Here are a couple of pieces of information from the InvestmentU newsletter. I can't vouch for the accuracy of the numbers but I believe the trends implied in the numbers.
- 80% of the world's cranes are now in China for all the skyscrapers being built
- Shangai has more than 4000 skyscrapers, twice the number in Manhattan, with another 2000 on the way
- There are more than 170 cities with more than 1 million people
- They are building, throughout the country, the equivalent to a city the size of Houston every month
14 comments:
Roger -- One very real way to play this is through zinc.
The s/d balance is very bullish. Demand (esp. in China) is skyrocketing. Many of the current producers are depleting resources. Avoid the smelters, who are getting killed by the rise in concentrate prices.
P.S. I'm also bullish on platinum and palladium, for related reasons.
Alex
BHP baby.
If you put FXE, BHP, and VPL on the same 1 year chart the results look pretty much the same (except the very recebt spurt in BHP, which may be due to Gold?)
Given China's very fragile State controlled Economy/Banking System, and the high volatility in commodities, why not have other Asian countries to fall back on, i.e. - diversification, with Vanguard's Asian Pacific ETF = VPL.
They should catch the upside effect of China, and may protect the downside if China stumbles.
OG
ETFconnect says that Japan represents 76% of the VPL fund.
Japan and FXI may appear to have been correlated of late, I have not checked, but both economies are quite different and it is not clear to me that they will trade similalry in the future.
If you want to directly invest in china, I think PGJ is the best ETF for doing so. The Powershares ETF is ADR's only and so all of the companies must comply with US listing requirements. PGJ also has more components than FXI has, so is in that sense more diverse.
However china is still a developing economy, and has risk to it. I still maintain that the best way to get exposure to developing countries is to invest in companies and developed economies that do business with those economies.
Market Participant
PGJ has lagged FXI at every turn. Before buying PGJ it my worth exploring why it has lagged.
FXI is a personal holding
Oops, VPL isn't too good for Asia, 76% in Japan and most of the rest is in Australia. Back to the drawing board.
Better shut up and read instead. There are sure a lot of smart people posting now, hope it keeps up.
OG
Jeff Matthews gives his take on global resources and the bond market and, in the process, comments:
[M]ost interesting of all in these tales of an emerging global resource squeeze might have been Tuesday’s front page story in the New York Times, the headline of which married three words that I believe have never appeared in the same sentence together: “labor” and “shortage” and “China.”
It seems the easy acquisition of labor at very low wages (and io ipso China's ability to arbitrage same) may be hitting some bumps.
See http://jeffmatthewsisnotmakingthisup.blogspot.com/2006/04/three-words-you-never-saw-in-same.html
RW
Roger,
IMHO FXI has been boosted a flood of loose money sloshing into the chinese market. A fairly large proportion of FXI's companies are not listed on US exchanges which suggests that they either can't afford it or else can't make it.
It can also be argued that greater concentration of FXI into only 25 stocks makes for greater volitility. PGJ also has a lower expense ratio of %0.60 vs %0.75 for FXI.
Given that you can earn upwards of 7% on a selected portfolio of REITs, and mortgage REITs are very depressed. I'm not very convinced that investing in china has the best risk return profile.
Market Participant
Market Participant,
I am not following your last comment. "FXI has been boosted by loose cash"
Its assets are only $2.23 billion. Its three largest holdings are PTR, CEO and SNP weighted at 8.6, 7.8 and 6.8 respectively. The market caps of those three are $192 bil, $32 bil and $52 bil respectively. The three stocks account for 21% of the fund. The numbers are such that I disagree with the tail wagging the dog idea.
While you are right about FXI being more expensive it has more than made up the difference with outperformance.
Again I submit to readers, if you have an interest in buying PGJ you might want to figure out what might cause the lag to change, I don't know the answer.
Lastly, deciding between REITs and China is not something I understand. You may be right about REITs being depressed but I'm not sure why it would come down to China vs. REITs. China and India, sure, or REITs and BDCs, sure. Choosing between China and REITs is almost like choosing between bonds and tech stocks.
Roger,
As I see it, I have a limeted amount of funds to allocate, I think that at this time investing in non-equity REITs/BDCs has a greater margin of safety than investing in China.
I'm not sure why PGJ is lagging FXI, but it could be due to some more marginal chinese companies getting ADR's while FXI is strictly "red chip" as a concentrated market cap index.
I think, that there is been a huge amount of inflows into the chinese markets and that in the case of a concentrated ETF like FXI that can start bending the market. FXI 25 stocks are going to be very popular with all sorts of foreign funds that want chinese exposure.
With China you are buying a growth story and that growth could be priced in already. There is also alot of risk from the fact that China is a communist country, and most chinese companies have a significant amount of state involvement.
Market Participant
I'm not going to convince anyone of anything but REITs always have a higher margin of safety than Chinese stocks.
The asset classes have completely different characteristics.
You can tell me to go to hell, but I am telling you with the best of intentions that trading off between a low beta, income producing vehicle and an emerging market makes no sense.
I won't pick on you any more about this.
Roger,
I'm thick as brick, I guess what I was trying to get across is that if you want to invest in something that is risky, uncorrelated, and has good growth opertunities; then value REITs are a better choice than FXI.
For the same amount of risk, I think you can do better investing in "value" REIT's than you can by investing in EEM in general, and China in particular. I think that alot of the growth in china is priced in, and that we may be entering a speculative bubble.
Mortgage REITs have been been quite depressed becasue alot of people have overrated to the flattening yield curve issue (Mortgage reits are usually leveraged about 8:1). So that even REIT's that do not have these problems have gotten hammered and are very cheap.
Also Roger have seen Ameritrade's new izone service? They are offering flat $5 trades to select accounts on min balance of $5000. I've blogged about it here: Ameritrade's new izone: all trades only $5, all of them.
Market Participant
Dear Market Participant,
What Roger is trying to say, is that this discussion is on investing in China. To arbitrarily slide on over to REITS is a bit of a stretch, unless you are talking about Chinese Reits...in other words, in this post, we are talking about the merits of investing in China, and the different ways to do this, not comparing investing in China to investing anywhere else. ( that would be saved for another post )
g
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