{"id":14321,"date":"2010-10-22T11:22:23","date_gmt":"2010-10-22T15:22:23","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=14321"},"modified":"2010-10-22T11:22:23","modified_gmt":"2010-10-22T15:22:23","slug":"most-investors-are-dead-wrong-about-chinas-economy","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2010\/10\/22\/most-investors-are-dead-wrong-about-chinas-economy\/","title":{"rendered":"Most Investors Are Dead Wrong About China\u2019s Economy"},"content":{"rendered":"

By Kent Lucas, Editor, Safe Haven Investor and Global Income Generator<\/strong><\/p>\n

TaipanPublishingGroup.com<\/a>
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The Chinese real estate markets, particularly in the big cities, are clearly are at bubble levels. There’s no way around it.<\/p>\n

But here’s the good news: If the bubble bursts, it’s not enough to cause a collapse in the whole economy. Real estate plus housing-related purchases are only 15% of Chinese GDP, so the economic ripple effect will be contained.<\/p>\n

And the better news for us is that bubble-popping expectations are already being reflected in Chinese stocks<\/a>.<\/p>\n

In fact, the Shanghai stock market has been a solid underperformer this year.<\/p>\n

That creates investment opportunities for us. Sooner or later, inexpensive valuations will have to catch up with the country’s intrinsic growth rate.<\/p>\n

And right now, the appeal of Chinese stocks is at very high levels.<\/p>\n

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Chinese Stocks Are Clear Long-Term Winners<\/h3>\n

The Chinese market has underperformed this year but clearly has been a long-term winner. Especially when compared to stock markets in developed countries, like the U.S. S&P 500.<\/p>\n

If you look back over the past five years as the country and economy has aggressively opened itself up, you can see the impressive performance.<\/p>\n

The chart below shows how well the Chinese market<\/a> has done, up 124%, along with emerging markets in general (via the iShares MSCI Emerging Market Index ETF in red line) up 56%.<\/p>\n

That compares with the S&P 500 (blue line), which is down 10% over the same past five years:<\/p>\n

Five-Year Performance of the S&P 500 Index, China’s Shanghai Index and the iShares Emerging Market ETF<\/strong><\/p>\n

\"Five-Year
\nSource: Google Finance<\/em><\/a><\/p>\n

For those who think that investing in China isn’t safe… I say, baloney. In fact, I’d go so far as to say that in many cases, investing in China is much safer than investing in the U.S.<\/p>\n

After all, the S&P 500 is as “safe” as it gets in many investors’ minds. And look how China trounced that.<\/p>\n

(By the way, I’m just contributing to <\/em>Smart Investing Daily today, but regular editors Sara Nunnally and Jared Levy are constantly providing readers with easy-to-understand investment articles<\/a>.)<\/em><\/p>\n

I call China a “tipping point” economy<\/a> — meaning it is an economy growing at a rapid pace. Now, some will argue that China’s economy has already tipped. But just because China has already experienced massive growth doesn’t mean that it won’t continue to grow. As I mentioned, the country’s intrinsic growth rate is still climbing… and now is the perfect time to get in at these oversold levels.<\/p>\n

On the other hand, the U.S. is the exact opposite of a tipping-point economy. It is a very mature economy. It’s not growing at a fast pace anymore.<\/p>\n

China is getting a lot of attention these days as the wagging tail of the dog that is the global economy. The size of its economy surpassed Japan to take the No. 2 spot behind the U.S. and its demand for global commodities and energy resources is unmatched and insatiable.<\/p>\n

China has been the backbone of global demand for energy, agricultural and metals commodities, such as iron ore, gold, soybeans, cotton, sugar, palladium and oil, to name a few. And the country’s demand for these products will only continue.<\/p>\n

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“China” and “Safety” Are Not Antonyms!<\/h3>\n

So if you’re looking for “safe”… what can you conservatively do to protect your money while building wealth?<\/p>\n

Well, conservative, blue chip stocks are still the best way to build wealth safely. Let me repeat that: Conservative, blue chip stocks are the BEST place to put your money, bar none.<\/strong>
\nBut instead of American blue chip stocks… the key is to find rock-solid, blue chip companies… outside the United States.<\/p>\n

As badly as the U.S. consumer is needed to be the linchpin of a global economic recovery, clearly the sheer number of developing market consumers along with their high level of spending is a very powerful trend that smart investors <\/strong>will happily take advantage of to produce outsized investment returns.<\/p>\n

And despite China’s real estate bubble… I still believe China is one of the places you’ll see those amazing returns come to life.<\/p>\n

P.S. If safe — but very large — gains from all over the world is what you’re looking for, China is just one place to find them.<\/strong> I just put together a brand-new program that my publisher is calling a “conservative investor’s” dream. This new program shows you exactly which “tipping point economies” are ripe for the picking… and the very best way to play them to your advantage. You can get all the details here.<\/a><\/strong><\/p>\n

Don’t forget to follow us on Facebook<\/a> and Twitter<\/a> for the latest in financial market news, investment commentary and exclusive special promotions.<\/p>\n

About the Author<\/em><\/strong><\/p>\n

Kent Lucas is the Editor of Taipan’s Safe Haven Investor<\/em><\/a> and a regular contributor for free financial market e-letter Taipan Daily<\/a><\/em>. He has a Bachelor’s Degree in Economics from Harvard University, his Master’s from Stanford University and over 20 years of financial and business experience. His background includes seven years as a research analyst and portfolio manager for a leading investment management firm. He has also actively managed $1 billion worth of equity assets, with particular attention to multi-industrial companies along with auto, construction and farm equipment-related companies. Kent has also worked in leading financial institutions’ divisions including tax-exempt derivatives, corporate trust, and equities sales and trading.<\/p>\n

As the Editor of Taipan’s Safe Haven Investor<\/em>, Kent uses his stock market investment system and the 13F Disbursement Plan to uncover the most profitable long-term investment opportunities found in the SEC 13F Disclosure Form. Kent extensively combs through thousands of stocks, managed securities, and the total market value of companies listed on Form 13F, and then isolates the one or two stocks that are poised to deliver the best gains with the least risk.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Chinese market has underperformed this year but clearly has been a long-term winner. Especially when compared to stock markets in developed countries, like the U.S. S&P 500.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-14321","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/14321","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=14321"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/14321\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=14321"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=14321"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=14321"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}