10 years ago the British handed control of Hong Kong back once again to the Chinese. This is the start of massive changes to that economy. State controlled companies were put in private hands and small company began to blossom. The Chinese economy started looking more and more such as a free market.
The result was incredible growth.
China has a lot more than 1.8 billion citizens and as their economy develops, the middle income grows. Now the GDP of China is expected to improve a lot more than 10% every year Investment in China. This economic growth is so 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 explained “I do not want to market Chinese stocks. I wish to own them forever and I would like my [four year-old] daughter to own them.”
Now that’s what I call a long term investment strategy.
During the last few years, investors have made a lot of money in the Chinese markets. If you’d bought China 25 Index from the beginning of 2005 you would have made a lot more than 315% on your money by October 2007.
Nevertheless the excitement in the Chinese markets got only a little out of hand last year. As a matter of fact, in May I warned of a near term bubble. As it turns out I was right. but only a little early on my call.
The index started falling in October of 2007. During 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 recall the influence China had when I was employed in Singapore. It included language, social customs, food, and even economics. Now they’re influential the world over.
In the short-term, the outlook appears uncertain. Some economists believe the economic slowdown in the United States could spread to emerging markets. In that scenario, the Shanghai market might fall further. Some advisors have gone in terms of suggesting that people avoid the Chinese markets entirely.
I believe they’re horribly wrong and a bit shortsighted.
Unless you’re focused on very short-term trading, now is the time for you to go long China. The united states is in early stages of a multi-decade economic expansion. Their economic growth is second-to-none, and their infrastructure continues to be in early stages of build out.
Don’t let the recent market correction scare you away. Think of it as a great way to expand your emerging market exposure at a 30% discount. A good way to get broad experience of the Chinese market is through the iSharesFTSE/Xinhua China 25 Index ETF (FXI).
Brian Mikes is the editor of the Dynamic Wealth Report, a totally free investment newsletter that offers 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.
