Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

China’s Economy Rocks! Ignore the Naysayers

Stock-Markets / China Stocks Sep 23, 2010 - 08:32 AM GMT

By: Tony_Sagami

Stock-Markets

Best Financial Markets Analysis ArticleIf you read the business news or watch CNBC, you’ve been bombarded with a steady stream of experts warning you about China. Warning you about the Chinese stock market, warning you about the Chinese real estate bubble, warning you about the Chinese economy.

The majority of those China worrywarts have been crying “wolf” for a long, long time. Like Samuel Clemens said, “the reports of my death have been greatly exaggerated” and that is certainly true of the Chinese economy.


Chinese Premier Wen Jiabao speaking at the World Economic Summit in Tianjin, said, “China’s economy is now in good shape, featuring fast growth, gradual structural improvement, rising employment and basic price stability.”

But don’t take his word for it. You need to look at the cold, hard facts and the ones that came out of China in the last week were impressive:

  • In the last 12 months, the output from all the factories in China increased by 13.9% in the month of August. That was above the 13% that all the experts were expecting and more solid evidence that the Chinese manufacturers are doing just fine.
  • All that increased work at China’s factories must have translated into extra income for Chinese consumers because retail sales jumped by 18.9% in August. I suspect a lot of those retail sales were to popular western brands like Tiffany, Louis Vuitton, Yum Brands, Nike, and Apple.

The Apple iPad started selling in China last Friday. The 16GB model will sell for $590, while the 32GB will sell for $708, and the 64GB for $826. How big of a seller will the iPad be in China? From my sources, the answer is BIG!

Chart
  • Here’s proof of Chinese buying spilling over to its foreign trading partners. In August, imports into China jumped by 35.2% to $140 billion. That is on the heels of a 38% increase in July. No matter how you slice it, that’s a lot of “stuff.”
  • The Chinese National Bureau of Statistics reported that home prices in its 70 largest cities rose 9.3% year-on-year in the month of August. That is, by the way, on the heels of a 10.3% year-over-year increase in July.
  • Capital spending — on things like factories and office buildings — in urban areas grew by 24.8% in the first eight months of 2010. That shows that investors and business owners are confident in the future to invest their money into long-term projects.
  • Unlike the U.S., China’s banks are eager to lend money. China’s big four state-owned banks extended a combined US$32 billion in new loans in the month of August, a 2.3% increase from July and the first increase in four months.
  • Like gasoline is to a car, money supply is to a country’s economy. Show me a country with a growing money supply and I’ll show you a country with tons of growth ahead of it. M2, a broad measure of money supply, jumped by 19.2% in August. A lot of that money was from bank lending, but a lot of it is from businesses and individuals willing to spend — not hoard — any money that they accumulate.
Factory output in China increased by 13.9% in the month of August.
Factory output in China increased by 13.9% in the month of August.

Despite what the vocal naysayers tell you about China, it is still a vibrant, growing economy. China’s economy has grown more than 90-fold since the late leader Deng Xiaoping initiated economic reforms more than 30 years ago.

2010 is no exception. China’s economy grew at an annualized 11.9% rate in the first quarter and another 10.3% in the second quarter.

Most experts expect the full-year GDP growth numbers to come in somewhere between 8% to 9% and I think that is too low. Heck, the Wall Street crowd has been underestimating China for decades and not included enough China in their portfolios.

They are starting to figure it out though. A new survey of 215 money managers managing $579 billion by Bank of America Merrill Lynch found that 11% of them expect the Chinese economy to strengthen over the next 12 months.

Eleven percent may not sound like much, but that’s a dramatic change from the 19% that were BEARISH on China a month ago. That’s a 30% turnaround. And if those same 30% start putting more of the billions they manage into China … Chinese stocks will take off.

Next year is shaping up to be even stronger. China’s National Bureau of Statistics said last week that it expects China’s economy to grow by at least 10%.

In my view, it would be a big investment mistake to not include a significant piece of China in your portfolio.

I don’t want you to make that mistake, and the easiest way to avoid it is with exchange traded funds. Here are three broadly diversified China ETFs to consider:

iShares FTSE/Xinhua China 25 Index (FXI): Seeks to track the performance of the FTSE/Xinhua China 25 index. This index consists of 25 companies that represent the largest 25 Chinese companies listed on the Hong Kong Stock Exchange.

PowerShares Golden Dragon Halter USX China (PGJ): Seeks results that correspond to the returns of the Halter USX China index. This index consists of 103 Chinese companies whose common stock is publicly traded in the U.S. The index uses a formula that prevents the largest market-cap companies from becoming too large a component of the index.

SPDR S&P China (GXC): Seeks to replicate the total return performance of the S&P/Citigroup BMI China index. This index consists of the largest 342 companies that are publicly traded and domiciled in China.

If you want to zero in on specific sectors of the Chinese economy, there are several ETFs that do that too:

  • Claymore China Technology (CQQQ)
  • Claymore China Small Cap (HAO)
  • Global X China Consumer (CHIQ)
  • Global X China Industrial (CHII)
  • Global X China Financial (CHIX)
  • Global X China Energy (CHIE)

And don’t forget about individual stocks. There are more than 100 Chinese companies — such as New Oriental Education (EDU), China Housing & Land (CHLN), and Mindray Medical (MR) — listed on the NYSE or Nasdaq. It is as easy (and inexpensive) to buy shares in China Mobile (CHL) as General Electric.

Between ETFs, no-load mutual funds, and individual stocks, nobody has an excuse to not include China in their portfolio.

Best wishes,

Tony

This investment news is brought to you by Uncommon Wisdom. Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. From time to time, the authors of Uncommon Wisdom also cover other topics they feel can contribute to making you healthy, wealthy and wise. To view archives or subscribe, visit http://www.uncommonwisdomdaily.com.


© 2005-2022 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