While opinions about China vary, one thing is certain – there is a lot of change taking place there. Now the world’s second-largest stock market, China has experienced a booming middle-class population (with hundreds of millions more to join over the next decade) and a dramatic jump in gross domestic product over the past 20 years. Chinese businesses have reinvented themselves over this time, making remarkable quality improvements and taking a total stakeholder approach. While outside investors may see this level of economic success as unsustainable, at Burgundy, we believe there is still significant potential for the region.
In this educational video series, Investment Counsellor Rachel Davies speaks with Portfolio Manager Ching Chang for an exploration into the country. Ching shares learnings and expectations for this market by expanding on its potential tailwinds, commenting on the associated risks, and providing insight into what makes it a compelling opportunity for long-term quality/value investors like Burgundy.
The transcript has been edited for clarity.
Video #1: The Current Landscape & Opportunity
Rachel and Ching highlight the pace of change in China, offering insight into Chinese companies and the differing approaches to analyzing them.
Video #2: Lessons Learned from Burgundy’s Extended Research Trip
In 2018, in a move that changed how Burgundy thought about the country, the Emerging Markets team embarked on an extended research trip to live in China for six months. Rachel and Ching reflect on the trip’s key lessons and explore how their learnings continue to inform the team’s investment decisions.
Video #3: Burgundy’s Edge
Rachel and Ching discuss how retail trading dominates China’s stock market and explore the ways a long-term focus helps investors stomach the region’s volatility.
Video #4: Navigating the Risks
Despite the headlines to the contrary, you may be surprised that the business landscape and management principles in China share a lot of commonalities with other countries. Rachel and Ching address the risks of investing in the region, share how Burgundy’s approach helps to mitigate concerns around regulation, and offer insight into why research is essential to understanding this area.
Video #5: Analyzing ESG Factors in China
At Burgundy, our approach to analyzing environmental, social, and governance (ESG) factors is one of integration. We believe this improves our ability to manage risk, allows us to make better investment decisions, and ideally enhances our returns over the long term. Rachel and Ching discuss Burgundy’s approach to ESG analysis in China and why we look to invest in companies that are seeking to benefit all stakeholders.
Video #6: The Burgundy China Fund
Rachel and Ching offer an insightful look into the Burgundy China Fund, highlighting how its portfolio companies act relative to their Western peers and using Burgundy’s quality/value perspective to comment on expectations.
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