Europe's consumer, healthcare and technology companies should win out from thesweeping reforms in China, reckons Morgan Stanley, citing the commitment to amarket economy, as well as the relaxation of the one child policy and the hukouhousehold registration system.
To capitalise on this, the bank launches a new "China reform" basket of 50such European stocks with high revenue exposure to China, estimating that theeasing of the one child policy will add 25 million to the population.
These include autos - like Audi, BMW, Daimler and Volkswagen - which will in the long term benefit from higherdemand for cars, especially large sedans and SUVs.
In the consumer goods and retail space, Morgan Stanley highlightsopportunities for Danone and Nestle as it expects "theanticipated birth rate increase combined with the continuing urbanisation, theincreasing household penetration and per capita consumption to support thedouble-digit Chinese infant milk formula market growth rate".
Hotels like IHG and other leisure companies will cash in onincreased travel, while urbanisation should help drive demand for iron ore tothe benefit of mining majors like BHP, Rio Tinto and AngloAmerican.
In healthcare, while China is still a relatively modest contributor tooverall revenues for the likes of AstraZeneca, Bayer,GlaxoSmithKline and Novo Nordisk, Morgan Stanley notes thatit is a key contributor of revenue growth - a trend it expects to continue.
The basket - whose constituents currently make between 78.6 and 5.0 percentof their sales in China - also includes companies in chemicals, energy,utilities and industrial sectors.
For more on the Chinese reforms, see and
Reuters messaging rm://antonina.vorobyova.thomsonreuters.com@reuters.net
Astrazeneca (AZN)
Anglo American (AAL)
InterContinental Hotels (IHG)
Rio Tinto (RIO)
Glaxosmithkline (GSK)
