Billionaires' advice on making money: Look at tech, China
SINGAPORE – What's the best way to make money? Be on the right side of technology.
This was the advice of successful global business players at the Forbes Global CEO Conference in this city-state on Wednesday, October 29, during a discussion on how to make profit for tomorrow's growth.
The panel included Chew Gek Khim, Executive Chairman of The Straits Trading Company Ltd; Yoshihiko Miyauchi, Senior Chairman, ORIX Corporation; Steven Pan, Executive Chairman, Regent Hotels & Resorts; Gary Rieschel, Managing Partner, Qiming Venture Partners and Teresita Sy-Coson, Vice Chairperson, SM Investments Corporation.
Asked what to look for when investing, the panelists agreed on the importance of technological advancement.
Rieschel, one of the most prominent China–based American investors who spent time in Silicon Valley, Japan, and China, said one important question to ask before investing in a company is: how will Information Technology (IT) affect them?
He said the phrase that “the internet will change everything” used to be a trite phrase a decade ago, but has since become a reality especially with the switch from desktop to mobile devices.
“You cannot be on the wrong side of this wave of technology and expect to make any money anywhere,” he said. “You need to understand whether they are on the right side or the wrong side.”
Whether its on a country level, or an industry or a group of companies, Rieschel said it is imperative to know, "how can that group take that technology and apply it?"
"Understanding that is a great investment thesis," he said.
Reischel also pointed out that the biggest question right now, especially when it comes to consumer companies, is distribution. All around the world, he said companies are using similar materials and technology, but it is distribution that still remains largely inefficient.
“We're looking at where we can invest where there are clever ways to sell products,” he said.
He cited Xaomi's success in eliminating the need for a sales channel, by selling phones directly online with no intermediary between seller and consumer. Xaomi is now the world's 5th largest smartphone maker. According to Forbes, It had a 5.1% share of the market as of July, from 1.8% just a year ago.
Once the technology question is answered however, and the investor is confident that the company or “business thesis” will work, Reischel said another question to ask is, where then do you invest?
“Do you put it in the US? The Philippines? Taiwan,” he said. “When you have sure thesis like that, question is should you apply it to all emerging markets?”
SMIC's Sy-Coson encouraged investors to look at the Philippines, which she said has been bypassed for a long time but has since gotten attention since the administration of President Benigno Aquino III.
“With VCs and technology, we're a bit slow so there are a lot of opportunities,” she told a room of international CEOs and innovators. “You can experiment in other countries, and if it works, you still have time to invest in the Philippines. The Philippines is something many people can look into after looking at what's going on in the other countries in the region.”
Sy-Coson said she was optimistic about the domestic market, and said the Philippines is “on our way up.”
“The Philippine is unique, but it also has good returns as well,” she said.
Importance of China
Aside from the question on technology's effect, Rieschel emphasized the second important question to ask: what's the impact of China on this industry or company?
As the Chinese travel more and more around the world as well as internally, Rieschel said the Chinese will continue to spend and innovate.
“Anything the Chinese do outside will change what they do forever,” he said. “The intersection of technology and China, you need to understand that impact.”
Rieschel said the environment is much more complex today than ever before with the rise of China, unlike in the past when the biggest companies were only in the United States and the only option to replicate was the American model. Today, there is now a need to understand both the US and China.
“You just now have two USAs. Just think of having everything in the US as a replica in China. It's just a different business model,” he said. “It used to be that you have a US model and you bring that to the Philippines for example. Now there's an alternative model. There's a China model.”
He said this is especially important since the US is “a little slow to catch up” with this idea, citing Silicon Valley's surprise by the success of Alibaba and the fact that 3 of the top 10 internet properties in the world are now Chinese firms.
The panel also shared their thoughts on which industries and investments seem to be undervalued.
Kim of the Straits Times and Pan of Regent Hotels and Resorts emphasized that distressed assets in Europe are undervalued, while Pan added US assets and Chinese real estate have weak returns.
Rieschel too said internet stocks in the United States are already fully valued, while Latin America as a region is undervalued still. He also said he foresees a lot of money coming from the healthcare sector, which has turned to technology as well, and which he called “totally predictable” and “by definition will increase.”
Sy-Coson, meanwhile, said she disagrees Philippine stocks are overvalued, but rather fairly valued, adding there are a lot more aside from stock market that promise growth in the country.
The panelists also agreed on common threats to global financial markets, highlighting geopolitics and groups like the Islamic State of Iraq and Syria (ISIS) as factors that would have a lot of impact, as well as natural disasters, and aging populations in countries like Japan and Germany, which will need a younger generation to keep the economy moving. – Rappler.com