been a nail-biter of a reporting season here in the first half of 2018.
But the real action, in my opinion, is what companies are doing with dividends.
What does this mean for you? Well there is one stock I've found that could very well turn out to be THE best buy of 2018. And while there's no such thing as a 'sure thing' when it comes to investing - this ripper might come as close as I've ever seen.
Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.