Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
Will Biden’s Neo-Populist Economic Doctrine Support Gold? - 25th Sep 21
Markets Deflationary Winds Howling - 25th Sep 21
Crude Oil Price Piercing the Sky: Where Will We See the Black Gold by Xmas? - 25th Sep 21
Cryptocurrency policy choices and consequences - 25th Sep 21
The Next Emma Raducanu UK Tennis Star Pleasing the Crowds at Millhouses Park Sheffield - 25th Sep 21
Stock Market Rescued by the Fed Again? - 24th Sep 21
Are Amazon Best Cheap Memory Foam Mattresses Any good? Bedzonline £69 4ft Small Double ECO Example - 24th Sep 21
Evergrande not a Minsky Moment - 24th Sep 21
UK Energy Firms Scamming Customers Out of Their Best Fixed Rate Gas Tariffs - 23rd Sep 21
Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Should School Children be Jabbed with Pfizer Covid-19 Vaccine To Foster Herd Immunity? - UK - 23rd Sep 21
HOW TO SAVE MONEY ON CAR INSURANCE - 23rd Sep 21
Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
Trading Crude Oil ETFs in Foreign Currencies: What to Focus On - 22nd Sep 21
URGENT - Crypto-trader event - 'Bitcoin... back to $65,000?' - 22nd Sep 21
Stock Market Time to Buy the Dip? - 22nd Sep 21
US Dollar Bears Are Fresh Out of Honey Pots - 22nd Sep 21
MetaTrader 5 Features Every Trader Should Know - 22nd Sep 21
Evergrande China's Lehman's Moment, Tip of the Ice Berg in Financial Crisis 2.0 - 21st Sep 21
The Fed Is Playing The Biggest Game Of Chicken In History - 21st Sep 21
Focus on Stock Market Short-term Cycle - 21st Sep 21
Lands End Cornwall In VR360 - UK Holidays, Staycations - 21st Sep 21
Stock Market FOMO Hits September CRASH Brick Wall - Dow Trend Forecast 2021 Review - 20th Sep 21
Two Huge, Overlooked Drains on Global Silver Supplies - 20th Sep 21
Gold gets hammered but Copper fails to seize the moment - 20th Sep 21
New arms race and nuclear risks could spell End to the Asian Century - 20th Sep 21
Stock Market FOMO Hits September Brick Wall - Dow Trend Forecast 2021 Review - 19th Sep 21
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Investors Follow the Money to Asia's Tech Hub

Stock-Markets / Asian Economies Mar 18, 2014 - 12:03 PM GMT

By: Frank_Holmes

Stock-Markets

China's slower economic data points and a surplus in copper and iron ore drove many commodities lower this week, while gold rose. In the short term, until the copper and iron ore surplus is liquidated, or absorbed at a slower pace, the base metals market will likely be sloppy.

As the second-largest economy in the world and a huge driver of commodities demand, it's not surprising China provoked such a significant response from world markets. Interestingly, most of the media thought it was geopolitical fears from Ukraine that chopped up the market and lifted gold.


Over the past few decades, we've watched the country experience tremendous economic growth, with its share of world GDP growth going from only 1.4 percent in 1992 to nearly 20 percent two decades later. China has become quite an economic powerhouse, with a tremendous effect on domestic urbanization and wealth, changing consumption patterns dramatically.

So even if the country experiences short-term headwinds, we believe the long-term story remains slower, but stable. The important part is to look past the negative headlines to uncover the best opportunities, or as we like to say, "Follow the money!"

At U.S. Global, we strive to follow the money by analyzing the broader Asian market, focusing on the areas that are sustaining leadership, both by sector and by country.

For instance, did you know that the strongest-performing sector in Asia over the past year is technology? Take a look at the chart below showing that technology stocks in the MSCI Asia Index (excluding Japan) increased 14.2 percent over the past 12 months. The sector far outperformed energy, which declined the most in the same time frame.

Technology is Best Performing Sector in Asia

In the Investor Alert, we've often discussed how the tech industry has been gaining strength in Asia, but particularly in China, which is quickly becoming the largest e-commerce market.

The world has drastically changed since the last technology boom more than a decade ago. As China has become one of the best consumption stories out there, local technology companies have profited. Take a look at other discussions we've had on China's booming sector:

You can see below that Chinese technology companies have far outpaced other major Asian technology sectors. Over the past year, China's tech stocks grew 77 percent. In Taiwan, tech businesses rose 15.3 percent while Korean tech stocks decreased 11.6 percent.

China is Best Performer Among Major Asian Technology Sectors

So what about China makes it a technology hub?

Similar to what's happening in the U.S., mobile Internet is transforming consumer behavior in China, with further penetration of smart phones, proliferation of mobile-payment apps, and 4G networks rolling out in China. These technologies aid in the ease and pleasure of shopping from home and staying connected, facilitating the rapid adoption of mobile e-commerce in the country.

In fact, as of the third quarter of last year, mobile e-commerce transactions already comprised 9.5 percent of total e-commerce volume, up from just 0.7 percent in the first quarter of 2011.

Rapid Adoption of Mobile E-commerce in China to Benefit Mobile Internet Leaders

With this significant growth, what I think is really important in China these days is the entrepreneurial spirit taking place. You have these young entrepreneurs growing up in China, creating new companies and achieving incredible success. In fact, according to the Chinese government, the startup of new companies in the private sector increased 30 percent in 2013, reaching 233 million businesses!

The entrepreneurs have government support too. In the widely watched annual press conference following the end of the National People's Congress Conference, Premier Li Keqiang highlighted the government's focus on innovation as a key driver for growth. In his signature no-nonsense and candid manner, the premier restated the importance of modernization and advancement.

As I wrote recently in my blog, innovation is one way companies grow and thrive in today's highly connected and competitive world.

This innovation can be seen in the government's recent selection of technology companies, Tencent and Alibaba, to open private banks. Currently, almost all banks in the country are state owned. This is yet another positive for tech companies, who have already collected deposits from many smart-phone users, who are able to achieve better rates than normal banks can offer.

Indonesia is Top-Performing Country in Asia

When it comes to country leadership in Asia, Indonesia is topping the performance charts. Among Asian countries, Indonesia has been the best performing country over the past six months, increasing about 8 percent as of March 14.

What is particularly impressive is that, despite investors' worries about the country's current account deficit and weak currency last year, businesses found Indonesia an attractive place to expand operations and do business.

Aggregate foreign direct investment has been strengthening across Southeast Asia, rising 7 percent in 2013 to $128.4 billion. Foreign investment was a particularly bright spot in Indonesia, as it grew 17 percent, according to Bank of America Merrill Lynch. What's more, investment into Indonesia has been growing at a consistent pace over the past five years.

Rapid Adoption of Mobile E-commerce in China to Benefit Mobile Internet Leaders

This is a very encouraging sign, as there is great historical parallel, says Xian Liang, portfolio manager of the China Region Fund (USCOX). He says that in the 1980s and 1990s, foreign direct investment kept flowing into China, which helped the economy grow.

Just last week, the country was upgraded to market weight by Goldman Sachs, which cited various reasons investors could see a pick-up in the investment cycle within the country.

We see additional positives for Indonesia, including the following:

  • The country's current account deficit in the fourth quarter improved significantly. Indonesia managed to produce a trade surplus of $50 million compared to economists' expectation of a $775 million deficit.
  • Indonesia inflation stabilized as November CPI was 8.37 percent versus the consensus of 8.45 percent.
  • The country is getting ready for its presidential election on July 9, which could be positive for stocks. According to Goldman Sachs, "elections have historically been an important domestic catalyst" for Indonesia. In addition, depending on the outcome of the vote, pro-growth policies "could help boost investment activity and provide impetus to the overall growth cycle," says Goldman.
  • Secular drivers remain intact for Indonesia. Younger demographics, lower labor costs, robust domestic demand, and rising geopolitical competition among superpowers should help sustain favorable investment cycles in Southeast Asia, especially in faster growing countries such as Indonesia.

This is only a glance at some of the strengths in Asia where the China Region Fund is focused. With its ability to dynamically adapt and move to these areas, the fund can overweight these areas of relative strength while trying to avoid areas that have been under pressure. See how the fund has outperformed its benchmark over the one-month and one-year time frame by downloading the fact sheet here.

Want to receive more commentaries like this one? Sign up to receive email updates from Frank Holmes and the rest of the U.S. Global Investors team, follow us on Twitter or like us on Facebook.

By Frank Holmes

CEO and Chief Investment Officer

U.S. Global Investors

U.S. Global Investors, Inc. is an investment management firm specializing in gold, natural resources, emerging markets and global infrastructure opportunities around the world. The company, headquartered in San Antonio, Texas, manages 13 no-load mutual funds in the U.S. Global Investors fund family, as well as funds for international clients.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.Standard deviation is a measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is also known as historical volatility. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The NYSE Arca Gold BUGS (Basket of Unhedged Gold Stocks) Index (HUI) is a modified equal dollar weighted index of companies involved in gold mining. The HUI Index was designed to provide significant exposure to near term movements in gold prices by including companies that do not hedge their gold production beyond 1.5 years. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The U.S. Trade Weighted Dollar Index provides a general indication of the international value of the U.S. dollar.

Frank Holmes 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