Amidst the ongoing trade friction, weak global economic outlook and the protests in Hong Kong have been ongoing for longer than many thought. Central banks around the world have been easing their monetary policies. In such times of uncertainty, investors couldn’t help but wonder if there are some defensive investments that can continue to perform strongly despite market conditions.
Investors are right to fear about the impact of a prolonged trade war, as two superpowers battling it out is no good for the global economy. Yet, it is possible that the market has overreacted, forgetting that the organic Chinese long-term growth stories have remained largely intact.
Tingyi (Cayman Islands) Holding (322.HK)
Tingyi (Cayman Islands) Holding better known by its Master Kong brand name, produces and sells instant noodles, packaged drinks and other daily consumer goods. The company has been actively exploring higher end products, in line with consumption upgrading in China. The stock is currently trading at an attractive valuation with a P/E ratio of 20 times. This looks cheap compared to historical values of over 30 times. The company’s growth prospect remains strong due to robust domestic demand. During the first half of this year, it reported a 3.7% sales increase in its instant noodle business.
Vitasoy International Holdings Ltd (345.HK)
Vitasoy International has seen strong growth in recent years. China is the fastest-growing market for the company. There is still room for growth as penetration in China is still low. Vitasoy’s products are quite affordable and therefore is resistant to economic downturns. The company’s dividend payout ratio is over 60%, a respectable figure which still allows reinvestment into the business.