Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
The Hottest Sports Stock Of 2020 - 23rd Sep 19
Stocks Wedge At The Edge – Front And Center - 23rd Sep 19
Stock Market Top Almost Confirmed - 23rd Sep 19
Thomas Cook COLLAPSE! 300,000 Passengers Stranded, Flights Cancelled, Planes Grounded - 23rd Sep 19
Massive Stock Market Price Reversion May Be Days or Weeks Away - 22nd Sep 19
How Russia Seized Control of the Uranium Market - 22nd Sep 19
Dow Stock Market Trend Forecast Update - 21st Sep 19
Is Stock Market Price Revaluation Event About To Happen? - 21st Sep 19
Gold Leads, Will the Rest Follow? - 21st Sep 19
Are Cowboys Really Dreaming of... Electric Trucks? - 21st Sep 19
Gold among Negative-Yielding Bonds - 20th Sep 19
Panicky Fed Flooding Overnight Markets with Cash - 20th Sep 19
Uber Stock Price Will Crash on November 6 - 20th Sep 19
Semiconductor Stocks Sector Market & Economic Leader - 20th Sep 19
Learning Artificial Intelligence - What is a Neural Network? - 20th Sep 19
Precious Metals Setting Up Another Momentum Base/Bottom - 20th Sep 19
Small Marketing Budget? No Problem! - 20th Sep 19
The Many Forex Trading Opportunities the Fed Day Has Dealt Us - 19th Sep 19
Fed Cuts Interest Rates and Gold Drops. Again - 19th Sep 19
Silver Still Cheap Relative to Gold, Trend Forecast Update Video - 19th Sep 19
Baby Boomers Are the Worst Investors in the World - 19th Sep 19
Your $1,229 FREE Tticket to Elliott Market Analysis & Trading Set-ups - 19th Sep 19
Is The Stock Market Other Shoe About To Drop With Fed News? - 19th Sep 19
Bitcoin Price 2019 Trend Current State - 18th Sep 19
No More Realtors… These Start-ups Will Buy Your House in Less than 20 Days - 18th Sep 19
Gold Bugs And Manipulation Theorists Unite – Another “Manipulation” Indictment - 18th Sep 19
Central Bankers' Desperate Grab for Power - 18th Sep 19
Oil Shock! Will War Drums, Inflation Fears Ignite Gold and Silver Markets? - 18th Sep 19
Importance Of Internal Rate Of Return For A Business - 18th Sep 19
Gold Bull Market Ultimate Upside Target - 17th Sep 19
Gold Spikes on the Saudi Oil Attacks: Can It Last? - 17th Sep 19
Stock Market VIX To Begin A New Uptrend and What it Means - 17th Sep 19
Philippines, China and US: Joint Exploration Vs Rearmament and Nuclear Weapons - 17th Sep 19
What Are The Real Upside Targets For Crude Oil Price Post Drone Attack? - 17th Sep 19
Curse of Technology Weapons - 17th Sep 19
Media Hypes Recession Whilst Trump Proposes a Tax on Savings - 17th Sep 19
Understanding Ways To Stretch Your Investments Further - 17th Sep 19
Trading Natural Gas As The Season Changes - 16th Sep 19
Cameco Crash, Uranium Sector Won’t Catch a break - 16th Sep 19
These Indicators Point to an Early 2020 Economic Downturn - 16th Sep 19
Gold When Global Insanity Prevails - 16th Sep 19
Stock Market Looking Toppy - 16th Sep 19
Is the Stocks Bull Market Nearing an End? - 16th Sep 19
US Stock Market Indexes Continue to Rally Within A Defined Range - 16th Sep 19
What If Gold Is NOT In A New Bull Market? - 16th Sep 19
A History Lesson For Pundits Who Don’t Believe Stocks Are Overvalued - 16th Sep 19
The Disconnect Between Millennials and Real Estate - 16th Sep 19
Tech Giants Will Crash in the Next Stock Market Downturn - 15th Sep 19
Will Draghi’s Swan Song Revive the Eurozone? And Gold? - 15th Sep 19
The Race to Depreciate Fiat Currencies Is Accelerating - 15th Sep 19
Can Crypto casino beat Hybrid casino - 15th Sep 19
British Pound GBP vs Brexit Chaos Timeline - 14th Sep 19
Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - 14th Sep 19
War Gaming the US-China Trade War - 14th Sep 19
Buying a Budgie, Parakeet for the First Time from a Pet Shop - Jollyes UK - 14th Sep 19
Crude Oil Price Setting Up For A Downside Price Rotation - 13th Sep 19
A “Looming” Recession Is a Gold Golden Opportunity - 13th Sep 19
Is 2019 Similar to 2007? What Does It Mean For Gold? - 13th Sep 19
How Did the Philippines Establish Itself as a World Leader in Call Centre Outsourcing? - 13th Sep 19
UK General Election Forecast 2019 - Betting Market Odds - 13th Sep 19
Energy Sector Reaches Key Low Point – Start Looking For The Next Move - 13th Sep 19
Weakening Shale Productivity "VERY Bullish" For Oil Prices - 13th Sep 19
Stock Market Dow to 38,000 by 2022 - 13th Sep 19 - readtheticker
Gold under NIRP? | Negative Interest Rates vs Bullion - 12th Sep 19
Land Rover Discovery Sport Brake Pads and Discs's Replace, Dealer Check and Cost - 12th Sep 19
Stock Market Crash Black Swan Event Set Up Sept 12th? - 12th Sep 19
Increased Pension Liabilities During the Coming Stock Market Crash - 12th Sep 19
Gold at Support: the Upcoming Move - 12th Sep 19
Precious Metals, US Dollar, Stocks – How It All Relates – Part II - 12th Sep 19

Market Oracle FREE Newsletter

How to Invest in the Esports Revolution

Asian Emerging Market Stock Market Sell off Excellent Buying Opportunity

Stock-Markets / Chinese Stock Market Mar 15, 2008 - 02:52 AM GMT

By: Yiannis_G_Mostrous

Stock-Markets

Best Financial Markets Analysis ArticleThe current market weakness presents an excellent opportunity to buy Asian stocks.

Although the state of the US economy and the global credit crisis is gloomy, and it's on track to remain so for some time, the global financial system won't completely collapse. It seems that the US monetary policy is losing credibility, which will be difficult to restore to previous levels. But the order of the world is changing, and everyone wants to avoid total destruction.


Don't underestimate the probability for a rally, bear market or otherwise. Few investors with whom I've spoken expect a strong rally. And when the majority doesn't expect something to happen, it usually takes place anyway. Only time will tell; a few momentum indicators aren't confirming just yet. But there's a risk on the upside at these levels.

This is the year that Asia will consolidate and get ready for the next leg up in this long-term bull market, which commenced at the bottom of the Asian Crisis in 1998.

And what a difference 10 years makes. Before the Asian Crisis, the region was in a tailspin: Everyone from this side of the globe gave advice on how Asian countries should deal with their liquidity/credit problems. Asia was forced to follow the path of tighter credit and prudent economics.

Although this advice almost destroyed the region, it also helped the economies sober up to get their finances and businesses back in order. This is why the Asian Crisis is so important to the fundamental case for investing in Asia.

The western financial system is going through a similar problem right now: Debt levels are high, and no one really knows who owns what, particularly in terms of collateralized debt obligations (CDO) and the like. The difference now is that few advocate the hard medication that was prescribed for Asia back then.

It's true that Asia can't go it alone yet because it's not big enough. China and India consume around 10 million barrels of oil per day, while the US alone consumes 27 million. This is why the longer the developed economies stay above water, the best it will be for everybody. Asia and other developing economies such as Russia and the Gulf states will continue to contribute to saving the banking system (i.e., cash infusions to big banks) and hope for the best.

On the long side, the strategy for this year remains quite simple: Buy quality companies that offer long-term growth potential, but also keep some hedges on for good measure.

At the end of the day, I want to be invested where the growth is and the economic fundamentals are in good shape. And that place is Asia.

Buy Infrastructure

Chinese investment in transportation infrastructure continues with railways in the driver's seat.

Until recently, infrastructure--particularly in Asia--focused on road building. China alone has built 820,000 kilometers (km) of new roads over the past decade, spending USD53 billion in the past five years alone. In 2006, China's highway investment reached USD81 billion, surpassing the USD72 billion the US spent.

India, on the other hand, has added only around 470,000 km over the past 10 years. In 2006, India spent USD6 billion on roads, a drop in the bucket compared to its needs and to China's efforts. Furthermore, much of India's road network is of low quality, with many single-lane and two-lane roads that slow traffic.

According to the Chinese government's plans, the national railway network's total length should reach 90,000 km in 2010 and 100,000 km in 2020 from 75,000 km in 2005. Fifty percent of the total is expected to be double-line rails (one of which can be electrified) and outright electric. The plan calls for the construction of eight passenger transport lines and three intercity high-speed railway transportation systems, and enlargement of as well as improvement to the existing network.

Given that Chinese passenger and freight transportation has been increasing at an average of 18 percent a year, the government's urge to upgrade and expand transportation is logical. China is planning to spend more than USD170 billion updating its railways, and construction machinery companies should benefit because around 46 percent of the rail investment goes to construction.

China Infrastructure Machinery (CIM) is the only Chinese heavy machinery company that individual investors can easily access because it's listed in Hong Kong. It's the second-largest loader producer in China under the brand name Longgong. It's also diversified into producing forklifts and excavators recently, which should help future earnings growth.

The company's success is founded on its excellent marketing techniques (sales are up 36 percent per year in the past three years) and low pricing. Forty-three percent of CIM's sales come from road, railways and bridges, so the company will be a big beneficiary of the boom.

CIM is expected to surpass competitors and become the largest loader producer in China by sales volume. Because of its success, the company is planning to allocate more money in its research and development (R&D) program in order to improve quality.

China's construction machinery industry has become the third-largest producer in the world behind the US and Japan; 2006 marks the year that China became a net exporter. Chinese companies have been gaining market share around the world. Developing regions such as India, Africa and the Middle East are rapidly becoming big marketplaces for these companies.

Although CIM isn't one of the biggest construction machinery companies in China, it is one of the most profitable, and it's coming strong from a low base. For instance, the new product lines introduced in the last couple years--forklifts and small excavators--have been growing strongly.

The company is expected to sell just more than 700 excavators this year, up from 44 in 2007. And the same kind of growth is expected in the forklift division. CIM is also one of the cheapest stocks in the sector and boasts one of the higher returns on equity (ROE) at 40 percent.

The Mechanics

I prefer the local shares to the over-the-counter (OTC) listing. And because Hong Kong is easily tradable through serious brokers in the US as well, I strongly recommend you buy the stock locally.

Not every brokerage is coming along. Some simply don't want to expend the effort needed to open their business beyond the domestic market. 

Interactive Brokers' trading platform offers easy access to US-, Canadian-, European-, Japanese- and Hong Kong-listed stocks alike, among others. The company boasts cheap commissions and also has a great system for handling currencies. You can choose to convert all or part of your account into British pounds sterling or euros to handle buys in Europe at favorable rates. The minimum amount to open an account is USD10,000.

A more mainstream broker that can now handle some international trading online is E*Trade. Commissions are slightly higher, and the Web site is particularly easy to use with solid news and quote feeds for most foreign markets. Note that the brokerage operations are entirely segregated from the firm's troubled mortgage operations and are federally insured as well.

This is by no means an exhaustive list. If you've had positive experiences buying foreign stocks with other brokers, please drop us an e-mail , and we'll include them in an upcoming issue.

 

By Yiannis G. Mostrous
Editor: Silk Road Investor, Growth Engines
http://www.growthengines.com

Yiannis G. Mostrous is an associate editor of Personal Finance . He's editor of The Silk Road Investor , a financial advisory devoted to explaining the most profitable facets of emerging global economies, and Growth Engines , a free e-zine that provides regular updates on global markets. He's also an author of The Silk Road To Riches: How You Can Profit By Investing In Asia's Newfound Prosperity .

Yiannis_G_Mostrous Archive

© 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