| China still the best destination for equity investment |
|
|
|
|
|
eudidy
New Poster
Cash: $ 0.45
Posts: 2
Joined: 26 Jul 2010
|
| China still the best destination for equity investment |
 |
|
China was never at the heart of the global financial crisis, yet in the past two years worries over China’s economic future have not been relieved. The media warned China a year ago about its massive overcapacity and an impending economic collapse.
Today the case is just the opposite - the international community is more concerned about China’s overheated economy. China’s move to raise overall wages and introduce an exchange rate reform regime has also been at the top of the news recently. Although China of course faces challenges ahead, we do not think there is much cause for concern.
China has successfully weathered the global financial crisis thanks to the government’s massive stimulus plan and the central bank’s huge liquidity injection. China’s inflation adjusted GDP growth rate in the first quarter of this year has surged to 11.9%. To some observers, this signals that the economy is excessively overheated. After all, no major economy except India has realized a growth rate near 10% this year.
We do not agree with the alarmist talk mentioned above. An 11% real GDP growth rate is not unprecedented in China. Over the past decade China has realized average annual growth of 10% without a sharp rise in inflation. Of course China will not be able to grow at this rate forever. We estimate China’s GDP growth will ultimately maintain a more reasonable and sustainable level as economic development advances and demographic structures shift. But this leveling will be realized over the next decade, rather the next few quarters.
However, even though the economy is not at fever pitch, GDP growth rate may still fall because China’s central bank is adopting aggressive tightening policies. Yet we believe China’s central bank is doing the right thing because the rate of inflation has risen rapidly and surpassed 3%, and is likely to reach 5% in the next few months. Recently, the other focal point - housing prices – shows signs of stabilizing. In this case, China is very likely to maintain easier macroeconomic policies this year. One year after China implemented a stimulus plan to boost the economy, it surely does not want to risk putting a brake on economic growth.
In fact, we foresee that China will not be able to sustain the same rapid growth in the second half of this year, and almost all the Asian economies face the same reality. This should be the result of policy exit and weakening of positive basis effect.
On June 19th, China’s central bank announced exchange rate reform in order to enhance the exchange rate flexibility of the renminbi. We think the renminbi will appreciate in a mild manner rather than climb sharply. This appreciation will help curb inflation and stimulate domestic consumption.
Disputes over wages, especially in foreign funded companies, have become the hotspot recently. Several companies have promised to raise salaries over 10%. This may sound too high, yet it is noteworthy that a double digit wage hike is not rare in China. The manufacturing industries posted an average 14.5% rise in annual salaries during 2004 and 2008. Wages did not rise in 2009 only because of the financial crisis, so there is room for the current and future wage hikes.
From a purely economic perspective, wages should be aligned with labor productivity growth. Productivity has continued to grow in recent years and is close to the inflation level. In addition, investors should bear in mind that although a rise in the cost of labor will affect the profit margin of a certain company, it also provides the best support for China’s transformation into an economy more driven by consumption.
China is facing challenges ahead; and a misstep in government policies may result in a temporary economic setback. Even in this case, China will still enjoy a brighter outlook than many other countries. Meanwhile, China is still among the primary destinations for international equity investors given the reasonable valuation of Chinese stocks listed in Hong Kong. The recent unhooking of the renminbi from USD will further catalyze the growth of the Chinese market.
Source:http://research.fnchn.com/China_still_the_best_80169.aspx
|
Fri Aug 06, 2010 3:39 am |
|
|
StockTrader6080
Contributing Member
Cash: $ 7.65
Posts: 38
Joined: 26 Sep 2009
|
| Dragon makes it ways |
|
|
Over the last ten years China’s economy has surged past those of Canada, Spain, Brazil, Italy, France, and Germany, and is expected to pass Japan this year, to become the second largest economy in the world, behind the U.S.
Whether it’s manufacturing efficiency, high-speed rail-line technology, nuclear power plant construction, clean air energy technology, education, China is making impressive global inroads, even in areas where the U.S. still has significant dominance. Much of it has to do with China’s massive population, about which the U.S. can do nothing.
CoolTrade Robotic Traders
|
|
Thu Aug 19, 2010 1:29 pm |
|
|
iexin
Member
Cash: $ 3.00
Posts: 15
Joined: 19 Aug 2010
|
I do agree that China is facing challenges ahead,from the quality control point of view and the overall goodwill.
ways earn money online
|
|
Thu Aug 19, 2010 8:14 pm |
|
|
Hosannakk
Contributing Member
Cash: $ 3.40
Posts: 27
Joined: 20 Aug 2010
|
Foreign investment in India is expected to receive a boost from investors including non-resident Indians (NRIs), on the back of the encouraging Deloitte Touche Tohmatsu and the US Council on Competitiveness combined report titled, "2010 Global Manufacturing Competitiveness Index". The report has ranked India second only to China globally and followed by South Korea. India is said to be gaining and getting a better foothold on the same over the next five years too. The factors being allocated for stronger performances are India's rich talent pool of scientists, researchers, engineers and its large, well-educated English-speaking workforce and democratic regime make it an attractive destination for manufacturers. Already, robust industrial output augmented by a good performance by manufacturing, especially the capital and consumer goods sectors, has put up a double-digit growth figure of 11.5 per cent in May 2010.
Stock Exchange Updates
|
|
Fri Aug 27, 2010 2:25 pm |
|
|
Roksana
Full Member
Cash: $ 10.30
Posts: 59
Joined: 26 Oct 2010
|
There are countless ways to invest your money - equity funds being just one of them. But what does this type of investment entail, and is it right for your financial goals?
To consider investing in an equity fund, it's important to understand the basics of this type of investment. An equity fund is a fund that invests in stocks, which usually deals with a small amount of cash. Other types of funds such as bonds, money funds and other securities - in contrast, deal with greater amounts of cash.
south shore savings bank
|
|
Wed Nov 03, 2010 6:25 am |
|
|
LottomagicZ4941
Senior Member
Cash: $ 3.31
Posts: 2488
Joined: 02 Dec 2004
Location: Earth
|
One more thing on Brazil. The got the US gov according to NPR to subizide(sp?) their cotton farmers.
If I had another window working I would google subizidize to spell it right.
ZZZZZZzzzzzzzzzz going back to bed. But thinking of re-balancing a tad. Japan can be a value trap. But thinking about returning some money to that neck of the woods. Will still be 50% in USA. I'm still patriotic enough to never bet against my own country to much.
I'll do some research but right now I'm thinking 50% USA and no more then 10% to any other area. 10% Latin America 10% Japan 10% China well that will get me over 10% Asia Okay perhaps no more then 30% for another area.
My Current Favorite Marketing Tool. If you like text adverts you will like it
Save 25% off some versions of Turbo Tax some say it's a CPA in a CPU
|
|
Wed Nov 10, 2010 8:43 am |
|
|
|
