10 years ago the British handed control of Hong Kong back again to the Chinese. This is the start of massive changes compared to that economy. State controlled companies were put into private hands and small company started to blossom. The Chinese economy started looking more and more like a free market.
The effect was incredible growth.
China has significantly more than 1.8 billion citizens and as their economy develops, the middle-income group grows. Now the GDP of China is expected to improve significantly more than 10% every year. This economic growth is really exciting that Jim Rogers, one of the best money managers of our time Investment in China, uprooted his entire family and moved to Asia. When asked why, he explained “I actually do not need to sell Chinese stocks. I do want to own them forever and I would like my [four year-old] daughter to own them.”
Now that’s what I call a longterm investment strategy.
During the last several years, investors have made tons of money in the Chinese markets. If you had bought China 25 Index in the beginning of 2005 you’d have made significantly more than 315% on your cash 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 early stages my call.
The index started falling in October of 2007. During the last month or two, 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 entire world over.
In the temporary, the outlook appears uncertain. Some economists believe the economic slowdown in the United States could spread to emerging markets. Because scenario, the Shanghai market might fall further. Some advisors have gone as far as suggesting that people steer clear of the Chinese markets entirely.
I believe they are horribly wrong and a bit shortsighted.
Unless you’re dedicated to very temporary trading, now is the time for you to go long China. The nation 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 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 exposure to the Chinese market is through the iSharesFTSE/Xinhua China 25 Index ETF (FXI).
Brian Mikes may be the editor of the Dynamic Wealth Report, a free of charge 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.