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Australia set to benefit from urbanisation in China
As economies around the world brace for a slowdown in China's growth, Australia is primed to take advantage of an 'urbanisation' effect that is set to renew the demand for resources and energy stocks.
Nikko Asset Management head of global strategy John Vail said that the Chinese government, compared to governments and central banks in developed countries, took a long-term view on areas such as rebalancing the economy and income divisions, so there was unlikely to be a short-term 'fix' aimed at returning growth to the previous high levels.
Vail said that whether or not China was headed for a 'hard' or 'soft' landing, he was still positive on global equities and commodities, because China remained the major contributor to global growth.
Bob Van Munster, head of Tyndall's intrinsic value equities team, said the current trend of urbanisation in China and around the world would work in Australia's favour by ensuring ongoing demand for resources such as iron ore.
"Recent research suggests that close to another three billion people will become urbanised by 2050, with China contributing 0.4 billion of the three billion and the majority of the balance provided by India, Africa and other Asian countries," he said.
The price boom might be over for raw materials, but as people move from rural areas to the city, the volume story still had a long way to run, he added.
"Within resources there is great variation between energy stocks and mining stocks, with the latter running on exceptionally low price-to-earning ratios," he said.
"This highlights the importance of stock selection within each sector for investors that are looking for good long-term value."
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