Mongolia can be next big commodity story, says RCM CIO
Mongolia is set to reap large economic benefits from neighbouring China’s increasing demand for commodities over the next few decades to accommodate the country’s expected growth, according to RCM’s Asian expert Raymond Chan.
The Citywire A-rated manager, who is Asia Pacific CIO of Allianz subsidiary RCM, believes there is real potential in the country despite labelling it a more ‘adventurous investment’.
‘It may become very rich simply because they have a lot of the commodities that China needs and they are well-located, just across the border from China.’
He says the Asian powerhouse’s industrialisation and urbanisation will continue to provide key opportunities for other surrounding countries as well.
‘Demand for commodities has increased,’ says Chan, ’and we are looking outside China at those companies which export to it, for example, companies in Australia and emerging Asian countries like Indonesia.'
Despite competition from its near neighbour India, Chan believes China will remain the driving force behind Asia’s growth for the foreseeable future.
‘China has better prospects than India in the near term because it has the superior infrastructure in place to support economic growth. GDP per capita is already $3000 whereas India’s GDP per capita is $1000.
‘However, India could well overtake China in population in 15 years time and as long as its infrastructure and political system is in place, it has, in our view, the potential to reach a GDP per capita of $3000 as well.’
Chan also plays down concerns about a slow down in China’s rate of production, saying demand is still strong. For example the country’s car industry, he says, is in a very healthy state and the sector’s major manufacturers still have scope to make good returns.
‘We now see Chinese automobile production lines running at full capacity, with demand so high that cars cannot be produced fast enough to satisfy demand. Clearly, there is room for Western and Eastern car manufacturers to do business in China.
‘In contrast, India’s infrastructure is not as advanced as China’s. The Indian government have realised that they need to catch up and have set aside 6-9% of its GDP, that is 500 billion rupees, to develop it going forward.'
‘Half of the funds will likely be allocated to building power plants and toll roads with the other half, probably to be spent on ports, airports and water treatment plants.’
The Asia specialist runs a number of RCM funds including Allianz RCM Korea funds and Allianz RCM Asia Pacific. The latter has returned 59% over the last five years while its Citywire benchmark, MSCI AC Asia Pacific ex Japan TR USD, has risen 69% in euro terms.
The Citywire A-rated manager, who is Asia Pacific CIO of Allianz subsidiary RCM, believes there is real potential in the country despite labelling it a more ‘adventurous investment’.
‘It may become very rich simply because they have a lot of the commodities that China needs and they are well-located, just across the border from China.’
He says the Asian powerhouse’s industrialisation and urbanisation will continue to provide key opportunities for other surrounding countries as well.
‘Demand for commodities has increased,’ says Chan, ’and we are looking outside China at those companies which export to it, for example, companies in Australia and emerging Asian countries like Indonesia.'
Despite competition from its near neighbour India, Chan believes China will remain the driving force behind Asia’s growth for the foreseeable future.
‘China has better prospects than India in the near term because it has the superior infrastructure in place to support economic growth. GDP per capita is already $3000 whereas India’s GDP per capita is $1000.
‘However, India could well overtake China in population in 15 years time and as long as its infrastructure and political system is in place, it has, in our view, the potential to reach a GDP per capita of $3000 as well.’
Chan also plays down concerns about a slow down in China’s rate of production, saying demand is still strong. For example the country’s car industry, he says, is in a very healthy state and the sector’s major manufacturers still have scope to make good returns.
‘We now see Chinese automobile production lines running at full capacity, with demand so high that cars cannot be produced fast enough to satisfy demand. Clearly, there is room for Western and Eastern car manufacturers to do business in China.
‘In contrast, India’s infrastructure is not as advanced as China’s. The Indian government have realised that they need to catch up and have set aside 6-9% of its GDP, that is 500 billion rupees, to develop it going forward.'
‘Half of the funds will likely be allocated to building power plants and toll roads with the other half, probably to be spent on ports, airports and water treatment plants.’
The Asia specialist runs a number of RCM funds including Allianz RCM Korea funds and Allianz RCM Asia Pacific. The latter has returned 59% over the last five years while its Citywire benchmark, MSCI AC Asia Pacific ex Japan TR USD, has risen 69% in euro terms.
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