by Tony Sagami -
When it comes to China, the media has been focused on the riots in
Tibet and the protests following the Olympic torch around the globe.
For emerging market investors, getting swept away by newspaper
headlines is a huge, not to mention costly, mistake.
To be sure, China has some major political and social obstacles to
navigate going forward. The situation in Tibet is not pretty, and the
Olympic Games are fast becoming a PR nightmare for Beijing.
But don't let yourself be distracted from the underlying economic
picture, which continues to be stellar.
As evidenced by the latest economic news ...
China's Economy Is on Fire!
The final Chinese GDP numbers for 2007 were released last week. They
were revised upward from 11.5% to 11.9%. That is the fastest growth
rate in 13 years, which means the Chinese economy is picking up
steam ... not slowing down!
What's driving those red-hot GDP numbers? Consider the following ...
Auto sales have exploded across China, with over 500,000 people
driving new cars off the showroom floor each month.
Retail sales jumped by 20.2% in the first two months of this year,
highlighting a 33.8% increase in auto sales. An interesting fact: Over
half a million new autos are hitting the streets in China every month!
The lifeblood of a growing economy, foreign investment, continues to
gush into China. Foreign Direct Investment (FDI) jumped by an amazing
61.3% to $27.4 billion in the first quarter of this year. Hong Kong,
the British Virgin Islands (offshore money), and Singa****e were the
top three sources of new foreign funds.
Anybody worried about the slowing U.S. economy affecting Chinese
im****ts is dead wrong. The Chinese trade surplus expanded by $41
billion in the first quarter, an impressive 40% increase over the
previous year.
The World Bank re****ted that China is now the world's second-largest
economy as measured by purchasing power. The U.S. is in first place,
with Germany in third. Now you know why U.S. companies are racing to
get their piece of China's economic pie.
The Chinese war chest of cash keeps getting bigger. Net foreign
reserves increased by $61.6 billion in January, $57.3 billion in
February, and $35 billion in March to total $153.9 billion for the
year.
Remember when people used to talk about Fidelity Magellan moving the
market with its $100-plus billion in assets? The Chinese national
pension fund said it expects to double in size to over $143 billion by
the end of 2010. The people running the fund know what they're doing,
too; it earned a 43.2% return in 2007.
And all that gu****ng good news was just released in the last week!
In stark contrast to China, what kind of economic news did you hear
out of the U.S. last week? Well, let's see now ...
Consumer confidence fell to a 26-year low ...
Foreclosures were up 57% in March ...
Oil burst through $115 a barrel ...
Initial jobless claims surged to a post-Hurricane Katrina high ...
And Citigroup posted a $5.1 billion first-quarter loss and announced
13,200 layoffs.
You see, unlike the U.S. economy which is rolling over into a
recession, the Chinese economy continues to grow at a double-digit
pace. So, unhitch your wagon from the nag and saddle up to the fastest
thoroughbred.
Oh, and just remember ...
Buying China on the Dips Has Been
An Extremely Profitable Strategy
As civil unrest and political turmoil in China have dominated
headlines around the globe, the Shanghai Composite has fallen 49% from
its October peak. The 34% drop in the first quarter was the worst ever
in China's history and last week's 11% decline is the worst in over a
decade.
Would it surprise you to learn that these types of drops aren't
uncommon in China? The Shanghai Index lost 55% from June 2001 and July
2005, years in which the Chinese economy grew by an average of 9.5% a
year.
Buying the dips in China has proven to be a highly lucrative strategy
among wealthy investors.
As you can see, investing in China can be a roller coaster ride, but
buying on these dips has been ... and will likely continue to be ...
an extremely profitable strategy. After all, anybody who was smart
enough to buy after that last 55% plunge saw the Shanghai Composite
rocket higher by more than 600% in two short years!
Yeah, that's right ... the smart money pocketed a 600% return!
Today isn't any different. Unlike the dot-com pieces of junk that
didn't make money or even have viable business plans, the Chinese
companies that are now on sale are part of the foundational building
blocks of the Chinese economy =97 construction, retail, energy, finance,
health care, food, and trans****tation firms.
We're talking about real companies with real profits. And you now have
the op****tunity to buy their stocks at a 50% discount!
Is today the absolute bottom? I can't say for sure, but I think you'll
be very happy with the results a year or two down the road if you take
the plunge now.
My Suggestion: Invest Alongside Chinese Entrepreneurs
But remember, no matter what you do, don't let headlines designed to
sell newspapers dissuade you from taking advantage of the great
investment op****tunities in China!
Best wishes,
Tony
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