Global equities

Samir Mehta: The role reversal driving equities in China and India

Samir Mehta: A stealth bull market in China means it’s time to revisit Asian equities

Samir Mehta: Trump tariffs are unlikely to impact China’s big online retailers

Investors should be ready for any scenario as Donald Trump weaponises trade tariffs.

This week we await the outcome of a call between Trump and Chinese president Xi Jinping to find out if tit-for-tat US-China tariffs will be paused as they were for Mexico and Canada.

But either way it would take a lot to disrupt the momentum of China’s big online retailers, argues Pendal’s Samir Mehta.

Last year China’s four big online shopping platforms – Alibaba’s AliExpress, TikTok, Shein and Temu – shipped almost $US200 billion worth of goods internationally. Of that, some $45 billion went to the US.

In anticipation of tariffs, Temu and Shein had already modified bulk shipping, diversified logistics and expanded their US networks. Meanwhile as TikTok’s future hung in the balance, Americans flocked to another Chinese app: Xiaohongshu.

“When a product provides a value proposition far superior to alternatives, tariffs might temporarily alter – but not permanently change – human behaviour,” says Samir.

Samir Mehta: How luxury stock Prada is making a fashionable comeback

Samir Mehta: Tune in to Tencent Music if you’re looking for a hidden gem

WHO is the Bob Dylan of music streaming?

That’s the question Pendal’s Samir Mehta posed at the Sohn Hearts & Minds Conference in Adelaide last month.

For most, the answer is obvious: Sweden’s Spotify has revolutionised the way we consume music, dominating developed markets and setting the benchmark for subscription-based streaming.

But in investing – just like in music – real success is found beyond the obvious.

For every Bob Dylan – whose sandpaper voice and sermon-like lyrics changed the face of music worldwide – there’s a Sixto Rodriguez: overlooked by mainstream audiences until an Oscar-winning documentary, Searching For Sugar Man, revealed he had been quietly building a cult following in small but devoted markets.

“Spotify has done a brilliant job in developed markets, but there’s lots of other markets that still have potential,” says Mehta, who manages the Pendal Asian Share Fund.

“What we need to do is search for the Sugar Man of streaming.”

“Music follows exactly the same trends across the world – and the Sixto Rodriguez of streaming is China’s Tencent Music Entertainment.”

Aussie equities: How Xero and NEXTDC are leveraging AI technology

On a tour of the US late last year, Pendal equities analyst Elise McKay met with dozens of companies – and found generative AI was a topic in almost every meeting.

“There’s strong evidence that over the longer-term generative AI will have a big impact across the business landscape,” McKay said at the time.

Six months later, investors are still entranced by the US “Magnificent Seven” tech stocks.

But several ASX-listed companies are making solid progress in leveraging the technology, points out Elise. These include cloud-based finance software maker Xero and data centre manager NextDC – both held by Pendal.

In her latest update, Elise outlines XRO’s “Just Ask Xero” AI assistant and NXT’s Nvidia-based “AI factory” which is expected to launch in coming months.

Elise also addresses one of the big issues that continues to face the AI industry – access to power.

The industry is working on solutions including better computing efficiency, improved cooling technologies and alternative power sources.

Pendal’s head of income reveals a high-conviction call and a non-consensus view for 2024

This week Pendal’s head of income strategies Amy Xie Patrick was asked in a Bloomberg webinar about her highest conviction call for 2024.

“While markets are pricing in a soft landing, I argued there would likely be a US recession in 2024,” says Amy.

“A lag in the impact of policy tightening has been evident in the slowdown of inflation and wages in recent months.

“This can be seen particularly in shifting trends in the labour market. The most obvious signal is a falling ‘quits rate’, signalling workers are becoming less confident about alternative job prospects.

“In my view, lagged effects will continue to appear in the data next year – and as we all know from history, recessions happen slowly, then suddenly.

“Likely in the second half of next year markets will realise disinflation is no longer immaculate – and is being caused by recessionary forces.”