China’s economic slowdown is making veteran global investors like David Herro more cautious, but the manager of the $19.7 billion Oakmark International fund says some of the fears may be overstated.
In meetings with German auto makers, we are getting the same story: Business is holding up and profits, if anything, will increase over time. The electric vehicles they have been developing over the last decade are in full swing; BMW has a new class coming out in 2024-2025 so there is cautious optimism. Plus, they trade at three times cash flow, have big chunks of cash and are buying back stock.At this stage, the BYD s of the world are more mass market.
[That crackdown on luxury goods in 2014] started with efforts to deal with corruption through gifting and was directed at officials buying expensive jewelry or premium alcohol on the government’s dime. But meanwhile, among rank-and-file Chinese consumers, there’s still a migration to the upper middle class and they still have urbanization. These are big positive factors.
China has been wooing foreign companies and investors, including recent talk of loosening ownership restrictions. Is that a start?