Last month, WAM Global (ASX: WGB) Senior Investment Analyst William Liu visited China, meeting with company management teams, industry experts, suppliers and distributors, across Beijing, Shanghai and Hangzhou. These meetings allowed him to deep dive into the complexities of the market, as well as the opportunities and the risks facing businesses.
China is an economic powerhouse as the world’s second-largest economy, backed by key indicators such as gross domestic product (GDP), export dominance, foreign trade surplus and significant foreign direct investment (FDI). It is a world leader in manufacturing, infrastructure investment and has a growing and shifting consumer market. Many global companies have ambitions to benefit from the rising middle-class consumption in China, in industries such as luxury goods, beverages and healthcare.
While China’s economic power is undeniable, the more recent economic environment has been challenging and we have seen a deterioration in consumer confidence. This became more evident when “consumption downgrade” was a recurring topic across many of the meetings.
Read the full article from Will’s China trip here.
Stock Spotlight
Ferguson Enterprises
(NYSE: FERG)
Ferguson Enterprises Inc. is the largest value-added distributor serving the specialised professional in the North American construction market. The company has provided FY2024 guidance for low single-digit percentage revenue growth and an operating margin in the range of 9.0% to 9.5% and we believe this guidance is conservative and achievable. Looking ahead, Ferguson is well-positioned to benefit from structural trends supporting U.S. reshoring and the resurgence of U.S. industrial activity. With manufacturers re-establishing operations domestically, demand for new-build and renovation projects is set to rise. These factors, coupled with the stabilisation and potential easing of interest rates, create a favourable medium to long-term outlook for the U.S. construction market. Ferguson’s strong track record of executing bolt-on mergers and acquisitions (M&A) also enhances its competitive position and growth potential. As these trends gather momentum, we expect organic growth to re-accelerate in FY2025, positioning Ferguson to capture significant upside from renewed investment in U.S. infrastructure and industrial projects.
RB Global
(NYSE: RBA)
RB Global is the leading global marketplace for commercial assets, heavy equipment and vehicles. In November, the company reported strong third-quarter FY2024 results and raised its earnings guidance. In its automotive salvage business, rising repair costs are prompting insurers to write off more vehicles, which is a positive trend for the company. Additionally, RB Global announced a significant competitive win with Suncorp Group in Australia, securing up to 65,000 vehicles annually. While the construction and transportation sectors remain mixed due to macroeconomic uncertainty, we expect RB Global to benefit from improving conditions in the industrial economy. With U.S. election uncertainty behind us, customers are likely to resume equipment purchases, stimulating trade-in and replacement cycles.
