Investing in China: What You Need to Know
Updated from April 16.
Last weekend, in a Barron's interview, legendary investor Jim Rogers said, "The 21st century is going to be the century of China." When asked about investment opportunities in China, Rogers replied, "Perhaps the safest investment is the renminbi, the Chinese currency."
Wednesday, the Financial Times reported that GE (GE) plans to invest up to $2 billion in China via acquisitions and other deals over the course of the next three years.
So what do you need to know about investing in China?The following is a series of several investment angles on China from TheStreet.com. China Watch: GE's a Bright Idea (Video) Patrick Schultz says that despite negativity about GE in the U.S., it's looking pretty good overseas. Watch the video.
From Inflation Numbers Hit Stocks in China: China's central government announced that consumer price inflation for March was 8.3%, ahead of the expected 8.2%. Still, the number was half a percentage point lower than inflation for February. Gross domestic product for the first quarter was higher than expected, at 10.6% vs. 10.4% estimated by analysts, although it fell from 11.2% in the previous quarter. Despite the warm inflation number, traders and analysts in Hong Kong didn't trust the government's numbers, speculating that the real figure is in fact much higher. Read the full article.
China Watch: Beware the Telecoms (Video) China Mobile (CHL) said it is seeking small stakes in global telecom firms rather than controlling stakes. Schultz says you should beware the telecom sector, too, at least until the restructuring plan is over. Watch the video.
From Tuesday's Asia ADR Recap: Shares of China's largest chipmaker Semiconductor Manufacturing International (SMI) exploded 36% higher on heavy volume Tuesday [April 15] after rumors circulated that the company was close to selling a stake to a strategic investor. The company said it was not holding discussions related to acquisitions. American depositary shares of SMI finished up $1.13, at $4.20. Shares of Chinese air carrier China Eastern Airlines (CEA) fell 5.6% Tuesday after the company announced a net profit of 585.5 million in 2007, vs. a net loss of 3 billion yuan in the prior year. Revenues rose by 14% in 2007 to 43.5 billion yuan, vs. 38.2 billion yuan in 2006. Despite returning to a net profit, investors weren't impressed that most of CEA's profits came from the Chinese yuan's rise against the U.S. dollar. Shares of CEA finished down $2.47 at $41.38. Read the full article.
Hank Greenberg Makes China Connection (Video) In a special interview, insurance titan Maurice 'Hank' Greenberg speaks about investing in China. Watch the video.
From Ericsson Signs China Mobile Network Pacts: Wireless-equipment maker Ericsson (ERIC) said Monday [April 14] it has inked deals with two Chinese mobile operators to build out GSM networks. Stockholm-based Ericsson said that separate agreements with China Mobile and China Unicom (CHU) are valued at a total of $1.44 billion. The expansion projects will allow both operators to boost their network capacity and performance. Read the full article.
China Watch Mail Bag: LDK Solar Not So Hot (Video) One reader wants to know whether now is a good time to add to his LDK Solar (LDK) position. Watch the full video.
From Sands, Wynn to Win if HK Dollar Rallies: The recent strength of the Hong Kong dollar has some industry watchers saying the currency's peg to the U.S. dollar has a chance of being broken this year. If so, an even stronger Hong Kong dollar would provide immediate boosts to U.S. casino operators like Las Vegas Sands (LVS) and Wynn Resorts (WYNN), which are paid in the currency at their Macau casinos. This phenomenon is why some institutional investors are calling such casino stocks "hidden currency plays." The other reason is the possibility that the Chinese government will eventually freely float its own currency and allow it to be used for gambling in Macau -- which would also benefit U.S. casino owners. Read the full article.
China Watch: Copper's on Fire (Video): Copper closed at a record high of $4 per pound this week [April 7-11], which Patrick Schultz says is due to supply and demand, not speculative buying. He says take advantage of Freeport-McMoRan Copper & Gold (FCX) and Vale (RIO). Watch the video.
From Corporate Finance: Theory and Practice in China: When asked: "What motivates you to consider a new investment project or a merger," most companies [listed on China's stock exchanges] answer: "the implementation of the company's development strategy," or "to increase the company size," or "competitive strategy in the product market." About 92% of respondents think that "the development strategy is important," 74% say "increasing the size of the company is important," and 75% think that "market competition is the motivation." The researchers also find that big companies put more emphasis on development strategy than smaller companies. The national holding companies are more interested in company size while companies from the manufacturing industry pay less attention to size, and more attention to their strategy for product competition. Read the full article.
China Watch: Applied Materials' Fun in the Sun (Video) Semiconductor company Applied Materials (AMAT) just got a $1.9 billion deal for solar equipment. Learn why it got the deal and not other solar companies and whether this is a sign that investors should take a closer look. Watch the video.
From China Offers Chance to Cash in on Green Energy: When former U.S. Vice President Al Gore and the U.N. Intergovernmental Panel on Climate Change won the 2007 Nobel Peace Prize for their focus on global warming, the Nobel committee said climate change "must be treated with the utmost seriousness." But it's not just politicians and academics becoming involved with the issue. The global capital markets are having their say. Peony Capital Ltd., a ¿400 million ($590 million) Beijing-based carbon trading fund backed by Microsoft (MSFT) founder Bill Gates, said in August that it would buy 10 million tons of emission reductions by 2012 from projects in China. Peony is just one of many. Read the full article.
China Direct: We've Got the Goods (Video) Shares of China Direct (CDS) have been soaring along with magnesium prices and Chinese stocks. Marc Siegel, president of China Direct, says it's only the beginning. Watch the video.
From China's Shifting Microfinance Landscape: New Players, Old Problems: According to Wang Jun, senior research fellow at the China Center of Economic Research, Qinghua University, there is still no clear demarcation between commercially oriented and policy-driven finance. Even in today's policy environment, explained Wang, who is also on the staff of the World Bank , it remains politically problematic for banks to place commercial objectives ahead of supporting poverty-relief policy objectives. "Nobody wants to stand up and say, 'My strategy is based at the county level and below, but I must make a profit,'" he said. "'I will provide financial services and products. But I'm sorry, I will not provide services for every farmer, or take every farmer as my customer. I have to select those who are willing to pay me back.'" Since banks then will be forced to fund rural schemes out of their own budgets, he added, they may be tempted to try to recoup cost from the government. A clear demarcation between policy and commercial finance is called for, Wang argued. Read the full article.
From China: 'The Best Place to Invest in the Next Five to 10 Years': China has the largest population in the world, and it has had economic growth in the last nine or 10 years of at least 9%, 10% or 11%. If the bubble bursts, maybe the economy grows at 7% a year. That's still greater than other economies in the world. China has had double-digit growth in the last 10 years, and if it is growing at 7%, it is not a calamity. I think the major difference between now and five or 10 years ago is that in countries like China, when the market went down previously, people ran away and said, "I've had enough of emerging markets, I've had enough of China, I've had enough of Thailand." Now people say it is a buying opportunity. If the market went down, money would race in. China is too large an economy and people won't say, "No, I'm not going here because it went down a little bit." Read the full article. To stay up to date on China and other emerging markets, bookmark and visit TheStreet.com's Playing Emerging Markets section.
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