Is Standard Chartered (LSE: STAN) the best cheap FTSE 100 share out there? Here’s why I think the answer could be YES.
Marching into the metaverse
I wouldn’t buy StanChart because of its expertise in digital industries. The FTSE 100 business is, of course, one of the world’s largest banking businesses. Its day-to-day operations don’t revolve around tech.
However, some news surrounding StanChart and its ambitions for exploiting the metaverse caught my eye this week.
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On Monday the business announced it had acquired a plot of ‘virtual’ land in The Sandbox’s Mega City district. Standard Chartered follows HSBC’s recent entry into this artificial world, one that could pay off handsomely as consumers get more digitally engaged.
Analysts at JP Morgan recently said that “the metaverse will likely infiltrate every sector in some way in the coming years”, adding that it estimates the market opportunity “at over $1trn in yearly revenues.”
I like the proactive approach that the FTSE 100 banks are taking to capitalise on this opportunity.
A top emerging market stock
As I say though, StanChart isn’t a UK share I’d buy because of its credentials as a metaverse stock. However I would buy it because of the bright outlook for banks that operate in fast-growing emerging markets.
The rate at which financial product demand is growing in Standard Chartered’s Asian and African markets makes it a top stock to buy, in my book. A combination of low product penetration and rising wealth levels is supercharging demand for financial services.
As analysts over at the IMF note: “Higher incomes will lead to more demand for mortgages and cars, working capital for more companies, trade credit for Asia’s increasingly global companies, and bonds to finance infrastructure and provide stable incomes for retirees”.
Standard Chartered could be in a better position to exploit these exciting growth regions following upcoming restructuring measures. The business recently announced it was exiting nine markets across Africa and the Middle East to concentrate on other territories. Collectively, this handful of markets only generates around 1% of group profits.
A cheap FTSE 100 stock to buy
Like any share, Standard Chartered exposes investors to both opportunity and risk. And in the case of this business a significant downturn in the global economy is a real danger. Furthermore, a resurgence of Covid-19 in China poses another significant threat amid the spectre of fresh lockdowns.
Still, I believe these dangers could be reflected in its dirt-cheap share price. At 500p per share, the FTSE 100 bank trades on a forward price-to-earnings (P/E) ratio of just 7.7 times.
This is way inside the accepted bargain-basement level of 10 times and below. It also makes Standard Chartered better value for money on paper than fellow Asia-focussed FTSE 100 bank HSBC. The latter trades on a forward P/E ratio of 9.8 times.
While investing in stocks and shares puts your capital at risk, of course, StanChart’s a brilliant bargain I’d happily buy for my portfolio for the next decade. Though it’s not the only great growth share I have my eye on right now.
