MARKET MOVER REPORT – Mining to Dining Boom

13 January 2016

MARKET MOVER REPORT – Mining to Dining Boom

Global equity markets have come under significant pressure in 2016. We have been using the current
market sell-off to find attractive entry points to invest in high quality stocks with solid business models
.
Despite the volatility recently experienced in markets our portfolio has continued to perform, and one of
our core multi-year portfolio themes is an agricultural boom, as we see Australasia benefiting from a
transition from a “mining boom” to a “dining boom”. One of these agricultural company’s discussed below
is Treasury Wines (TWE.AX) up 37.3% since being added to the portfolio in September 2015.

An Agricultural Boom
Although Chinese and global demand may be slowly transitioning away from hard
commodities (metals etc.), this is certainly not the case for soft commodities and
agriculture. A growing middle class, particularly through China & the rest of Asia, is
putting significant demand pressure on agricultural resources.

With demand growth out-stripping current supply, prices are likely to significantly
increase, leading to larger profit margins for producers. We believe the agricultural sector is set to take the place as the growth engine of Australia and New Zealand going forward. This thematic features heavily in our model portfolios – a “Mining Boom to Dining Boom”. We believe this is set to be a multi-year investment theme and Australasia will directly benefit from this dynamic given favourable trading agreements and close proximity with China and the rest of Asia.

China in Transition
We believe China’s economy is in a multi-year transition as it shifts from construction
and manufacturing to a consumer driven economy.
At the same time we believe 2016
will see a stabilisation of growth for China, following the massive stimulus measures
implemented by the Chinese government last year. Our view is that the Chinese economy is certainly not on the brink of collapse, and an expected growth rate of around 6.5% – 7.0% for next year will be supported by further stimulus from the Chinese authorities if required.
Portfolio Positioning
Investors should take note of changes in underlying drivers in China and it is not a
surprise that manufacturing, energy and materials sectors are likely to experience
some level of underperformance. ’s portfolios have been constructed to account
for both sides of the coin. We are aware of the downside and have attempted to take


measures to protect our investments. At the same time our core investment themes
are benefiting from the transition in China rather than being hindered by the change.

Chart of the Moment

Treasury Wines (TWE.AX) has been a star performer for the AU portfolio,
returning 37.3% to shareholders since the start of September 2015.
TWE is an example of a stock that can still benefit from the gentrification of China. TWE is achieving impressive growth via its expansion into China and is directly benefiting from the increase in income of the middle class. Agriculture features heavily in the portfolios as we believe it is a long term thematic that will benefit from the
transition China is under taking (from a manufacturing to consumer led economy).
has recently added another agricultural stock to its Australian portfolio – it is achieving massive growth with profits up over 186.5% last year alone and we believe that it is a must have stock.

Global equity markets have come under significant pressure in 2016. We have been using the current market sell-off to find attractive entry points to invest in high quality stocks with solid business models. Despite the volatility recently experienced in

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