China: Still at the ‘top of the head’
by Steven Halpern
Filed under: International markets, China, Newsletters, Stocks to Buy
“Is China’s rip-roaring bull market over?” asks Larry Edelson. The editor of Real Wealth says, “No. No. And no!” Here, he looks at two favorite funds for investors seeking exposure to China.
“China’s economy continues to fire on all eight cylinders. The country’s fourth-quarter 2007 gross domestic product rose an amazingly robust 11.2%. That’s down a tad from third-quarter growth of 11.5%, but who’s kidding who? China is still at the top of the heap as the fastest-growing major economy on the planet!
“Meanwhile, Beijing’s fiscal revenues are soaring. According to the National Statistics Bureau, the government’s fiscal revenue hit $691 billion (almost $2 billion per day) last year, up from $261 billion in 2002.
“And don’t forget, that’s just tax revenues. China’s mountain of foreign reserves has climbed to an astounding $1.53 trillion – and is growing at a rate of more than $1 billion per day.
“Add it all up, and China has almost $2.3 trillion stashed in the bank. Plus more than $3 billion a day of positive cash flow. In contrast, the U.S. has negative cash flow of more than $2.7 billion per day.
“I find it incredible that just a few years ago almost every analyst I talked to told me China’s banking system was going to implode. Now , China’s banking system is now one of the strongest in the world, with 15% of their deposits held as reserves at the People’s Bank of China, the country’s central bank.
“Contrast that with U.S. banks, which hold on average about 8% of their capital, including stock and earnings, as reserve capital to meet so-called Tier 1 requirements for bank safety. That’s less than half of what China’s banks hold.
“My suggestion: Buy the heck out of China’s stock market. The pullback you’ve seen there is nothing more than a sharp technically-based sell-off. Here are investments you can use:
1. iShares FTSE/Xinhua China 25 Index (ASE: FXI). One of the most liquid ETFs that tracks China’s top 25 companies, the FXI is a great way to play China. The ETF is down more than 32% from its highs and is now bouncing off of long-term chart support. I consider it a great buy!
2. U.S. Global Investors China Regional Opportunity Fund (USCOX). This mutual fund invests at least 80% of its money in the China region, from Mainland China to Hong Kong, Taiwan and more. Manager Frank Holmes’ worldview and analyses are similar to mine. The fund is now trading at just $11, back to 2003 levels. Another great buy, in my opinion.”
Each day, Steven Halpern’s TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation’s leading financial newsletter advisors.