Mining companies BHP (BHP ADR) of Australia, Glencore (GLNCY) of Switzerland and Rio Tinto (RIO) of the U.K. made a Credit Suisse list of stocks that can benefit from an economic rebound in China.
And Credit Suisse analysts expect such a rebound, CNBC reports.
“There are early signs of China PMI [purchasing managers’ index] new orders turning up,” they wrote in a commentary. “If China PMIs rise relative to global PMIs, then China’s relative performance should start to improve.”
Credit Suisse economists anticipate China’s GDP will grow 5.9% this year, compared to the overall economist consensus of 5.2%.
That makes Credit Suisse analysts bullish on the mining and life insurance sectors. As for mining, “the copper price is very correlated to China PMIs, and half of industrial commodity demand comes from China,” they said. Another mining company they like is Anglo American (NGLOY) of the U.K.
As for life insurance, Credit Suisse analysts touted the U.K.’s Prudential (PUK) as it “now generates the vast majority of its revenues from Asia” and trades at a lower valuation than its local competitors.
The analysts also mentioned Dutch e-commerce/Internet company Prosus PROSY. Its 29% ownership stake in China’s technology titan Tencent is a plus, they said. Prosus is “a liquid and diversified means of gaining exposure to the China tech sector.”
Prosus, too, is trading at a lower valuation than its competitors, the analysts said.
They expressed caution about luxury goods companies. “We worry … that 80% of Chinese household wealth comes from real estate, and real estate prices falling is unhelpful,” they said.
