Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

You’ll Never See a Better Moment to Invest in China

Companies / China Stocks May 16, 2015 - 05:43 PM GMT

By: ...

Companies

MoneyMorning.com Keith Fitz-Gerald writes: We recently talked about how analysts consistently create investing opportunities for you with their wrong-headed calls on individual companies they know very little about (click here to see that again).

But we haven’t talked about what happens when they create ideal entry points in whole sectors… or even entire nations… about which they know even less.


So let’s do that today.

I want to give you a truthful look at what’s happening in the single most underestimated, misunderstood, and perpetually disrespected country on earth: China.

Then we’ll examine why it’s creating an ideal moment to invest, how savvy investors are jumping in anyway, and what steps you can take to join them (including three investments you can make today).

Here’s everything you need to know…

Analysts Have Helped Create a $28.3 Billion Disconnect in World Markets

The latest “paranoid punditry” is coming from the head of emerging markets and global macro at Morgan Stanley Investment Management, Ruchir Sharma.

Speaking this week at the Global Private Equity Conference in Washington, DC, he said he’s of the opinion that the worst of the Chinese economic slowdown is still ahead because of the nation’s debt. Specifically, he noted that whenever a country increases its debt to GDP sharply over five years, there’s a “70% chance of a financial crisis and 100% chance of a major economic slowdown,” as reported by Yahoo! Finance. The implication, of course, is that China’s going to see the same.

On China: Use History as Your Guide

Doomsday predictions related to China are nothing new. They’ve been spread for years by companies and individuals commanding very large audiences.

The New York Times warned readers on January 18, 2004, that China “may be in a bubble now, especially on the investment side of the economy.” Since then, China’s GDP has surged by 297%.

That same year, the International Finance Corporation, which is the main investing arm of The World Bank, announced it would stop financing China’s manufacturing sector, summarily declaring that it was hopelessly over-invested. In fact, China’s manufacturing sector proved to be so robust that it overtook the U.S. as the world’s leading manufacturer… not bad for a country that ranked below Italy in 1980!

Famed short seller Jim Chanos, who’s made huge waves in the national media for years about China’s looming meltdown, won’t give up the ghost. On April 3, 2015, he noted on CNBC that China’s panicking in the face of sluggish growth.

Hardly.

But that’s fine, because it means bigger profits for you.

Respectfully, I really wish guys like Sharma would crawl into a hole somewhere. Their version of doom and gloom just isn’t true. China’s latest market rally began in Q2/2014 and tacked on 128% through the end of April.

Sharma is essentially making the same argument that many others have made for the last 40 years… and for 40 years they’ve been dead wrong.

Here’s where China’s got key advantages.

1) Growth

So what if China’s growth falls from 7% to 5%…? The United States will be lucky to do just 2% after spending trillions of dollars! You’re still talking about a country with a growth rate that’s double or even triple our own. Any central banker around the world will love to have those numbers.

Even if you can’t mentally get past that point about growth – and lot of people can’t for a variety of reasons – take a look at this chart.

2) Capital

China’s got around $4 trillion USD in reserve. That means Beijing can recapitalize China’s banking system several times over and still have change left. (Meanwhile, the United States is $220 trillion in the hole.)

There’s no question China can “term out” the debt and take a page from our politicians by kicking the can down the road – a point Robert Petty of Clearwater Capital Partners made that echoes my own in response to Sharma’s observations.

Keep the numbers you hear in perspective. For example, the State Administration of Foreign Exchange (SAFE) just reported that $28.3 billion in capital fled China’s economy last month… at a time when the Chinese economy was growing by 7%. Western economists flipped.

To put that in context, the U.S. economy saw $4.1 billion in capital flow across its borders last month in foreign investment, despite a much more anemic growth rate of 0.2%… exactly 1/35th of China’s current growth rate. Capital expansion and cross-border movement is a natural byproduct of growth.

The key thought here is that if China’s government wants to continue the growth it needs – and it does – China will have to develop new trading relationships with new trading partners. That’s why it’s pushing into Africa, the Middle East, and even Europe.

3) Demographics

Don’t forget that China is a country in transition. It is moving from a manufacturing base to one that’s focused on domestic consumption (much the way the United States did 100 years ago). Liberalizing the economy is only a small part of the equation. A lot of money has yet to flow to education, medical care, insurance, and even social works.

While we’re at it, don’t forget we’re talking about an economy powered by 1.3 billion people using a currency that’s still not fully convertible and which is unencumbered by the “nanny state” spending of the United States, Europe, and Japan.

Hundreds of millions of Chinese consumers are expected to join the middle class by the year 2020 – that means hundreds of millions more people who will be able to afford cars, smartphones, and all manner of products they couldn’t afford before. A report from McKinsey projects that China’s upper middle class will account for 54% of urban households. In 2012, that number was just 14%.

This is the power of Demographics which is exactly why it’s one of six Unstoppable Trends and, specifically, why China’s at the heart of it.

It can break a nation, as is happening in Japan, which has the highest number of elderly per capita on the planet. Or it can lift entire nations to new heights, like the Baby Boomer demographic did for America post-World War II. China happens to be on the right side of the Trend at the moment.

4) Economy

And, finally, China’s still a centralized economy. While Western economists may not like it, this gives China a measure of strength we don’t have in our own “free” markets.

The irony was not lost on Warren Buffett, who noted at the most recent Berkshire Hathaway shareholder meeting that “investors should have faith in China.”

I couldn’t agree more.

At the end of the day, China will play an important role in your financial future whether you like it or not. CEOs know that in order to achieve the growth they need to keep investors happy, they’ll have to find a way to work with the Red Dragon, even if our political leaders don’t… or can’t.

How to Invest In China

My favorite “in” China stock is Alibaba Group Holdings Inc. (NYSE:BABA).

The company dominates the e-commerce industry in China (which is expected to grow by 32% this year, to total $562.6 billion in sales). The consulting firm Forrester says that the Chinese e-commerce market could grow to $1 trillion by 2020 – so Alibaba has enormous long-term potential if it can just retain, never mind grow, its current market share.

And it shows no sign of slowing down its aggressive acquisitions and partnering strategy that ties its fate ever more closely to China’s rise. Just yesterday, for example, Alibaba announced a strategic investment in the logistics company YTO Express, which already services 2,300 Chinese cities and is one of only three companies in the country that is licensed for aviation logistics.

If ETFs are more your speed, consider the Guggenheim Small Cap China ETF (NYSEArca:HAO). It’s a passive exchange-traded fund designed to replicate the performance of the AlphaShares China Small Cap Index. That gives it exposure to a wide variety of small-cap Chinese companies that would otherwise be off limits to Western investors including everything from basic materials to technology to healthcare, consumer cyclicals, and even communication services. HAO has returned 28.79% since I recommended it to Money Map Report subscribers eight months ago and remains a great choice today.

How to Invest Because Of China

If you just can’t stomach the thought of an “in” country investment, then consider investing “because” of China.

Bar none, my favorite in this arena is Apple Inc. (NasdaqGS:AAPL).

CEO Tim Cook makes no bones about the role China plays in Apple’s future noting late last year that he plans to grow the number of Apple stores in China by 166% in 2015. “When I look at China,” Cook said, “I see an enormous market where there are more people graduating into the middle class than any nation on Earth in history.”

What’s more, Apple isn’t confining its investments in China to the smartphone market. The company announced plans for a new solar installation project in China last month that will allow it to power all of Apple’s 40 stores and offices in China. Given how seriously Beijing has signaled its intention to move away from fossil fuel dependency and turn to green energy in recent years, Apple’s investment could lay the groundwork for rapid expansion in a centralized economy that increasingly dictates that new facilities meet stringent energy requirements. Not to mention an entirely new revenue stream that’s not yet being contemplated here in the United States.

Perhaps most importantly, though, Apple has an additional reason to invest in China that most other companies don’t, and it’s related to the Demographics Trend. China surpassed the U.S. as Apple’s biggest iPhone market in April when revenue for the second fiscal quarter in the region surged by 70%, so $16.8 billion.

That’s a level of growth that will continue as hundreds of millions of Chinese citizens win entry to the middle class and continue to spike demand. And like any good CEO, Cook knows to follow the money.

So do we.

Best regards for great investing,

Keith Fitz-Gerald

Source :http://totalwealthresearch.com/2015/05/youll-never-see-a-better-moment-to-invest-in-china/

Money Morning/The Money Map Report

©2015 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules