Over the next decade we could be witness to a massive transfer of wealth from one side of the world to the other. We in the West will get relatively poorer, while people elsewhere in the world are getting richer.
That sounds depressing but it is not all bad news. Many of our best companies thrive on overseas sales. Great manufacturing companies such as RENISHAW (RSW) and XAAR (XAR) make a high proportion of their sales in China. BURBERRY (BRBY) is opening Asian branches as fast as it can to sell its iconic check scarves. Our drug companies, banks and insurance companies are all striving to serve the needs of the world’s nouveau riche.
The Chinese are free and rich and they want to travel
And while we do our best to export goods to the world’s developing economies, their people are eager to come over here.
I don’t see that changing in the aftermath of the looting and skirmishes in recent days. The Chinese in particular have a thirst for travel. Just imagine what it must have been like to live under the Maoist regime. No culture, no freedom of expression and certainly no travel.
Now that many Chinese can travel they are desperate for education. They are desperate to see a world glimpsed for the first time on the pages of magazines and on television screens. And few places, despite the riots in recent days, have the same attraction as London.
And, after the Olympics next summer, even more will want to head to London – promising bumper sales for those home grown penny share companies that are geared to this new tourism.
How London attracts an army of tourists each year
I think that the Olympic Games is a colossal waste of money – but we should, at least, do it well. With less than a year to go the facilities are taking shape, the plans for transport and policing are being laid and we have had none of the stories of unready facilities that have dogged previous Games.
We will convey a good image to the rest of the world. I am sure overseas viewers will see sweeping images of London, of Big Ben, the London Eye, Buckingham Palace and all of our other famous attractions. And many of the images of destruction that we have seen in recent days will be a distant memory.
Let’s hope they also manage to avoid the overcrowded furnaces known as the London Underground; the traffic jams; the national embarrassment otherwise known as Heathrow Airport; and the price of a bus ticket.
Tourism should boom after the Games, and it is not doing too badly already. Last year nearly 15 million people visited London from overseas. Not many ever leave the capital – this number was as many as visited the rest of the UK altogether.
This army of tourists spent £17bn, but the interesting thing is that the vast majority of them still come from the USA and the rest of Europe. More people manage to make the trek from Australia than arrive from China or India, but that will surely change in the future.
Of all the countries that I have visited none is less attractive than China. Apart from the rolling hills of Guilin, the countryside is unremittingly drab and many people in China have, literally, never seen the sun shining in a blue sky. No wonder they long to see the world, and London will be high on their list.
London is the world’s ultimate luxury good
I consider London to be the world’s ultimate luxury good. It attracts the rich and famous. It is cosmopolitan and expensive. It has some of the world’s best sporting venues, best theatres and restaurants and it has something that China and for that matter the USA lack, a strong sense of history.
I am no bull on UK property, but I make an exception for London because it is a city for the world and not just for the UK. My favourite London property shares are Great Portland Estates (GPOR), for its focus on quality assets in the West End, and the secretive Daejan Holdings (DJAN), where the dividend is raised without fail every year and the heavyweight £24 share price is backed by assets of £51.43.
But down in penny share world there is another great way to play the enduring attraction and success of London. You can read about it in the August issue of Red Hot Penny Shares.
• This article is taken from Tom Bulford’s free twice-weekly small-cap investment email The Penny Sleuth. Sign up to The Penny Sleuth here.
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