Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Central Banks May Ramp Up Gold Buying - 18th Apr 21
How to Get Rid of Driveway Weeds With Just WATER! 6 Months later NO Weeds, Ultimate Killer! - 18th Apr 21
State of the European Markets - DAX, FTSE, CAC, AEX, SMI, IBEX 35, S&P/MIB, Euro Stoxx 50, RTS - 18th Apr 21
Einvestment Fund: What You Need To Know About Investments - 18th Apr 21
Google Alphabet (GOOG) AI Deep Mind Stock Trend Analysis - 17th Apr 21
Stocks and Bonds Inflationary Slingshot - 17th Apr 21
Best Smartphone Selfie Stick Tripod Review by ATUMTEK Works with Samsung Galaxy and Iphone - 17th Apr 21
How to Give Budgie's First Bath | Easy Budgie Bathing and Water Training with Lettuce - 17th Apr 21
Record-breaking Decrease in New Passenger Vehicle Sale in Europe - 17th Apr 21
US Stocks Climb A “Wall Of Worry” To New Highs - 16th Apr 21
Gold’s Singular Role - 16th Apr 21
See what Anatomy of a Bursting Market Bubble looks like - 16th Apr 21
Many Stock Market Sectors Are Primed For Another Breakout Rally – Are You? - 16th Apr 21
What Skyrocketing US Home Prices Say About Inflation - 16th Apr 21
Still a Bullish Fever in Stocks? - 16th Apr 21
Trying to Buy Coinbase Stock on IPO Day - Institutional Investors Freeze out Retail Investors - 15th Apr 21
Stocks or Gold – Which Is in the Catbird Seat? - 15th Apr 21
Time For A Stock Market Melt-Up - 15th Apr 21
Stocks Bull Market Progression Now Shows Base Metal Strength - 15th Apr 21
AI Tech Stocks Buy Ratings, Levels and Valuations - 14th Apr 21
Easy 10% to 15% Overclock for 5600x, 5900x, 5950x Using AMD Ryzen Master Precision Boost Overdrive - 14th Apr 21
The Current Cannabis Sector Rally Is Pointing To Another Breakout - 14th Apr 21
U.S. Dollar Junk Bond Market The Easiest Money in History - 14th Apr 21
The SPY Is Nearing Resistance @ $410… What Is Next? - 14th Apr 21
The Curious Stock Market Staircase Rally - 14th Apr 21
Stocks are Heating Up - 14th Apr 21
Two Methods in Calculating For R&D Tax Credits - 14th Apr 21
Stock Market Minor Correction Due - 13th Apr 21
How to Feed Budgies Cucumbers - Best Vegetables Feeding for the First Time, Parakeet Care UK - 13th Apr 21
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21
The History of Bitcoin Hard Forks - 10th Apr 21
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Two Very Important Stock Market Investment Rules!

InvestorEducation / Investing Mar 20, 2007 - 05:52 PM GMT

By: Money_and_Markets

InvestorEducation

Someone once asked the famous bank robber Willie Sutton why he robbed banks. Willie's answer was simple – “Because that's where the money is!”

You know, Sutton had a point. That's why I was very interested to hear that Kevan Watts, the head of Merrill Lynch's international division, will be moving his office from London to Hong Kong.

Guys like Watts aren't flocking to Asia to eat sushi or fried rice ... they're going because that's where the money is. Heck, a third of Goldman Sachs' 2006 pretax profits came from Asia!


So while a lot of investors are burying their heads in the sand and avoiding overseas markets, the smartest guys on Wall Street keep entrenching themselves more deeply in Asia.

Today, I want to tell you why Asia will remain the place where the money is made. And then I'll give you six ways to get a stake.

Let's start with two guiding investment principles that every investor needs to understand …

Stock Prices Follow Earnings;
Earnings Follow GDP Growth

Historically, earnings have been the most important factor in determining a company's stock price. It makes sense when you think about it: Investors want to own the most profitable companies, so they bid up the prices of the companies that make the most money.

Now, the next important question to ask is, “How do I know which companies will make the most money?” Again, history demonstrates that corporate earnings will generally correspond to the host country's overall economic growth.

Sure, there are always exceptions to this rule. But give me a booming economy, and I'll show you lots of profitable companies and a rising stock market.

Here's the key: As an investor, you need to take a close look at what parts of the world are showing the strongest economic growth. Then, invest in the best growth stocks you can find in those countries.

Don't Look to the U.S.
For the Greatest Growth

I am disappointed to say that the U.S. is not a high-growth country right now. Our economy expanded by little more than 2% over the previous 12 months. And as you'd expect, corporate earnings are now slowing down faster than a sailboat that just dropped anchor:

The fourth quarter of 2006 marked the 14th consecutive quarter of double-digit earnings growth for the S&P 500. But earnings in the first two quarters of this year are expected to rise just 4.3% and 4.4%, respectively.

Plus, even those modest expectations may be too high now that the subprime mortgage meltdown is unfolding. It could easily infect other parts of our economy. In fact, I believe there's a good chance that our rapidly weakening real estate market will pull the economy into a recession.

It seems like Federal Reserve Governor Susan Bies shares my view. Just last week, she said of falling real estate prices, “This is not the end, this is the beginning.''

There's a chance our economy will continue to chug along at a low-single-digit growth rate. That would be especially possible if Ben Bernanke and his Fed buddies lower rates and turn on the monetary spigot.

I'm not suggesting that you completely turn your back on American stocks, either. However, if you subscribe to the earnings-follows-GDP philosophy that I just laid out, then you've got to ask yourself if there are any economies around the globe growing faster than the U.S.'s uninspiring 2% rate. And the answer is, “Absolutely!”

Asian Countries Are Doubling, Tripling, Even Quintupling U.S. GDP Growth

The National People's Congress (NPC), the highest legislative body in China, just concluded its annual two-week meeting. They use this event to set the year's economic and social policies. The big news out of the meeting – China's targeting 2007 GDP growth of 8%.

What's more, the Chinese have low-balled their growth rate for years. Last year, China posted a 10.7% increase, the fourth double-digit year in a row. Of course, even the NPC's 8% target is still 400% better than what the U.S. is doing!

Want concrete indications of China's continued growth? Check these out:

  • The Civil Aviation Administration of China (CAAC) said it is going to spend $6.5 billion to construct 37 new airports and enlarge 31 existing ones in the next five years.
  • Suning, one of the country's leading home appliance retailers, said its 2006 profits jumped 105% in the last year thanks to booming sales of televisions, cell phones, and computers. Demand is so strong that the company opened 145 new stores in 2006!
  • In China, 712,000 cars were sold in just the first two months of this year. That's a 33% increase over the same period last year.
  • The country's February trade surplus hit $23.76 billion, accounting for a 41.5% increase from the previous year.

Of course, when it comes to politicians, statistics, and estimates, I'm an equal opportunity skeptic. That's why I frequently travel to Asia to see things with my own eyes.

In just a few weeks, I'll be on my way back over there to assess the situation in person. And as usual, I plan on returning to the States with a bunch of new investment opportunities. 

In the meantime, if you want to get a diversified stake in Asia, you can certainly use exchange-traded funds (ETFs). Here are six of your choices:

From Wall Street to the Great Wall: How to Invest in China
$19 (34% discount)From Wall Street to the Great Wall: How to Invest in China

#1. iShares FTSE/Xinhua China 25 Index (FXI): This fund invests in the 25 largest and most liquid Chinese companies, such as CNOOC (NYSE: CEO), China Life Insurance (NYSE: LFC), and China Mobile (NYSE: CHL). That makes it the Chinese equivalent of the Dow Jones U.S. index.

Note: If you prefer regular ol' mutual funds, you may want to look at U.S. Global China (USCOX), a traditional mutual fund that specializes in Chinese investments.

#2. iShares MSCI Hong Kong Index (EWH): China may get all the headlines, but Hong Kong is one of the very best ways to participate in China's growth. This ETF holds a diversified basket of Hong Kong companies, with a current emphasis on banking, financial services, and real estate firms.

#3. iShares MSCI Taiwan Index (EWT): China and Hong Kong are growing at astounding paces, but Taiwan may very well end up being the cheapest way to participate in that growth. Reason: The country's stocks have been out of favor because of political tensions between Taiwan and China. But I think those problems will get ironed out, and when they do, Taiwan's stocks should surge!

#4. iShares MSCI Singapore Index (EWS): Singapore is another of the world's fastest growing economies, yet the Straights Times index of the country's stocks is trading at just 16 times earnings. That means this ETF gives you great bang for your buck.

#5. iShares MSCI Korea Index (EWY): South Korea's corporate profits are rising even faster than China's. So when it comes to translating economic growth into cold, hard profits, South Korea is a good bet.

#6. iShares MSCI Japan Index (EWJ): Japan is quite simply the blue chip way to participate in the Asian growth story. Like the story of the hare and the tortoise, it's not always who gets off to the fastest start; rather who maintains a sustainable pace. That's why the EWJ could prove to be a very productive Asian ETF over the long haul.

Best wishes,

By Tony Sagami

P.S. If you prefer to cherry-pick the very best individual companies from each of these fast-growing Asian economies, check out my Asia Stock Alert service. It'll be right up your alley!

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.MoneyandMarkets.com


© 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