Passports to China

By Brummer, Alex | The Spectator, February 12, 2011 | Go to article overview

Passports to China


Brummer, Alex, The Spectator


FTSE blue-chips offer safer access to emerging markets

One of the remarkable statistics to emerge from the euroland crisis is the scale of UK trade with the Irish Republic. Export traffic across the Irish Sea amounts to 7 per cent of the total: more than all our trade with the fast growing 'BRIC' economies - Brazil, Russia, India and China. The consequence is that UK plc looks to be missing out on the high-growth emerging markets which are forecast to power a 4.5 per cent expansion of the global economy in 2011.

The coalition has sought to plug this gap with high-profile trade missions such as last year's excursion to China led by David Cameron. The reality is, however, that all the missions seem to have achieved so far is $2 billion of orders for Rolls-Royce engines to power the A380 Airbus. This may be satisfying in the light of Rolls's recent mishap with a Trent engine in a Qantas plane over Singapore, but one suspects the orders would have come irrespective of ministerial efforts.

Access to Asian markets for the world's top aero-engine maker is a given.

All of this creates a problem for UK investors wanting to share in BRIC growth prospects. There 's no shortage of direct routes, such as Fidelity guru Anthony Bolton's China Special Situations investment trust. Another respected manager, Neptune, offers access via its China Fund. But these funds invest directly in Chinese enterprises, with all the risks of boom-bust speculation and uncertain accounting. How much better it would be to enjoy the emerging-market story by investing in FTSE100 stocks. One route is via specialist funds such as M&G Global Basics, managed by Graham French.

But it is also possible to take the direct route by buying individual companies. This might not be as difficult as it seems.

There are several FTSE players with outsize Asian ambitions. Top of my list are two very different retailers, Tesco and Burberry.

In the UK grocery market, Tesco is close to saturation, and departing boss Sir Terry Leahy set a goal of balancing UK revenues with those overseas. It can be no coincidence that his successor, Phil Clarke, has spent the last few years building Tesco's Asian businesses. In Thailand it is already a leader. In China, it is experimenting with Tesco 'cities' - using its property skills to make itself the anchor tenant, developer and manager of malls across the country. …

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