Investment Strategies to Participate in Asia's Growth Potential?

[David]

What's your strategy for participating in the continued growth in Asia, and particularly China?

 

Being a stock picker in the US market is fraught enough with difficulty, but doing it in China, for instance, seems downright foolhardy--like riding a motorcycle.

 

I've had good luck with the Matthews funds, but I'm curious about your own strategy.

 

I know too much about Latin America to invest there.

[sgendler]

Invest in companies that seem to have a good strategy with regard to Asia? I can think of a few without doing too much research.

 

--sam

[David]

Invest in companies that seem to have a good strategy with regard to Asia? I can think of a few without doing too much research.

 

Tell me more! Auto companies, for instance, might have a good strategy in Asia, but suck so badly in other places that they are a poor investment.

[Sean]

Our household participates heavily in the continued growth in Asia. Yep, everything from our furniture, to tools, to electronics, to kids toys, to patio furniture is all made somewhere in Asia!

 

Oh..that's probably not what you mean. What, have you lost faith in the dollar? You don't really think that China would drop the dollar as their reserve currency, do you?

[David]

Oh..that's probably not what you mean. What, have you lost faith in the dollar? You don't really think that China would drop the dollar as their reserve currency, do you?

 

Yes, I have lost some faith in the dollar. Unless I'm in Panama or Cuba or Venezuela.

 

But I think we are on a slow but inevitable path of losing our world power status. I suspect we're the next Great Britain.

[rrrich]

I suspect we're the next Great Britain

 

Ouch!!! It hurts to hear someone say outloud what I've been secretly fearing. Where's Churchill when we need him?

 

end hijack...

[belezar]

My preferred way is to own companies that sell things to that area. I personally think that by and large the area, despite the growth, is too unstable to invest in, particularly China. Further, gains can so often be diminished with currency translation that I do not consider foreign investing to be an important part of portfolio, especially direct investment.

[John Ranalletta]

Oh..that's probably not what you mean. What, have you lost faith in the dollar? You don't really think that China would drop the dollar as their reserve currency, do you?

 

Yes, I have lost some faith in the dollar. Unless I'm in Panama or Cuba or Venezuela.

 

But I think we are on a slow but inevitable path of losing our world power status. I suspect we're the next Great Britain.

 

One alternative is to own the currencies which is easily done via an institution like Everbank (no affiliation, but I am a client).

 

One can buy renminbi accounts which are a pure speculation on a re-valuatioin by the Chinese which is no sure bet.

 

Everbank makes it very easy to hedge the dollar. I currently own and have own the Euro and Prudent Central Bank cds. The commodity cds did very well, too.

[sgendler]

AAPL seems to be handling Asia well, plus I know that both you and I have great respect for what they are doing (I'm betting (hoping) you already own some). Even so, I'm more bullish on AAPL than many of the investment companies are, and they are still prety bullish, with stock increases of 20% over the next year being predicted. I think they'll do that, but I think they'll continue to do so for more than just a year.

 

Internet advertising is pretty hot right now. NOBODY is delivering ads to asia, particularly China. That's a segment to watch. The first company that makes a big move toward china is probably going to do well with it.

 

I've got a few more, but I don't want to say something without having more solid research. I'd hate to say something foolish.

 

I should mention that I tend to have deeper knowledge (hence, confidence) about technology and tech companies, so that is what I talk about. I'm not, at all, advocating a tech heavy position. Just talking about some tech options. That said, Robert X Cringley made an interesting point about VC's being forced to pump money into new investments (and technology is where many of the new investments live) over the course of the next year, in order to fully invest their funds before they have to give back commissions.

 

In 1999-2000 -- at the very peak of the dot-com boom -- venture capital firms were not only taking companies public at a furious pace, they were just as furiously raising new venture funds -- funds that will shortly be coming to the end of their lives. Throughout the fixed lifespan of these funds venture capitalists are typically paid 1-2 percent of the total fund per year as a management fee. If a VC raises $100 million for a fund with a six-year life, they'll take $2 million every year as a management fee, whether the money is actually invested or not. Any money that remains uninvested at the end of the fund must be returned to the investors ALONG WITH THE ASSOCIATED MANAGEMENT FEE.

 

 

Right now, there is in the U.S. venture capital community about $25 billion that remains uninvested from funds that will end their lifespans in the next 12-18 months. If the VCs return those funds to investors they'll also have to return $3 billion in already-spent management fees. Alternately, they can invest the money -- even if they invest it in bad deals -- and NOT have to cough-up that $3 billion. So the VCs have to find in the next few months places to throw that $25 billion. They waited this long in hopes that the economy would improve and that technical trends would become clear so they could do their typical lemming-like jump off the same investment cliff as all the other VCs. Well, we're at the edge of the cliff, so get ready for the most furious venture investing cycle in history.

 

So, not to get too off-topic, it would seem that looking into tech companies with good asia strategies isn't necessarily a terrible idea.

 

Also, I have a fantastic record of giving great advice that I don't take myself, and I'm not taking this advice because I'm saving to buy a house in the short term, so I'm keeping my money accessible (plus, I already own AAPL and I work for an advertising company that I'd like to take into Asia, so I'm already invested in them in other ways).

 

--sam

[Bill1100]

David, if you are familiar with Barclay's iShares (or even if you're not ), they have an ETF based on the FTSE/Xinhua China 25 Index. It trades under the symbol FXI - you can find out everything about it in detail at the iShares site . If that link doesn't work, just go to ishares.com and click on the International/Regional link in the left column. iShares are used by many institutional managers to get fast, diversified exposure to a country, region, cap size, style, sector, or index. I use various iShares all the time. You simply buy them or short them like a stock.

 

Oh, yeah - the above does not constitute a recommendation, but is presented for informational purposes only...

[Patallaire]

Frankly David, while their performance is a little impressive, they don't have a long track history of success or 10 year record(which most didn't have). Looking at that universe and understanding what is projected to happen, I am positive you can do better.

Sector funds are just that, sectors. I think by finding a fund that dips into that market and yet is not 100% sectored there you will get better more consistant returns.

Dunbar released a study on average investor returns vs. the average asset allocated returns over a 20 year period. You would find it interesting.

[David]

Pat, the lack of a track record does make me nervous. But does anybody have a longer one for the region? I guess I figured I might have to compromise on that point.

[David]

Thanks, Bill. That's new information for me and I'll do some snooping around.

[John Ranalletta]

What's your investment timeline? Are you a trader or investor?

 

There are some observers, Dr. Marc Faber among them, who believe that China's meteoric ascent has also created some potential problems that could be magnified in a cyclical downturn. He writes:

"Conventional wisdom, as well as the media with its focus on China’s great achievements, a view I tend to endorse, argue for a relative adjustment in favor of China, India, and the other emerging markets. However, could this almost unanimous view, at least temporarily, be erroneous? After all we should not forget that China has built enormous excess capacities in the manufacturing sector, which could lead when demand disappoints to a hard landing as a result of a significant reduction in the growth rate of capital spending."

Personally, I'm investing in what China needs and buys...energy. As it happens, every country does and all the big guys (Japan, China, US, India...) are looking to lock up supplies via equity rather than supply contracts. At any rate, I think it's the way to play industrial and population growth without trying to identify specific companies.

[David]

What's your investment timeline? Are you a trader or investor?

 

Definitely on the investor side of things.

[John Ranalletta]

I guess my point in asking was to understand your average holding period, 'cause, I think investing there now is buying in near the top of this cycle. (Kinda' like real estate in California).

 

If I'm right, I'd be prepared for holding period of no less than 5-7 years or stopping out a loss.

[Jake]

Investment posts? Whaddarya nutz? Bring back the politics for some calm around here!

[steves]

David

 

The best way to invest is to do so for the long haul. After you decide to pick stocks or funds for the long haul you have to buy into the "time in" the market vs. "timing" the market. Once you do this, you then have to understand the most important thing to do with your investment $ is to do asset allocation. This is a split between types of investments that allows for a balance between value, growth, international, small cap, mid cap, etc.

 

I've missed many opptys. and made it okay on a few by trying to pick markets, equities, etc. I now use professionals to make my selections and only worry about the balance in my asset allocation because it's a proven fact that correct allocation is responsible for 80% of your gain and particular equity/fund selection is far less important within the asset sector.

 

Steve

[Bill1100]

David, something else you might consider would be a well-managed closed-end fund that specializes in the geographic area you are interested in. For instance, the Templeton Dragon Fund run by Mark Mobius or the Greater China Fund managed by Barings, are two good examples. They both trade at a discount to net asset value and both have been around for a while. When the Hong Kong, Taiwan, and mainland China markets are hot (which is NOT all the time), these guys perform rather well. Unlike the iShares, these are actively managed portfolios, with higher expense ratios, of course. The best time to buy these vehicles (or any closed-end fund) is when their discount to NAV is especially wide by their historical standards.

[Patallaire]

David:

The ones that are longer are generally blended in some form. They have exposure to the Pacific Rim area, albeit 60%, and they balance it with European or Latin American exposure for balance(for example). They are not pure sector plays, which in my opinion carry higher risks and encourage market timing(generally after the fact)

"The stock market is a device for transferring money from the impatient to the patient." - Warren Buffett

[Bill1100]

Here's an interesting article on investing in Asia and China in particular...

[David]

Very interesting article, Bill. Thanks.

[Jake]

More info on an old topic...

 

Here's a good piece put together by a research oriented fund co. There's a PDF you can download for your reading pleasure.

 

Be advised that it goes a bit beyond the typical "don't put all your eggs in one basket" advice typically peddled by this industry, so put the coffee on before reading...

[Ralph]

Invest in WAL MART. Therefor, you'll be investing in China.

 

Oh! And also keeping the low wage jobs here at home.

[John Ranalletta]

I always enjoy reading stuff with which I agree. Thanks, Jake.

[Pilgrim]

Invest in WAL MART. Therefor, you'll be investing in China.

 

Oh! And also keeping the low wage jobs here at home.

 

Where Americans can compete with illegal aliens for them!

Pilgrim

[John Ranalletta]

Invest in WAL MART. Therefor, you'll be investing in China.

 

Oh! And also keeping the low wage jobs here at home.

 

Where Americans can compete with illegal aliens for them!

Pilgrim

Actually, there is an acute shortage of skilled technical and managerial talent in the US. Immigration only threatens workers who don't invest in their education or skill set.

 

Our search department is expanding to help our clients find good, talented, effective people at all levels. We find that immigrants, with the exception of well-educated people from countries like India, do not compete for well-paying jobs.

 

US citizens have chosen with their wallets. By frequenting Walmart and other importers (KIA, Hyundai, etc.), they are saying, "We want lower prices." The majority rules. Low skilled workers are like companies that can only compete on price, not value. Sooner or later, somebody else can produce it more cheaply.

 

This is not a slam against anyone as my father raised a family of 9 kids swinging a pick in a coal mine. Those jobs are gone. Lucky for him, not before he died and coal mine unions' retirement funds dried up.

 

Yesterday, a road crew worked in front of my house. The crew employed two flag persons. A comedian once said that was the most demeaning job in the world, because one could be replace by a bucket of sand. While that's an exaggeration, it's an example of jobs that only require an attendent, but very few if any decision making or technical skills. We should not orient our economy to protecting those jobs from competition or elimination.

[BadAdam]

Invest in WAL MART. Therefor, you'll be investing in China.

 

Oh! And also keeping the low wage jobs here at home.

 

Where Americans can compete with illegal aliens for them!

Pilgrim

 

Please man. They didn't KNOW that their cleaning crews that they locked in the stores all night were illegally here. The contracting companies are to blame for that oversight.

 

(I own 200 shares of Walmart)