Welcome to Morningstar "3 Stock Picks". I'm Holly Black. With me is Juliana Hansveden,
and she's manager of the Nordea Emerging Stars Equity Fund. Hello.
Hello. So you've got three stocks for us
from the portfolio, where would you like to start? I'd like to start with Kingdee (KDIC). Kingdee
is a Chinese software-as-a-service company. And it's actually a leader in this nascent
segment. So it's focusing on software that is subscription based, rather than software
that you buy and download onto your computer or your servers. And this, of course, goes for
companies primarily targeting enterprises. And why is this a growing way for tech
companies to do their business as sort of subscription model?
It is more convenient, and it allows employees working for the company to access the software
from anywhere. And that was particularly relevant during the pandemic or still is,
but it's a trend in a structural growth area that that started even before the pandemic,
because in addition to the convenience, it is also more cost effective for the company. It doesn't
have to spend that much upfront, but instead it has this annual subscription that it pays.
Okay. What's stock number two? Stock number two is AIA (01299), the
Asian insurance company. And what do you like about AIA?
So AIA has one of the most efficient salesforces or agency forces in Asia, and it is targeting the
high end of the market, which is significantly under penetrated, and actually all of it is
significantly under penetrated in China, because I'm going to focus on China here as the growth
opportunity for AIA. And the combination of them being very efficient in selling,
having a unique proposition. And also the fact that China is opening up because historically,
foreign life insurance companies weren't allowed to sell policies in Mainland China. But that is
changing. So they're gradually gaining more and more access to the mainland market. And that is
one of the things that is driving their growth. And something we hear about insurance companies
in emerging markets is that as the population gets richer, the demand for insurance
increases. Why is that? It is because actually the
welfare systems aren't as developed in Asia and in China. If we focus on China in particular,
there is less safety in, for example, knowing that you get access to high quality health care,
or that you will be covered by a government pension, once you retire. There's actually
very limited certainty. And therefore you need to yourself save for the future, and to make sure
that your family is covered as well. So this is what drives the demand for life insurance. And as
household incomes rise, increasingly, they can afford this sort of thing and they can
afford to think about the future. Okay, what's our final stock?
The final stock is Samsung SDI (006400), the EV battery maker that is based in South Korea.
And I suppose I don't need to ask about what's driving this trend.
Right. Yeah, I think most most people will be familiar with what's going on there. Well, we just
think that Samsung SDI is one of the few companies globally that can make high quality EV batteries
at scale. And demand is quite obvious in the sense that the car OEMs are gradually phasing out
their traditional vehicles, and they are launching a combination of hybrid and pure EVs. And that is
only going to accelerate in the sense that most of them have set an end year for their ICs when they
will stop selling the internal combustion engines and move entirely to hybrids or EVs. And that is
a huge growth driver clearly. So here, it's more about being able to make the batteries in a safe
way, have the right technology and do it at scale. And we believe Samsung SDI can achieve that.
And something I always wonder with these battery companies is the ESG credentials because obviously
great for electric cars, but it still involves mining of commodity.
Absolutely. And that is a clear issue. Cobalt is one of the raw materials needed to make EV
batteries and cobalt is mined in places like the Democratic Republic of Congo in Africa,
which has human rights issues. So this is something we're engaging with the company on
and we are seeing improvements but I would say over time, the goal of the company is to phase
out their dependence on these controversial materials because it is difficult for them to
entirely know where each -- where all of the cobalt is coming from,
although they made a lot of progress in understanding their supply chain. So it's
about technological development and reducing their reliance on some of these materials.
Juliana, thank you so much for your time. From Morningstar I'm Holly Black.