A decade ago the British handed control of Hong Kong back to the Chinese. This was the start of massive changes compared to that economy. State controlled companies were put into private hands and small company started initially to blossom. The Chinese economy started looking more and more such as a free market.
The effect was incredible growth.
China has more than 1.8 billion citizens and as their economy develops, the middle class grows. Now the GDP of China is expected to boost more than 10% every year Private and corporate investments. This economic growth is really exciting that Jim Rogers, one of the best money managers of our time, uprooted his entire family and moved to Asia. When asked why, he said “I really do not want to market Chinese stocks. I do want to own them forever and I’d like my [four year-old] daughter to possess them.”
Now that’s what I call a long term investment strategy.
Over the last couple of years, investors have made a lot of money in the Chinese markets. If you had bought China 25 Index in the beginning of 2005 you’d have made more than 315% on your money by October 2007.
Nevertheless the excitement in the Chinese markets got a little out of hand last year. As a matter of fact, in May I warned of a near term bubble. As as it happens I was right. but a little early on my call.
The index started falling in October of 2007. Over the last couple of months, it’d fallen almost 33%.
Currently, China is emerging from an economic slumber. Politically, they’re a communist country. Economically, they’re waking up to free market revolution. I remember the influence China had when I was employed in Singapore. It included language, social customs, food, and even economics. Now they’re influential the planet over.
In the short term, the outlook appears uncertain. Some economists believe the economic slowdown in the United States could spread to emerging markets. For the reason that scenario, the Shanghai market might fall further. Some advisors have gone as far as suggesting that we avoid the Chinese markets entirely.
I believe they are horribly wrong and a bit shortsighted.
Unless you’re focused on very short term trading, now’s the time and energy to go long China. The country is in the first stages of a multi-decade economic expansion. Their economic growth is second-to-none, and their infrastructure continues to be in the first stages of build out.
Don’t allow the recent market correction scare you away. Consider it as a great way to expand your emerging market exposure at a 30% discount. A good way to have broad exposure to the Chinese market is through the iSharesFTSE/Xinhua China 25 Index ETF (FXI).
Brian Mikes is the editor of the Dynamic Wealth Report, a free investment newsletter that gives investment ideas and news you can’t get from the mainstream investment press. Brian and his team bring decades of Wall Street and Silicon Valley experience to help you discover profitable trading ideas you can use today.
