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 Still Key for Investors Despite Slumping Stock Markets

Stock-Markets / Chinese Stock Market Nov 15, 2011 - 05:50 AM GMT

By: Money_Morning

Stock-Markets

Best Financial Markets Analysis ArticleDavid Zeiler writes: Despite the recent downturn in China's stock market, investors need to remain focused on the profit-generating long-term growth potential of the Asian powerhouse.

The Shanghai Composite Index is down about 10% on the year, compared to a drop of less than 1% year-to-date for the Standard & Poor's 500 Index.


Chinese exchange-traded funds (ETFs), a popular way for U.S. investors to dip their toes into the Chinese stock markets, are off an average of more than 21% for 2011. That's a big shift from 2010, when the average China fund gained 13%, or 2009, when the average gain was an eye-popping 64.5%.

Anthony Bolton, one of the United Kingdom's most respected fund managers, called the end of the third quarter "a brutal period for Asian markets - as difficult a time to be running money as I can remember."

Bolton's U.K.-based Fidelity China Special Solutions Fund dropped 28.9% in six months.

A recent bounce up from lows reached in October has some experts wondering if China's stock markets hit a bottom or if they might slip still lower, but in any case investors mustn't abandon China, said Money Morning Chief Investment Strategist Keith Fitz-Gerald.

"Long-term, you can't afford to be without Chinese stocks," Fitz-Gerald said. "Timing is not what you should be focused on. You need to be focused on growth, and who has the money."

Fitz-Gerald pointed to the debt-crippled economies of the United States and Europe.

"That's not where the money is," he said. "It's in the emerging economies like China."

Controlled Slowdown
Several factors have combined to rock the Chinese stock market this year. The Chinese government has attacked inflation by raising interest rates five times over the past 12 months, but at the cost of slowing economic growth.

Even so, the Chinese central bank has projected the country's gross domestic product (GDP) will grow at a 9.2% rate in 2011 and an 8.5% clip next year.

That's still more than triple the growth of the U.S. economy. The Philadelphia Fed's quarterly survey yesterday (Monday) lowered its projected U.S. GDP for 2012 to 2.4%.

China's exports have slumped as a result of the sagging U.S. economy as well as the turmoil generated by the Eurozone debt crisis. The Eurozone is China's biggest customer.

In addition to hiking interest rates, China's government also has increased the reserve requirements for its banks, which reduced the amount of money available for lending, restricting capital.

"The Chinese government wants to prevent excessive speculation," Fitz-Gerald said. "So they're keeping a lid on interest rates and doing what they can to curb the inappropriate use of capital."

Fear Not
The Chinese stock market's recent stumbles, combined with questionable accounting practices among some "reverse merger" companies, which buy the shares of defunct public companies in order to use their tickers,has created the perception among some investors that China is just too risky right now.

Not so, says Fitz-Gerald.

"When everyone else has had the stink scared out of them, that's when you go in," he said.

Fitz-Gerald is not alone.

Fidelity's Bolton, despite the damage to his fund, also sees China as a good investment over the long haul.

"It is still under-owned by investors, but people see China is not a house of cards that is going to collapse," Bolton said. "When those views fail to materialize, you will see fund flows into China improve."

And Goldman Sachs Group Inc. (NYSE: GS) said it expects looser credit and an attempt by the Chinese government to help struggling companies to boost stocks there eventually.

"We are recommending a long position in Chinese equities," Goldman said in a research note.

Still, investors need to tread carefully, Fitz-Gerald said, as there is "plenty of trash among the treasure."

He advises investors to stay clear of the reverse merger stocks as well as small caps.

Instead, Fitz-Gerald says investors should stick with big sectors such as energy and consumer goods.

Apart from Chinese stocks and ETFs, Fitz-Gerald recommends "glocal" companies like McDonald's Corp. (NYSE: MCD) and ABB Ltd. (NYSE ADR:ABB) that have both a local presence as well as a global reach.

"I have no doubt whatsoever that the Chinese markets will out-accelerate the U.S. and Eurozone markets over the long term," Fitz-Gerald said. "The Global 100 are all going to China. That's where the growth is."

For in-depth analysis of the Chinese stock markets, check out Keith Fitz-Gerald'sTheNew China Trader service. For more information,click here.

Source :http://moneymorning.com/2011/11/15/china-still-key-for-investors-despite-slumping-stock-markets/

Money Morning/The Money Map Report

©2011 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.

Money Morning Archive

© 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