Ten years ago the British handed control of Hong Kong back once again to the Chinese. This was the start of massive changes compared to that economy. State controlled companies were placed in private hands and small business began to blossom. The Chinese economy started looking more and more such as a free market.
The result 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 improve more than 10% every year Gas and Oil production. 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 need to market Chinese stocks. I want to own them forever and I’d like my [four year-old] daughter to own them.”
Now that’s what I call a longterm investment strategy.
Over the last several years, investors have made a great deal of money in the Chinese markets. If you’d bought China 25 Index in the beginning of 2005 you would have made more than 315% on your hard earned money by October 2007.
Though the excitement in the Chinese markets got a little out of control last year. As a matter of fact, in May I warned of a near term bubble. As it turns out I was right. but a little in the beginning 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 and including free market revolution. I remember the influence China had when I was 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. In that scenario, the Shanghai market might fall further. Some advisors have gone so far as suggesting that people steer clear of the Chinese markets entirely.
I do believe they’re horribly wrong and somewhat shortsighted.
Unless you’re centered on very short term trading, now’s 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 is still 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. An effective way to get broad contact with 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 assist you discover profitable trading ideas you should use today.