Put your money, where your mouth is?

[True Blue]

Appears that many people here think that China's economic growth will be greater than USA for the future. I have read many articles touting investment in China. So other than the obvious "investment" we have all made in becoming a Chinese family, has anyone invested any long term (retirement) assets in the China economy?

 

While the prospects for gain appear to be strong, past history shows China is risky and speculative with big gains followed by big losses. Some are concerned that there are still some corruption scandals and the accounting investors see may be more the Enron accounting model than the true financial picture with some companies. Others are concerned with bubbles caused by housing demand, day trading, and other speculation as China is a "hot" investment market now so that demand may already be priced into inflated stock prices.

 

Purpose of this thread is not to garner hot "stock tips" but to answer these 3 questions

 

Q. Do you have any retirement investments related to the Chinese economy? Why or why not?

 

Q. If so, how did you invest? e.g. Emerging markets fund that includes China? Pacific or China sector mutual funds? Index funds or actively managed funds? Directly in Chinese stocks? Directly in US stocks of companies with substantial Chinese business interests (e.g. Walmart, KFC, Pizza Hut, Apple, GM Buick)

 

Q. How did you get information as to what Chinese funds/companies to invest in? Spouse or family member? Personal experience in China? Book or magazine article? Broker? Other? Do you recommend any Articles/Books to read?

 

Note: my questions above relate to "investing". Many of my wife's friends engage in "day trading" which is a short term activity with money you can afford to lose. It is speculating (dare I say gambling) by betting on which stocks will go up or down each day/week. I suspect the Chinese love of gambling, plus the lack of legalized gambling except in Macao) makes this a popular gambling alternative.

 

"Investing" is a long term (>3 years) buy and hold of companies you think will increase their value over time. They may be subject to some short term fluctuations or risk, but in the long term (e.g. ten years or more years from now) you would expect to be better off.

 

Thanks in advance for your response.

True Blue

 

ps - For anyone interested, investment author Professor Burton Malkiel has an interesting book (try your local library) and an interesting video lecture (search on Google) on investing in China.

[Yuanyang]

Lao po runs the stock market. I gave her about $5k about 6 years ago to put into the kitty. But you know how that goes, there'll never be an audit.

[Randy W]

Mathews China Fund (MCHFX) is up 211% (including dividends) over my original investment in 2005.

[Mike and Yan]

To celebrate the arrival of Yan I bought $14k of the TRPrice Asia mutual fund one year ago.

 

I told her it was her fund.

 

It made about what she used to make when she worked in China.

 

That means she can go to work without leaving the house.

[Turbo SS1414]

To celebrate the arrival of Yan I bought $14k of the TRPrice Asia mutual fund one year ago.

 

I told her it was her fund.

 

It made about what she used to make when she worked in China.

 

That means she can go to work without leaving the house.

 

Good!!Very Good!!...You forgot to tell us if she is a Rural Girl or a City one

 

 

I would like to put some money into shorting the real estate market there but I dont know how to go about doing it. That bubble has to burst someday and I want to cash in!!!

[credzba]

I would like to put some money into shorting the real estate market there but I dont know how to go about doing it. That bubble has to burst someday and I want to cash in!!!

 

 

How much you want to do?

I'll take your money!

[knloregon]

I agree with the Matthews China Fund recommendation and have been in it for nearly ten years. Even during the darkest days of the global meltdown, it had returned more that 10% per year. over the years I held it ---- and that's history now, as it has climbed way out of that hole. It is not, and never has been a pure China fund, since it predates when western funds could easily invest in mainland stocks. Much of the holdings are traded on the HK exchange, but it is getting more involved in mainland companies.

 

Even during the recession, the long-time manager Richard Gao has very consistently kept this fund outperforming the major related indexes (MSCI China, Lipper China Region Funds Category) -- he particularly looked like a whiz kid in the darkest days of 2008, when Business Week did a feature article on him and fellow Matthews Funds managers ("Riding out Asia's Financial Swoon", 11/24/2008)

 

But heres some advice that others have eluded to: I also believe China is in a real estate bubble, with some kind of financial shake up ahead (HK's real estate market is even more overheated, supported by 'hot' money from the mainland---so I would invest in this fund only if its a long term hold ---I'm not moving any money out of this fund. Suggest you get a prospectus: (matthewsasia.com)

[Tony_onrock]

Property bubble is a dirty word in my book!

I have everyting in the property market which can be wiped out overnight should the bubble pop.

On the other hand, I don't see the bubble though. Urbanization will keep the market going, although at a lower speed. If the underlying economy stays healthy, there should not be a major problem. You may see a correction now and then. The banks are pretty healthy and leverage is quite low in general for property owners. A 30% correction will put me back where I started but I am pretty sure it will bounce back afterwards. So, if the price indeed drop by 30% or more. I will be in the market buying again.

[Mike and Yan]

They only way to see the bubble is because it POPS!!!

 

The only way that the Chinese real estate bubble is going to pop is if the Chinese government starts to require a property tax.

 

In that event, those properties owned for speculation suddenly loose value. Worse is if the property is kept empty, as a form of savings then it's reasonable to expect the owner to be a motivated seller. That has some cascading consequences! POP!!!

 

I see no other weakness.

[knloregon]

WSJ just today had an article: "In Australia, Signs of Overheating".. much of the residential market is hot because of Chinese investment. But also, amazingly, interest rates for mortgages are about were America was in the late 90's (7.81% on a variable --- and they were just raised ~ !) ---while today the Fed moved to further lower (T-Bill authorization) ----FROM HISTORIC LOWS!! Interest rates that are almost certain to trickle down to home loans..

 

TONY ~ ! HOW CAN THIS BE~!! China has signaled that its interest rates for real estate are gong in the opposite direction ----- right?

 

So Tony, (as I've mentioned in the past----why aren't Chinese investing in Hawaiian real estate, where values in the last two years have dropped (conservatively) 35% in the last two years, and American banks will finance at about 5% ---(for out of state investors).

 

 

"...Worse is if the property is kept empty..." Mike, that pretty much describes the second resident relationship in places like Sanya --- (at least thats my experience) ... Economy gets tight, what do you dump first? Your resort property producing no income..... POP !! goes the bubble... (which keeps on poppin', on up the ladder...)

[Tony_onrock]

Agree that in the first tier cities and definitely Sanya, Hainan, there is a bubble in the sense that the price is out of the reach of the end users. The price has been popped up by speculation. However, in second and third tier cities, where we started going back in 2007 and where every fund is talking about going now, the demand is actually by end users, with prices ranging from 3000 -4000 RMB/sm. These are cities where the newer industries are moving in and tons of migrant workers are moving to. With the factories, all upstream and downstream companies are moving in. The demand in these third tier cities are real, with vacacy rate extremely low and over 70% as firt time buyers. I don't see a bubble in these sub-segments.

Actually I am planning on buying more right around Chinese new year when the migrant workers are going home and developers need to liquidate some stock to pay them.

Other than hard real assets, I invested in our fund which follows my reasoning and somewhat within our control. The other half are in cash or fixed income assets should the property market really goes .....

Personally I don't know the US market. Hawaii, I agree, should be a good market, as all other resort, vacation type of markets. Personally I like water front properties and if you have information on some in Hawaii, that is great. I have been looking at Newzealand cause that is where I want to live when I retire.

We did do a 200 mm USD deal in CA for an Asian buyer. They are very happy with the deal. Personally I will not invest in US as I plan on my retirement and de-naturalization.