Shah Gilani picks out three options plays from the recent surge in Chinese stocks.
- Here’s Exactly How to Play the Surge in Chinese Stocks
- The Massive Wave of Chinese Investment in the U.S. is Coming to a City Near You
- China Traffic Jam Just a Brief Bottleneck on the Road to Growth
- GM's IPO Filing Reveals Challenges That Could Discourage Investors
- Fighting to Feed the Dragon: McDonald's Vs. Yum!
- Taipan Daily: Reasons to sell in the aftermath of the Agricultural Bank of China IPO
- China's Exports Surprise Contradicts the Critics
- Despite the Near-Record Run in U.S. Stocks, Oil, Commodities and China Will be the Long-Term Winners
- Investment Strategies: For Market-Beating Profits, Here Are Three Stocks That Aren't on Wall Street's Radar Screen
- China's Exports to Return to Growth Next Year, but How Much Will It Matter?
- 7 Reasons China Will Lead the Global Economic Recovery
- China-Russia Oil Accord a Sign of a Changing World
- The View From China: As its Securities Regulations are Modernized, the Red Dragon's Profit Potential Will Soar
- Blackstone, China Govt. Planning a Bid for Rio Tinto, Say Media Reports From Today
- China Drills Into Africa with $5.4 Billion Investment
- Profit Strategies for an Uncertain Market
By Diane Alter, Contributing Writer, Money Morning
There's a new wave of investment occurring across the United States - and the "who" behind it makes this a very interesting story...
Faced with an economic slowdown at home, Chinese companies are pouring money into U.S. businesses at a record clip.
From energy to aviation to entertainment, Chinese investment in the U.S. swelled to a record $6.5 billion last year.
But that's just the beginning of this Chinese "invasion."
According to Rhodium Group, which conducts detailed tracking of Chinese investments in the U.S., new business investments are now on track to top that gigantic figure again in 2013.
"We are in the midst of a structural growth story that will transform the China-U.S. investment relationship from a one-way street into a two-way street," Thilo Hanemann of Rhodium told CNBC.
A major reason behind this investment trend: U.S. technological development.
A December 2012 U.S. Treasury Department Committee on Foreign Investment report said it "judges with moderate confidence that there is likely a coordinated strategy among one or more foreign governments or companies to acquire U.S. companies involved in research, development, or production of critical technologies for which the United States is a leading producer."
A finger wasn't directly pointed at China, but the inference was clear.
"Chinese companies are looking for management prowess and technology upgrades when they make acquisitions," Ben Cavender, a senior analyst at China Market Research Group, told The Wall Street Journal.
A line of cars and trucks 60 miles long (100 kilometers) has snarled the road along the Beijing-Tibet 110 Expressway for the past nine days.
The bumper-to-bumper gridlock, which finally began to ease yesterday (Wednesday), was created by a surge in trucks carrying coal from the province of Inner Mongolia to the suburbs of Beijing, where power plants continue to suck up and incinerate millions of tons of the black rock.
The speed of service and the ability to quickly adapt menus, packaging and advertising are what makes a market leader. And right now, the speed at which fast food companies make the transition into foreign markets, particularly China, is what matters most of all.
The industry's two biggest players, McDonald's Corp. (NYSE: MCD) and Yum! Brands Inc. (NYSE: YUM) - the parent company of KFC, Pizza Hut, and Taco Bell - know that.
China's official export numbers will be reported tomorrow (Thursday) as part of broader trade data, but had been expected to rise 32% year-over-year after recording 30.5% growth in April.
Chinese economic figures are often leaked widely in markets and government circles ahead of their official release, and are sometimes subject to last-minute revisions.
Moving forward, investors need to focus on quality, take the time to understand what's really happening in Washington, and turn to such once-unconventional investments as oil, commodities and China stocks, says Money Morning Chief Investment Strategist Keith Fitz-Gerald.
"I expect the markets to remain very fragmented. Volatility will almost certainly increase, leaving investors both psychologically scarred and totally confused," Fitz-Gerald said, underscoring the need for investors to embrace a truly global view. "Fully 75% of the economic activity on the planet now takes place outside U.S. borders. So it only makes sense that investors embrace new ways of thinking in order to avoid getting left behind. At the same time, energy and commodities still have a long way to run - meaning there's substantial profit potential available."
In a wide-ranging interview, the former professional trade advisor, best-selling author and noted Asia-investing expert:
- Predicted that oil and commodity prices are headed higher, making them "must-invest" asset classes for investors who don't want to be left behind.
- Stated that ongoing miscues in Washington coupled with higher growth abroad make it imperative that U.S. investors embrace a truly global view when planning their investing strategies.
- And predicted that many blue-chip U.S. companies will go for dual-listings, listing their shares on China's Shanghai Stock Exchange (SSE), providing those U.S.-based firms with access to the plentiful capital and robust growth available in that Asian giant's marketplace.
For this column, I'm going to focus on the latter - and show you how this seemingly unconventional investment strategy can actually make you a lot of money.
If you want quantifiable proof, consider this nice bit of research from Cem Demiroglu at Koc University in Turkey, and Michael Ryngaert at the University of Florida: In 2008, they conducted a study that showed that stocks without any analyst coverage experienced a 4.82% higher return than their peers after coverage initiation.
The lesson here is simple.
However, exports from China, which is largely considered to be the world's manufacturing floor, are becoming less and less relevant as the Red Dragon moves toward a more balanced economy.
For instance, imports are expected to grow 11% next year, reflecting a shift toward more domestic consumption. And while the country is known for its massive spending on infrastructure, its service sector is growing twice as fast as its construction and infrastructure sectors, according to Money Morning Chief Investment Strategist Keith Fitz-Gerald, who says exports account for only 20% of China's gross domestic product (GDP).