China

  • 19 May
    What Three Chinese Companies Tell Us About The Risks You Need To Watch For In Emerging Markets

    What Three Chinese Companies Tell Us About The Risks You Need To Watch For In Emerging Markets

    • Proper due diligence is needed to separate low risk from high risk investments.
    • The fact is, nobody does their research anymore as ETFs and index funds have taken over the investment world.
    • I’ll describe a few Chinese investments that look amazing at first but can easily lead to a total loss.

    Introduction

    Yesterday we talked about how emerging markets are generally becoming attractive. Today we’ll discuss a few Chinese stocks that show some of the risks lying in such a market.

    As I see the S&P 500 climb to new highs, I understand that risk isn’t what investors think about, but my experience that spans a few market cycles keeps me focused on the risks while investing.

    By risk I don’t mean short term volatility coming from market sentiment. The S&P 500 hasn’t been volatile at all in the last 8 years as it has just gone up, but for every point that it goes up while corporate earnings remain flat, the risk investors are taking gets higher. More →

  • 18 May
    Emerging Markets Are Becoming More Attractive Day By Day

    Emerging Markets Are Becoming More Attractive Day By Day

    • Volatility is a given in emerging markets, but it’s also what creates amazing opportunities.
    • Economics, fundamentals, and currencies are all in favor of emerging markets.
    • China is just doing what the FED should have done 5 years ago: tighten after an expansion period.

    Introduction

    Emerging markets are a volatile beast, this is a given. However, the inherent volatility is mostly the result of our perception and not of actual structural changes in a country. As an example, last year a wonderful buying opportunity emerged in Cemig (NYSE: CIG), a Brazilian utility from the state of Minas Gerais. CIG’s stock price fell from double digits to $1.05 in just a few years. More →

  • 24 Apr
    Global Growth Is Finally Getting Some Traction, Be Sure Your Money Follows

    Global Growth Is Finally Getting Some Traction, Be Sure Your Money Follows

    • Macroeconomic trends are extremely important for your investing or trading returns.
    • The IMF’s World Economic Outlook is a great starting point for understanding where the risks and opportunities lie.
    • Long term trends show emerging markets and commodities are the place to be.

    Introduction

    Investing is both difficult and easy. It’s difficult if you try to guess what the market’s sentiment will be next week or next month, while it’s easy if you simply look at slow moving structural macroeconomic trends. These trends are like little forces that shape the market, similar to the gravitational forces among planets in our solar system. More →

  • 03 Mar
    Why An ETF Is The Wrong Way To Invest In Emerging Markets

    Why An ETF Is The Wrong Way To Invest In Emerging Markets

    • Irrational market sentiment and low liquidity create high volatility that can easily be seized by smart investors. Just do the opposite of what the crowd does.
    • Despite what the market might think in a certain moment, emerging markets and businesses grow alongside economic development and positive demographics.
    • ETFs are the crowd and due to their construction and rules, ETFs represent buying high and selling low, which is a terrible strategy anywhere but it’s extremely costly on volatile emerging markets.

    Introduction

    I have a positive bias towards emerging markets because of their positive demographics, growth aspirations, and low starting level from a macroeconomic perspective, and because, from a behavioral perspective, emerging markets are completely irrational, much less liquid, and highly volatile, especially individual stocks.

    You might wonder why I like volatility, low liquidity, and irrational behavior. Well, at the first sign of fear on financial markets, everybody rushes to sell their emerging market position. This, combined with low liquidity, creates huge volatility which is the best investing opportunity if you are a value/growth investor. More →

  • 23 Feb
    Bubble, Crisis, Bubble, Crisis – Debunking The Chinese Real Estate Sector

    Bubble, Crisis, Bubble, Crisis – Debunking The Chinese Real Estate Sector

    • The Chinese government is controlling the real estate market and allowing short, two-year boom bust cycles.
    • Western investors don’t understand China and see either a bubble or a crash.
    • The best way to invest is to seize the wild market swings created by such erratic behavior.

    Introduction

    The question we would all like to know the answer to is this: is the Chinese real estate market in a bubble?

    If it is, any kind of burst would create a credit crisis, lower economic growth, and quickly spill over first on global financial markets, and consequently onto the global economy.

    There is no consensus on whether or not Chinese real estate is in a bubble. I’m going to describe both perspectives to give you the best information possible for China and Chinese real estate related investments. More →

  • 14 Feb
    A Look At The Crazy World Of Chinese Stocks

    A Look At The Crazy World Of Chinese Stocks

    • It isn’t unusual that a Chinese stock loses 75% to 90% of its IPO value after a year or two.
    • Delisting, lack of transparency, obscure companies, fraud, buyouts at large discounts, and fears around the economy are some reasons for such performance.
    • You should require at least 50% per year from Chinese stocks with minimum risk. Such opportunities can be found.

    Introduction

    Chinese stocks are, to say it in one simple word, crazy. And apart from crazy, looking at Chinese stocks that are trading on the NYSE seems like walking through a graveyard.

    Companies like China Xiniya Fashion Limited (NYSE: XNY), China Zenix Auto International (NYSE: ZX), ChinaCache International (NASDAQ: CCIH), or Kingtone Wirelessinfo Solution Holding Ltd (NASDAQ: KONE) all seized the craziness going on in 2011 around China and listed themselves on American markets. The results for initial investors were disastrous. More →

  • 06 Jan
    This Is Why You’ll Want To Take A Closer Look At Investing In China

    This Is Why You’ll Want To Take A Closer Look At Investing In China

    • The large GDP-credit gap in China could be a win-win; panics should be seen as an opportunity to buy on the cheap.
    • Forecasts for the yuan are negative indicating further depreciation. Don’t fight the positive dollar trend for now.
    • Some sectors are going to get crushed by China, thus it is a threat.

    Introduction

    In the last two years, China has shaken the markets twice: once when the Chinese market correction began in August 2015, and when it seemed that we were in for a Chinese/global recession in January 2016. More →

  • 01 Dec
    The Chinese Are On A Buying Binge. Will Your Portfolio Benefit?

    The Chinese Are On A Buying Binge. Will Your Portfolio Benefit?

    • Positive long term outlooks, sharp technologies, interesting metals, and strong brands are what the Chinese are looking for.
    • The boom in Chinese acquisitions isn’t expected to stop as economic growth and development continues.
    • The Syngenta AG acquisition offer was made at a valuation over 30.

    Introduction

    We all know China has been growing rapidly in the last 30 years. What many don’t know is that through this growth, China has become the second largest global economy and is expected to become the largest global economy by 2030. More →

  • 15 Nov
    Finding The Equilibrium In Emerging Markets & Why You Need To

    Finding The Equilibrium In Emerging Markets & Why You Need To

    • Emerging markets are volatile and considered risky, but the economics are great.
    • We can’t fight the market without looking at the risks, but what we can do is rebalance our portfolios and do some dollar cost averaging.
    • Such a strategy allows you to grasp the benefits of great economics and lower valuations while eliminating volatility risks.

    Introduction

    Last week was very interesting for emerging markets.

    Trump’s win sent shockwaves around the world and such movements usually hit those markets the hardest that don’t have much relation to the U.S. but are considered risky and therefore, investors quickly pull funds out of those markets. More →

  • 11 Nov
    Forget About The Election Noise, Let’s Talk About China

    Forget About The Election Noise, Let’s Talk About China

    • China’s long term outlook is very positive and its debt is not worrying.
    • However, due to the nature of economic cycles, we have to expect and prepare for potential trouble coming from China.
    • When trouble will happen is anybody’s guess as many have called negative scenarios several times, but those have so far failed to materialize.

    Where China Is Now & Where It Is Going

    China is the growth motor of the global economy. It consumes about half of the global produced copper and produces half of the global steel output. This is due to the incredible GDP growth China has achieved in the last 25 years, which has averaged 9% per year. More →

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