speculation on potential 'winning' long term investment in China
A recent 'poll' requesting that dancers select Dollar Den topics mentioned additional information on investments. Here's one possibility as a 'lead off' !
In keeping with Dollar Den policy, this is NOT a specific investment recommendation ... merely an informational posting. However, in keeping with full disclosure, I do own some Chinese stock shares. It should also be noted that the author of this article does have a 'vested interest' in promoting Chinese investment.
As always, perform your own due diligence ...
(snip)"Let us put it bluntly; the days of American hegemony are drawing to a close and within the next two decades, China will become the world's most dominant economy.
If you are sceptical about our claim, you may want to note that twenty years ago, China's economy was worth only US$342 billion and as of last year, its GDP had grown to US$4.4 trillion; representing an annual growth rate of 13.62%. Now, if China succeeds in growing its economy by roughly 8% per annum over the next two decades, its GDP will grow to US$20.5 trillion by 2029. At that point, China may well replace America as the world's largest economy.
It is worth keeping in mind that whereas American households are up to their eyeballs in debt, their Chinese counterparts have a savings rate of almost 40%! Furthermore, at a time when America and other nations in the West are struggling to stay afloat, China's foreign exchange reserves have surged to US$2.27 trillion!
Now, we are aware that many commentators are criticising China for the sheer size of the stimulus unleashed by its leaders. In our view, this ridicule is baseless because instead of spending printed or borrowed money, at least the Chinese are spending their savings.
In any event, the stimulus applied by the Chinese policymakers seems to be working. Over the past seven months, money-supply growth in China has risen by 26% and loans have surged by 32%. In turn, this inflationary orgy is creating a residential construction boom (Figure 2). All this economic activity is in stark contrast to America, where despite all the policy-actions, private-sector credit is contracting.
http://www.safehaven.com/images/saxena/15003_b.png
Look. China is the future and you can be rest assured that over the following years, the Chinese will raise their standard of living and domestic consumption will explode. Already, roughly 900,000 cars are sold each month in China and by the end of this year, the Asian powerhouse will replace America as the world's largest market for automobiles. Interestingly, similar trends of rising consumption can be observed in various household items such as refrigerators, motorbikes, mobile phones and so forth.
So, as an investor, you have a choice. Either you can continue to listen to the 'China bashers' or you can hop on the Orient Express and make a small fortune. It goes without saying, we have allocated capital to superb businesses in China and the ongoing correction in Chinese stocks is a great opportunity to accumulate more positions in this exciting economy. Apart from China, we have also allocated capital to India and Vietnam. It seems to us that in this low-growth world, investors will flock to these fast-growing economies; thereby pushing up asset prices. In fact, we will be bold enough to state that the next asset bubble will probably form in the developing nations of Asia and we have every intention of participating in the festivities."(snip)
from with many thanks to author / analyst Puru Saxena
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Re: speculation on potential 'winning' long term investment in China
^^^ for any Dollar Den readers who may be wondering how to invest in the Chinese economy ...
- most 'full service' stock brokerage accounts, as well as a couple of the 'discount' brokers, allow direct purchase of Chinese company stock shares listed on the Hong Kong stock exchange.
- for those brokerage accounts that cannot directly trade on the Hong Kong stock exchange, there are a variety of Exchange Traded Funds and Mutual Funds trading on the American stock exchanges. For example ...
and
Essentially, these Exchange Traded Funds and Mutual Funds purchase a variety of Chinese stock shares ... and when you purchase shares of the ETF or Mutual Fund you are becoming 'part owner' of these underlying Chinese stock shares.
ETF's typically consist of a fixed list or 'basket' of Chinese stock shares - in other words shares in the same Chinese companies always make up the ETF's holdings. This results in very little 'decision making', thus very low operating costs for the ETF ( which subtracts from ETF value versus the value of the underlying Chinese stock shares )
Mutual Funds typically consist of a variable list of Chinese stock shares - where a fund manager makes 'decisions' in regard to dropping certain Chinese stocks ( or reducing the number of shares held ), adding certain new Chinese stocks ( or increasing the number of shares held ), raising or lowering the total level of Mutual Fund investment in stock shares versus 'cash' etc. However, there is a cost associated with such fund management 'decision making' ( which subtracts from the Mutual Fund's value versus the value of the underlying Chinese stock shares) ... such that operating cost is typically much higher for a Mutual Fund than for an ETF.
While this probably goes without saying, the distinctions between direct purchase of stock shares, versus the purchase of ETF shares with a (more or less ) fixed 'basket' of investment holdings, versus the purchase of shares in an actively managed Mutual Fund where investment holdings are changing based on fund manager investment decisions, apply to every type of investment focus not just China.
And of course, if you can afford to put up a minimum of 1/4 million dollars, you can take advantage of author Puru Saxena's personal expertise in investing your money in the Chinese economy ! But somehow I doubt that many Dollar Den readers will be interested or able to jump the 1/4 million dollar hurdle to become a 'qualified' investor. For informational purposes, it should be noted that Mr. Saxena's investment services group is literally one of thousands of similar institutions around the world whose specific personal investment expertise ( plus local business / gov't connections and local economic 'intelligence' sources ) is only made available to high roller 'qualified' investors.
Again, a disclaimer that the above does NOT constitute a specific recommendation to purchase any stock, ETF or Mutual Fund shares.
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Re: speculation on potential 'winning' long term investment in China
While I too am invested in China, and I'd recommend it, I still counsel some caution. As well as China is doing they still have huge problems. Environmental problems; Social problems ( too many old; too few young and too many men- not enough women); overreliance on exports; rural poverty; ethnic strife etc.
Only about 5% of my portfolio is in Chinese stocks. I have weighted things more heavily towards Brazil and India.