Asia Investments
Premium
Southeast Asia: Strong Growth, Humming Factories, No Debt Crisis
Gloom has enveloped most of the investment landscape these days, but there is still one region that offers strong growth and serious returns.
I'm talking about Southeast Asia.
There was a time when investors scoffed at the likes of Singapore, Thailand, Malaysia and Indonesia. But no one's laughing now. The naysayers currently are all too busy pulling their money out of the regions they always assumed were safe – the United States, Europe, and even the trendy BRICs (Brazil, Russia, India, and China).
Indeed, there are precious few flourishing economies in the world today, and none look as promising as the ones you'll find in Southeast Asia. We're talking about countries that have pro-market governments, thriving manufacturing sectors, ample natural resources, and – with the exception of Singapore – wage levels that can still grow a great deal before pricing themselves beyond their Western competitors.
That's quite a lot by today's standards.
Just take a quick look around the rest of the world and you'll see what I mean.
Searching for a Savior
U.S. growth has fallen off a cliff and no amount of "stimulus" seems likely to get it back on track. Economic growth in Europe is stalled as well, and the continent is further jeopardized by the potential collapse of Greece and the European Union (EU). Even Australia and Canada, both with strong mineral and energy sectors, seem to be slowing as demand wanes in the wealthy West.
Emerging markets seem like a better bet for our money at first glance, but they, too, have problems when examined more closely.
Brazil and China are battling inflation. Brazil has a government that seems unable to stop spending, while China has a thoroughly corrupt government and a banking system with an enormous hidden bad debt problem. Russia is a snake pit, from which a foreign investor is unlikely to escape alive. And India, while growing rapidly, has a serious inflation problem and a government as corrupt as it is economically inept.
Fortunately, one incandescent bright spot shines through the darkness: Southeast Asia. So let's take a look at some of the investment opportunities being illuminated.
Chinese Car Companies Racing to Produce a Global Champion
With Detroit a shadow of its former self and Japanese automakers sidelined by that country's recent disasters, Chinese car companies are racing to produce a global champion capable of competing with Western brands.
It's something that's long been talked about and something that Nissan Motor Co. (PINK: NSANY) Chief Executive Carlos Ghosn says could happen in just five short years.
"The Chinese government says this is a huge industry. We want to have a Chinese champion," Ghosn told Reuters. "It's logical. It's normal. We were expecting this."
Ghosn anticipates such an emergence will take about five years, but could happen even sooner if one of the major Chinese car companies acquires a mass-market auto brand from a foreign rival.
So who will this Chinese auto champion be?
A short-list of serious contenders includes:
- SAIC Motor Co. Ltd.
- Geely Automotive Holdings Ltd. (PINK: GELYF)
- Dongfeng Motor Group Co. Ltd. (PINK: DNFGF)
- BYD Co. Ltd (PINK: BYDDY, BYDDF)
- Chang'an Automobile Co. Ltd.
SAIC, and Chang'an are state-owned, which makes them difficult to invest in. But Geely, Dongfeng, and BYD are open to U.S. investors, with the latter backed by Warren Buffett. At the very least, these Chinese car companies stand to profit handsomely as China takes its place as the automotive capital of the world.
The Japanese Economy: How Its Post-Earthquake Weakness and Scuffles With China Contribute to a Global-Market Reversal
[Editor's Note: Silver and gold skyrocketed for months, while the U.S. dollar plunged. Most investors expected those trends to continue. But Money Morning's Jack Barnes, a former hedge-fund manager, knew better. He warned of a looming reversal that would stand the global financial markets on end. In this new Money Morning series, "The Inflection Point," Barnes examines this unfolding reversal, and will show you how to profit.]
In our ongoing search for possible "inflection-point" catalysts – financial stimulants that could help turn global markets upside down – the Japanese economy has to be a prime candidate.
In the last part of the 1980s, Japan was the world power – so much so that investors on the U.S. trading floors of New York each day watched the Tokyo markets with a mixture of awe and fear. An oft-cited investing aphorism of the day explained this very clearly by holding that "when Tokyo sneezes, Wall Street catches a cold."
Not long after, the Japanese miracle ended, the stock-and-real-estate markets crashed, and that Asian country fell into a funk known as the "Lost Decade" – a misnomer, since the economic malaise that's lasted virtually ever since is actually more than 20 years long.
China's Economy Continues to Ascend – But Watch Out for Speed Bumps
Everyone knows that China's economy is hot. The only question is whether it may be a little too hot.
China posted yet another quarter of stellar economic growth in the first quarter of 2011, with its gross domestic product (GDP) growing 9.7%. However, analysts are worried about some of the side effects that have accompanied that growth- namely soaring inflation and the emergence of speculative bubbles.
Inflation in China hit a 32-month high in March, and the country's real estate market is beyond scorching.
Policymakers in Beijing insist they have the situation under control, and they've been trying to rein in liquidity and curb speculation to prove it. That's why China's economy, accustomed to double-digit growth, is only expected to grow 8% to 9% this year.
Buy, Sell or Hold: Toyota Motor Corp. (NYSE: TM) Needs to Rebuild from Supply Chain Collapse
Toyota Motor Corp. (NYSE ADR: TM), one of the largest manufacturing companies in the world, has offered strong periods of growth from which investors have profited.
However, today it is a "Sell" – and is likely headed toward a long-term redevelopment of its core company structure (**).
Toyota was founded in 1933 and is headquartered in Toyota City, Japan. Toyota has more than 300,000 employees and a global network of production plants. The company has a market capitalization of $126 billion with an enterprise value of $238 billion, once net cash and debt are accounted for.
Disasters Driving Japan Auto Parts Makers to China
Disruptions caused by Japan's March 11 earthquake and tsunami could further encourage Japanese auto parts makers to relocate factories to China – an eventuality already being driven by explosive growth in the Chinese auto market.
Japan's Big Three automakers – Toyota Motor Corporation (NYSE ADR: TM), Honda Motor Co. Ltd. (NYSE ADR: HMC) and Nissan Motor Co. Ltd. (PINK ADR: NSANY) – all already operate assembly plants in China. And while 60% to 70% of the parts those plants need come from within China, the rest must be imported from Japan. So if the assembly plants run out of the parts from Japan, production will halt.
Although no plant in China has yet reached that point – Toyota, Nissan and Honda have all said their factories have enough parts to sustain production for at least two more weeks – the possibility has led some to contemplate a more localized supply chain.
Japan Disaster Update: Beware of Global Insurance Stocks
[Editor's Note: During his time as a Money Morning columnist, former global merchant banker Martin Hutchinson has endeared himself to readers by repeatedly steering them into winning investments, while warning them away from losers. In this column, in the wake of the deadly Japanese earthquake, Hutchinson is playing the latter role, and warns us to steer clear of global insurance stocks.]
The catastrophe-modeling company AIR Worldwide Corp. has estimated that insurance company losses from the Japanese earthquake and tsunami could reach $35 billion.
That has insurance analysts feeling bullish about insurance stocks: In their view, losses are good because it enables the insurers to ratchet up their premiums.
Personally, I don't see it that way. While I like life-insurance and domestic-insurance companies as investments for ordinary investors, I think the big-ticket insurance market is too opaque, too insider dominated, and much too unlikely to deliver decent returns to its outside shareholders.
In short, here in the aftermath of the deadly Japan disaster, investors need to beware of global insurance stocks.
Asia Expert: Despite the G-7 Intervention, Japanese Banking Crisis is Inevitable
[Editor's Note: In Money Morning's lead story today (Friday), Chief Investment Strategist Keith Fitz-Gerald detailed his predictions for a post-disaster Japan. Late yesterday (Thursday), after Money Morning's news deadline, the Group of Seven (G-7) nations agreed to jointly intervene in the world currency markets in order to weaken the Japanese yen and aid Japan's rebound. In this Japan update, Fitz-Gerald explains that the G-7 intervention move won't be enough to avoid a Japanese banking crisis.]
The United States and Canada today (Friday) joined other Group of Seven (G-7) nations to intervene as a means of weakening the Japanese yen in an effort to help Japan deal with last week's catastrophic earthquake and tsunami. This G-7 intervention is a substantial development, although there are precious few details, since none of the [...]
Why Japan is a "Buy"
[Editor's Note: The ultimate financial impact of the earthquake, tsunami and unfolding nuclear tragedy in Japan is so hard to predict that many investors are opting to cut and run. In the face of such extremes in sentiment, we asked Money Morning's Martin Hutchinson - a former international merchant banker - to adopt the opposite viewpoint, and make a contrarian-investing case for Japan. That's just what he's done here.]
With a magnitude of 9.0, the March 11 earthquake in Japan was the worst in that country's 300-year history and was the fifth-worst the world has ever seen.
That trembler, coupled with the devastating tsunami that followed, ignited a flurry of fears and caused a two-day sell-off that sent Japanese stocks down 17%. The sell-off wiped out more than $650 billion in shareholder wealth.
Disaster in Japan: How Bad Will it Get?
[Editor's Note: Money Morning continues to bring you the latest and best investment-related news-and-analysis coverage of the disaster in Japan. In this report, Money Morning columnist Keith Fitz-Gerald - a best-selling author and acknowledged Asia expert - answers key questions about the situation in that Pacific Rim heavyweight. For a related story - how a contrarian investor rates Japan as a "Buy," please click here.]
Money Morning Chief Investment Strategist Keith Fitz-Gerald has spent almost every summer for the past two decades at his family home in Kyoto – which is why he knows Japan in a way that few other U.S. traders could ever hope to.
As part of Money Morning's continued coverage of the disaster in Japan, Fitz-Gerald is sharing those insights with readers. Here are the highlights of a question-and-answer session we held with Fitz-Gerald late yesterday ( Thursday).
For this global-investing guru’s assessment of Japan, please click here.
RSS
