“Major Business for Global Global” is tucked away in this basket of Asian technology stocks

International asset manager MainFirst focuses with its ‘Megatrends Asia’ fund on innovative technology companies from Asia. However, the stock markets are in serious trouble. How are Asian technology companies doing? bearish cycles? And given MainFirst’s exposure to two Chinese companies, what about China’s eerie role on the global stage? We asked portfolio manager Frank Schwarz, who casually mentioned that the fund was exposed to “the most important company in the world”.

“The most promising industries for the future are moving to Asia,” Schwarz says immediately. “Chips, electric cars, solar energy … all the main factories for this are located on the Asian continent.” All good, but that importance is not reflected in stock prices right now. The worldwide price tables are blood red.

“That underperformance of tech stocks worldwide are mainly related to the rise in interest rates, ”says Schwarz. “However, we do not predict whether the market will recover in the second half of the year or next year. That is not our job. What we do is monitor the business development of the companies we invest in. And in the first quarter, where we already have all the numbers, the turnover of ‘our’ Asian companies increased by 40 percent. So it was a very successful quarter despite the shutdowns in China and despite all the disruptions in the supply chains. ”

“If we compare this plus 40 percent with MSCI Asia’s regional index excluding Japan, revenue grew by only 3 percent. Our companies are growing more than ten times faster. For example, the Japanese index also grew by ‘only’ 9 percent. So our companies are doing well “We just have to wait for the climate to stabilize.”

The stock basket includes two Chinese lithium companies, Ganfeng and Amperex. Is it not a politically sensitive time to be exposed to China? What about China’s implicit support for Russia’s war in Ukraine, and the Chinese Communist Party’s (CCP) ties to big business over there?

“If you look at the shareholder structure of the two companies you mentioned, the government is not involved at all. It’s all private money – mainly from China, but not exclusively. The largest shareholder for both companies is an investment fund. And for us, it is not obvious that the CCP has any influence on that fund. The second largest position in CATL (Contemporary Amperex Technology Ltd., ed.) belongs to the founder. It is very difficult to get more information.

Either way, there is no direct impact on the business, but yes, there will be an indirect impact. Although the situation can be compared, for example, with the French oil company TotalEnergies. If Total wants access to new oil fields, the French government will also support these projects. And so it is now with the Chinese companies; if they want access to lithium mines in South America or Africa, the Chinese government will help.

As for politics in general, we do not worry so much about it. Everything can always be discussed. For example, 80% of the world’s population does not support the sanctions imposed on Russia, but we in Western Europe may have a very different opinion on this. In the long run, however, you should invest in Asia if you want to make successful investments. ”

Of course, the geopolitical game of chess cannot be neglected. For example, in the face of the Ukraine conflict, China may increasingly consider annexing Taiwan. You have also been exposed to Taiwan.

“Taiwan Semiconductor Manufacturing Company (TSMC) is one of our companies, yes. TSMC produces about 80 percent of the whole cutting edge semiconductors, chips needed for iPhone or other smartphones, for data centers, for servers, for PCs. Customers are giga companies like Apple, Nvidia, Qualcomm, Broadcom, etc. At least 20 percent come from Samsung (another share in the fund, ed.), if we exclude the chips from Samsung that they use in their own smartphones.

But the quality of TSMC’s chips is much better compared to Samsung’s. And that is why the market share is moving further towards TSMC. And then I want to say that it is now the most important company in Asia. The difference will be even greater in five or ten years. I would say that it is the most important company for the global economy. There is no new product from Apple or Nvidia without TSMC. No new data center is started (or run correctly) without TSMC. Virtually all servers worldwide depend on TSMC chips.

Assume that war breaks out between China and Taiwan and there are production delays of one or two years, then we go back to the Stone Age. Yes, that would be a complete disaster. “

(jvdh)

Leave a Comment