International investments
make more sense with the US dollar under pressure. When it
comes to investing globally there are two markets, just for
their sheer size and potential, that should not be missed,
China and India.
These are the two economies of greatest
growth potential but neither is without problems. First,
one of the very things that makes them attractive also gives
some concern. The attractiveness is that their currencies
are likely to appreciate versus the US dollar. However if
the dollar falls versus their currencies, one of their major
buyers (the US) will stop buying as much as prices in dollar
terms for Indian and Chinese goods will fall.
Indian and Chinese accounts and balance
sheets are also a bit mysterious, more questionable than
major market accounting which we know from the Enron and
other such scandals is questionable enough. We must expect
some scandals.
These countries are flush with money and
have strong foreign reserves so there are not a lot of yuan
or rupee debt investments. This leaves Chinese and Indian
equities as the most logical choice.
China has better fundamentals of the two.
China has a trade and current account surplus.
The Indian stock market is especially known for its volatility.
India has a trade and current account deficit.
Keppler Asset Management rates China as
a good value buy market, India a low value sell. Here are
the numbers from Keppler’s analysis.
| Country |
Price to Book Value |
Price to Cash Flow |
Price to Earnings |
Dividend Yield |
Return on Equity |
| China |
2.05 |
6.9 |
12.2 |
2.66 |
16.8 |
| India |
4.39 |
15.2 |
20.2 |
1.25 |
21.8 |
Because of these complexities, mutual funds
and Singapore companies that invest in China may be a better
alternative than to invest in Chinese shares themselves.
China and India investments can also be
blended with investments in Japan. This has worked pretty
well this year. The Asian portfolio which our Borrow Low-
Deposit High service began tracking October 21, 2005 is up
56% in seven months.
This portfolio started with four investments,
$75,000 each in Jyske Invest Indian Fund, Chinese fund, Japanese
Equity Fund and Emerging Bonds Fund.
The funds now are worth: JI Emerging Bonds
up from $75,000 to $77,416.36.
JI Japanese Equities Up from $75,000 to
$88,453.91.
JI Indian up from $75,999 to $94,254.
JI Chinese up from $75,000 to $102,591.58.
These returns are after the blood
bath, we have seen in emerging markets this last
month.
Not bad you might say, “a portfolio
rising at a rate 56% (96% per annum rate) during one of the
worst periods for such markets this decade is pretty good”.
However the volatility is there. This portfolio was up 105%
(180% rate) just weeks ago.
This dynamic up and down movement tells
us three things. First, Asia offers excellent potential. Second,
diversification within Asia is good for most investors but
do not risk everything on just one country or share. Third,
this is a long term play that will have its ups and downs.
Either make your bet there and leave it alone for the long
term or ride your Asian portfolio with careful stop losses.
You can learn more about the Jyske Asian
funds from Thomas Fischer at fischer@jyskebank.dk
Enhance great profit potential with
a diversified portfolio of Asian currencies through a MultiCurrency
Sandwich. Learn how at garyascott.com/catalog/bldh.html
Learn about investing in emerging currencies,
gold, silver, Ecuador, import-export, overseas markets and
more. Join Merri, me and Thomas Fischer at our September
15-16-17, 2006 International Business and Investing Made
EZ course in North Carolina. Review where to invest and do
business now and learn which markets and currencies may be
strong in the year ahead. Our May course was overbooked and
the September session is already filling up fast. Our free
accommodations are reserved on a first come first served
basis so do not delay! Go to garyascott.com/catalog/ibeznc.html
Gary |
