I’m curious if anyone can provide some insight into investing in China via a mutual fund. First of all, why is it that the country’s economy is growing so quickly but yet its markets are doing so poorly? Is it an issue of (a lack of) transparency and an unwillingness to invest as a result?
If I were interested in investing in a mutual fund, is now a good time?
It seems to me that oftentimes when the markets in the region go up, the Shanghai bourse goes the other way. Should I avoid China altogether?
I’ve bought into just about every region in the world (heavily in Asia) except for the United States (I bought into a US bond fund, though).
Shawerma, I would avoid investing in mainland Chinese stocks. If you want China’s domestic economy exposure, You should invest in multinationals which produce many products in China or those that sell many products in China. Examples: Intel, LVMH, Caterpillar, BHP Billiton, GE, etc. These companies either produce a lot in CHina or sell a lot to China or both…If you want mutual funds, ETFs or other funds like those…You should focus on the Taiwanese or Hong Kong equity funds…they are more transparent, better accounting, more free-market direction, etc. than China’s mainland equities…And they have China as a large export market…
The reason Chinese mainland stocks are doing terrible while the Chinese economy is experiencing explosive growth:
Chinese producers profit margins are contracting as super-competition strains just-low-cost producers (those without brand names, marketing ,etc.)
Chinese producers profit growth is declining due to the super-competition
Vast foreign and domestic investment into the Chinese economy is causing vast overcapacity in many industries which further depresses price power of producers…
Most quality Chinese companies that compete in world markets have equity listings in NY, HK, and Europe…not Shanghai and Shenzhen
Many state-owned or controlled enterprises are listed and traded in China and they have terrible governance and lack free-market direction due to state pressure
China’s capital controls make it hard for firms to follow free-market directions (example: yuan convertibility into other currency)
Foreign companies are really driving profit margin and profit growth from producing and selling goods in China
Foreign investors have a much more difficult time to invest due to the share structure for foreign instititions…A shares, B shares, etc…
Onedude, you forgot the part where many of the companies listed are majority owned by the Chinese Government who have created an artificial environment and prop up non-competitive companies.
[quote=“onedude”]Shawerma, I would avoid investing in mainland Chinese stocks. If you want China’s domestic economy exposure, You should invest in multinationals which produce many products in China or those that sell many products in China. Examples: Intel, LVMH, Caterpillar, BHP Billiton, GE, etc. These companies either produce a lot in China or sell a lot to China or both…If you want mutual funds, ETFs or other funds like those…You should focus on the Taiwanese or Hong Kong equity funds…they are more transparent, better accounting, more free-market direction, etc. than China’s mainland equities…And they have China as a large export market…
The reason Chinese mainland stocks are doing terrible while the Chinese economy is experiencing explosive growth:
Chinese producers profit margins are contracting as super-competition strains just-low-cost producers (those without brand names, marketing ,etc.)
Chinese producers profit growth is declining due to the super-competition
Vast foreign and domestic investment into the Chinese economy is causing vast overcapacity in many industries which further depresses price power of producers…
Most quality Chinese companies that compete in world markets have equity listings in NY, HK, and Europe…not Shanghai and Shenzhen
Many state-owned or controlled enterprises are listed and traded in China and they have terrible governance and lack free-market direction due to state pressure
China’s capital controls make it hard for firms to follow free-market directions (example: yuan convertibility into other currency)
Foreign companies are really driving profit margin and profit growth from producing and selling goods in China
Foreign investors have a much more difficult time to invest due to the share structure for foreign instititions…A shares, B shares, etc…
hope this helps…[/quote]
This was very informative onedude. Your post and the others have convinced me to stay away! I got into Japan when the market was in the mid-14000 range and was hoping for a repeat with China. But again, I think I will pass for now.
Well good luck. You probably did well on your Japan funds… but I see that equity market topping now…Nikkei 225 is 16,660…despite all the crappy Fujitsu systems at the Tokyo Stock Exchange…the market has had a good run off the January plunges…Good profits and good technicals have driven it…but…
A few Jap stocks still look great…but if core consumer prices can maintain a positive trend…there will be some problems that will hurt non-1st-tier manufacturers there…
[quote=“onedude”]Well good luck. You probably did well on your Japan funds… but I see that equity market topping now…Nikkei 225 is 16,660…despite all the crappy Fujitsu systems at the Tokyo Stock Exchange…the market has had a good run off the January plunges…Good profits and good technicals have driven it…but…
A few Jap stocks still look great…but if core consumer prices can maintain a positive trend…there will be some problems that will hurt non-1st-tier manufacturers there…[/quote]
I’m going to stop the monthly payments into the Japan fund and my Southeast fund Monday, and then wait a bit before selling both. I’m almost where I want to be on percentage terms with both. I bought into a Japan small company fund a couple of months ago with rationale you can probably guess.
I think Japan is a picky market. The small caps that have skyrocketed are going to slow down.
You have got to pick the quality names as the gains from here in Japanese stocks will be tough and a grind. The market (small, mid, large cap stocks) in japan is not going to go up so easily now…i think the best stocks there are the 1st-tier manufacturers who depend on the domestic market for less than ~30% of sales…