Where will China's next billion dollar market companies come from?

Freelance Lancet

From the global hundreds of billions of dollars company distribution can get what enlightenment? What are the most reliable perspectives? How can we look forward to China's future billions of dollars?

Vast territory may not produce strong companies

The first interesting thing is that hundreds of billions of dollars are concentrated in the world. The economy is as strong as the seed, and the economy is much more important than the land, strong or even bigger.

As of September 2014, the world's 69 hundreds of billions of dollars worth of enterprises, the United States Monopoly 33, China ranked second, 9, Germany, the United Kingdom have 5, if the region is considered the EU 21, almost all industrialized countries. The only exceptions are Brazil and India, but look closely, Brazil and India have only one oil company shortlisted.

An economically not strong country, it is difficult to have a large volume of economically powerful enterprises, and vice versa. Only a large number of powerful enterprises can create a strong country, economic power is a hotbed of high market capitalisation, followed by the economic total, the two jointly determine the total market value. It can even be said that an economic powerhouse does not necessarily require a large gross domestic product or a great enterprise or a sizeable market value. Switzerland, for example, has 3 such businesses. In many countries with poor economic fundamentals, even if they are large and vast, they are "sowing the seeds of the dragon", such as Nigeria, Pakistan, Indonesia and other populous nations.

This is not accidental, in a sense, the experience of industrialization will create a group of production efficiency, profitability of the enterprise, industrialization, information represents the country's use of complex knowledge to create wealth of comprehensive ability, and informatization is the upgrading and extension of industrialization.

Market capitalisation reflects wealth distribution logic

In the long run, the market is weighing machines, and the total market value reflects the relationship between the sum of corporate profits and the risk-free rate of return (or liquidity). The higher the GDP of a country, and the higher the proportion of corporate profits to GDP, means that the total profit of the enterprise is the highest, and "surplus value" is higher, which has the basis of high market value. People often focus on GDP growth and gross domestic product, ignoring the logic of wealth distribution, leading to many fallacies.

For example, China, GDP growth is very high, the ratio of corporate profits to GDP is not low, but many of these profits do not give back to shareholders, but to reinvest, the so-called net profit has not returned to shareholders, which leads to "surplus value" is relatively low, can not be a high valuation.

Japan, for example, Japan's GDP is very high, but hundreds of billions of dollars companies are not many, because in order to protect employment, high welfare, Japan has a lot of zombie enterprises, these enterprises profitability is very general, mixed in the market is not easy to improve the index. At the same time, because the Japanese enterprises within the competition is not strong enough to reconcile the consortium, resulting in a large number of Japanese industry market concentration is not high, and not easy to produce high market value of enterprises. For example, its auto industry has 9 major companies, the world's rare ... Without the recent perverse monetary easing, the stock market had not risen for 20 years.

It is not difficult to see that, to observe a market, we must pay attention to its structural characteristics, this structure reflects the distribution of wealth logic.

The ecological environment of sharks

Only large enough ocean to feed sharks, hundreds of billions of dollars worth of enterprises also need a huge industry market to accommodate.

Specifically, the major four types of enterprises, have a "flow" characteristics: The first category is the capital flow represented by the financial industry; The second type is the information flow represented by the TMT industry; The third category is the energy resource flow represented by the petroleum iron ore; the fourth category is the consumer goods flow which represents the consumer goods, mainly is the automobile, the fast elimination, Four major consumer goods of tobacco and medicine. These industries because of the higher homogeneity, liquidity, and market space is huge, so easy to form oligarchs, only oligarchs can give a high market price, and thus obtain a high value.

Excluding these categories of business-to-business manufacturing, regional services and so on are very difficult to do so, it also helps us to judge China can be born hundreds of billions of dollars in business market.

What are the billions of Chinese companies

China's hundreds of billions of dollars are concentrated: four lines, two barrels of oil, two of internet company bat, and TSMC, a company with a monopoly in it. If we dig into the future of China's billions of dollars worth of enterprises, but based on the following several judgments:

The first category, the China Grid, China Railway, China Tobacco and other big Macs may not be listed, are invisible Champions, do not need to analyze.

The second category, can be expected to the Internet industry will still appear super enterprises, such as Baidu, Beijing and east have such growth potential, distance from this market value is not far away, but the unlisted Huawei, there is no doubt that this strength.

The third category, to be seen in the automotive, media, pharmaceutical and other consumer goods industries. In these areas, the gap between Chinese enterprises is still huge, but there is still the possibility of producing industry Big Mac in theory, it is perhaps the most reasonable way to focus on those taps.

The fourth category, for the impending subversion, or declining industries, although in overseas these industries also exist hundreds of billions of dollars market enterprises, but in the domestic few possibilities. For example, the retail industry, must be overturned, such as steel, coal and non-ferrous enterprises, although will be integrated, but hundreds of billions of dollars is still a high expectation.

So, if you want to buy a potential billions of dollars in corporate pension words: long-term words, medicine, media or optional; Short term, internet companies more predictable. (the author is a financial writer)