NARI Technology
Wenli Zheng, portfolio manager of the T. Rowe Price China Evolution Equity Fund
An electrical equipment company, NARI Technology is facilitating the digitisation of China’s national power grid – enhancing the country’s energy efficiency. NARI is highly regarded for its technology leadership and product quality, while its prudent management has a reputation for under-promising and over-delivering.
While the company is an SOE, we have confidence our interests, as minority investors, are aligned with those of the management team. In 2018, NARI launched an employee stock incentive scheme, which granted restricted shares to key employees, therefore linking incentives to business performance.
We believe NARI, given its technology is integral to optimising the power grid’s efficiency, is a beneficiary of the Chinese government’s Net Zero 2060 policy.
Baidu
Sanjiv Bhatia, founder and CIO of Pembroke Emerging Markets, a BennBridge boutique
Amid continuing US pressure on Chinese technology companies, China has greatly emphasised ‘innovation’. We like China-based internet group Baidu in this regard.
In China, Baidu is the market leader in artificial intelligence (AI). The business designs high-end AI chips and leads the development of technologies closely linked to the space, including cloud native, autonomous driving, and intelligent transportation – areas in which the Chinese government aims to surpass the US. To achieve its position, Baidu has consistently spent 15-20% of its revenue on R&D, more than double what Alibaba or Tencent have spent over the last decade.
We believe Baidu is well positioned to weather the current regulatory crackdown on Chinese internet platforms under ‘Common Prosperity’, the country’s new economic agenda. This is because Baidu’s business mainly focuses on providing underlying technologies to support and enhance other Chinese businesses, unlike Alibaba and Tencent, who make money directly from Chinese consumers.
East Money
Jakob Zierau, portfolio manager of Nordea’s Asian Stars Equity strategy
As the leading online investment platform in China, East Money is well positioned to benefit from the transition of cash savings into a wider selection of investment products, which will help boost the population’s long-term wealth generation.
According to a PBOC study, financial assets only account for about 20% of household assets in China, versus about 70% in the US. Within financial assets, cash and deposits account for about 60% in China against just 10% in the US. In addition to broad wealth generation, allocating the wall of idle cash into the equity market will also help local companies raise cash and limit the need for FDI and international capital.
East Money has a strong market position as an online broker in China and has the largest fund selection platform, with its growing investor news and community engagement site registering more than 60 million monthly visits. It generates among the highest returns and lowest costs in the industry, and we see longer-term growth opportunities in other investment products and in overseas investments. The company also tends to be well aligned with minority investors from a governance perspective.
