Japanese Factory Automation Companies Positioned To Take Advantage Of Rising Labor Costs In China, According To Asian Fund Manager
August 9, 2010 - The Wall Street Transcript has just published 2010 Investing in China Special Report offering a timely review of the Specialty Finance sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
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Taizo Ishida is a Portfolio Manager at Matthews International Capital Management. Prior to joining Matthews in 2006, Mr. Ishida spent six years on the global and international teams at Wellington Management Company as a Vice President and Portfolio Manager. From 1997 to 2000, he was a Senior Securities Analyst and a member of the international investment team at USAA Investment Management Company. From 1990 to 1997, he was a Principal and Senior Research Analyst at Sanford Bernstein & Co. Prior to beginning his investment career at Yamaichi International (America), Inc. as a Research Analyst in 1987, Mr. Ishida spent three years in Dhaka, Bangladesh, as a Program Officer with the United Nations Development Program. Mr. Ishida received a B.A. in social science from International Christian University in Tokyo, Japan, and an M.A. in international relations from The City College of New York. He is fluent in Japanese. Mr. Ishida has been a Portfolio Manager of the Asia Pacific Fund since 2007 and of the Japan Fund since 2006.
TWST: What are the industries or sectors in which you like to invest? What exposure or weightings do you have?
Mr. Ishida: The whole theme is about Asian consumers, a rise of middle-class consumers in the next 10 to 20 years. If you look at India, it's still a strange balance of very rich and very poor people, and the middle class is not as big as what you find in China. It's all different stages of development according to country. I look for the sort of development that exists and how they are going to grow. Obviously, the first thing you look for is banks. It's not that interesting, but I think banking services are very new things for these countries. For example, Vietnam is a cash-rich country and not much banking is being done in this country; all cash transactions. If you look at the country, 85 million people are living in Vietnam and they are very vibrant and young - one of the youngest populations in all of Asia or anywhere in the world. If a Vietnamese person wants to start his or her own business, they need cash or credit for the initial investment. But not much banking is available right now. That's what you look for. I think the financial sector there is a good place to seek investment opportunities. Financials also include real estate. Property is a big deal and one of the important sectors to invest in. I have been to Thailand, Malaysia and Indonesia to find good growth property developers in the last 12 months. I think everybody needs a place to live, food to eat and clothes to wear. That's a very basic need for life in general. I would say sector-wise, financials are pretty big, and consumer discretionary and staples are important. I would say that a sector I'm not that interested in is energy or commodities more broadly. These are very cyclical in nature. We are also pretty big on health care.
TWST: What are some of the companies that you feel are representative of your investment approach and the reasons why you found them attractive?
Mr. Ishida: I like Ctrip (CTRP), a Chinese travel agency. It's a mainly off-line business at the moment, but the company is one of the biggest in China, and they cater to business travelers in China. If you go to China, you would notice so many people are traveling at any time of the day.
TWST: What about a Japanese company?
Mr. Ishida: I think Japanese companies are very well positioned. What's interesting to me are the recent labor issues in China and the sudden disturbance at Chinese plants. I'm talking about a series of labor strikes at electronic and auto companies. They are complaining about the cheap labor, their wages are not going up as much as the rest of the economy. I believe that the labor shortage in China is actually a real thing. China is not exactly India or Indonesia in terms of future labor supply because the population is getting old fast in the next 10 to 20 years. They are concerned with that. One thing about Japanese companies, they are very good at providing factory automation equipment to Chinese manufacturers.
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