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Should You Invest in the Future of China?

Guest Author - Tony Daltorio

The world's attention certainly has been focused on China these past two weeks. The 2008 Summer Olympic Games in China certainly have been entertaining to watch. Just seeing visuals of the "bird's nest" is a amazing sight.

From an investor's point of view, should any of your money be invested in that part of the globe? I certainly believe that every long-term investor has to have money invested in China.

If investors choose to avoid China for whatever reason, they are ignoring the fact that China has become the second most important country on the planet and a superpower. Need proof? Here are some facts:

1) In 2007, China contributed more to global growth than the US, becoming the first country to do so since the Great Depression.

2) In 2007, China took over the top spot as the world's largest consumer of the five most basic energy, food, and industrial commodities. This was reported by Newsweek.

3)In 2008, China's manufacturing sector has overtaken the US, with an output value exceeding the $2.7 trillion annual production generated by US factories.

4) China is now the world's 2nd largest market for automobiles.

5) Figures out just this week show that for the first ever, Japan now exports more to China that it does to the US.

While our economy in the US is struggling with all the problems in our financial system, China's economy continues marching along at an 8%-10% annual growth rate.

What should an investor do? First of all, my advice is to ignore all the blather you see and hear on CNBC from so-called analysts. I doubt if most of them could even find China on a map.

These Wall Street analysts have completely missed the boat. They believe that the Olympics marked the peak in economic activity in China. To gauge what the Olympics meant to the overall Chinese economy, compare a flea to an elephant. Its effect was miniscule.

Wall Street analysts have also mis-interpretted the recent down move in commodities. They think that commodities have peaked. Commodities fell over the last month as China shut down much of their manufacturing sector to ensure cleaner air for the Olympics. When the Olympics end, China's massive appetite for all sorts of commodities will resume.

How can an individual investor invest in China? There are three routes - stocks, mutual funds, and ETFs. There are numerous mutual funds which invest in China and Hong Kong. A good choice among the mutual funds would be either the Oberweis China Opportunities Fund(OBCHX)or the broader-based Oberweis Asia Opportunities Fund(OBAOX). Both funds offers investors a monthly or quarterly investment plan starting at only $100.

The second choice would be to choose among the various ETFs available(see my prior article about ETFs). Some of the better choices among the ETFs would include the NETS Hang Seng China Enterprises Index Fund(SNO)which covers all the Chinese companies listed in Hong Kong. A conservative choice would be the Wisdomtree Dreyfus Chinese Yuan fund where you sit back and earn interest on the Chinese currency while it moves up versus the US dollar.

The third option would be choose individual stocks. Good choices there would be stocks that feed China's need for commodities such as Australia's BHP Billion(BHP), the world's largest miner and Canada's Potash of Saskatchewan(POT), a huge fertilizer producer which helps to meet China's need to grow both more food and higher quality food.

The bottom line is that every serious long-term investor should have a China investment strategy.
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Content copyright © 2013 by Tony Daltorio. All rights reserved.
This content was written by Tony Daltorio. If you wish to use this content in any manner, you need written permission. Contact Sandra Baublitz for details.


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