Investing in the Asian Tigers

PANDA_IHB

PANDA_IHB

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This is my opinion: as it now stands, the United States is the beneficiary of a reverse Marshall Plan, which costs Asian economies a fortune to fund. When the Asians pull the plug, The U.S. economy will go down the drain and Asia will take off. I really have doubts for the future of this economy, therefore i am planning on taking money out of U.S. stocks and allocating more to foreign stocks, especially Asia. These are the following countries I am considering to invest in: Singapore, Korea, India, China, Hong Kong, and possibly Taiwan. Which of these 6 countries have the best potential for the future. What are the pros and cons of investing in each country? (political, real estate, business) It is seems like now is a good time to get in as many of countries as many of them have taken a big hit.
 
<em>"The U.S. economy will go down the drain and Asia will take off."</em>





Until China or the other Southeast Asian countries develop a larger middle class and an internal market, this is not going to happen. They have been using us as a consumer base to build up their manufacturing base. Once they have sufficient manufacturing capacity, they will need to raise wages to be able to afford all of the goods they produce. They are not there yet.





Wait until they have their next recession -- probably coinciding with ours -- then there will be some real bargains.
 
<p>Wages in China (at least in the coastal areas, which represent about 300 million people) are rising fast, and their agenda is to consume their own products. China's #1 priority (well, one of their top priority) is to become self-sufficient economically to the extent that is equivalent to the developed countries, according to a very high official. They are at least trying to go about building the economy in a methodical sequence, and are focused on infrastructure and consumer purchasing power. That is why China has been so attractive to foreign businesses, unlike India.</p>

<p>Having said that, I think China is still a risk play. Strategy is one thing, execution of the strategy for a 1.4 billion employee "company". I'm not convinced they can pull off the right decisions in all fronts.</p>
 
<em>"Wages in China have risen 30% over the last year."</em>





I have read that the expectation of wage increases and the already high inflation are creating an inflationary spiral similar to the 1970s in the US
 
<p>"I have read that the expectation of wage increases and the already high inflation are creating an inflationary spiral similar to the 1970s in the US"</p>

<p>That is probably true. How the gov't will handle the consequences of their monetary policies and the emergence of the free market will be a daunting task. A substantial risk and while they may ultimately end up fine, I see a blip coming. And it may be a prolonged blip.</p>
 
I remeber when the same arguments were made in 1990-92 when CALPERS stuck 2 billion into the tigers after some junket trip. The markets went crazy for a year over there. Then, reality set in and just like every bubble (the internet comes to mind) it POPPED! Be very carefull buying into hype. Look at the charts for that and the ensuing years for those markets. You didn't break even for over ten years.
 
you know the saying, when the US sneezes, the world catches a cold.





few snippets from today's WSJ on exactly these topics.





Stocks' Pain Touches All Regions of the Globe

U.S. Ripple Effects


Rattle India, China;


'Loss of Confidence'




<p class="times">The Dow Jones World Index, excluding U.S. shares, fell 8.7% in dollar terms in the first quarter. The Dow Jones Industrial Average dropped 7.6%.</p>

<p class="times">Some of last year's highflying markets, like India and China, have seen this year's worst drops, with shares in both countries down more than 20%. Japan's stock market, a laggard in 2007, fell deeper into the red, with the benchmark Nikkei Stock Average of 225 companies down 18%.</p>

<p class="times">The gloom has been equally intense in Europe, with benchmark indexes in the United Kingdom, Germany and France each falling more than 10%. Germany's DAX index had the biggest decline of the three, tumbling 19%. France's CAC 40 index dropped 16% and the U.K.'s FTSE 100 fell 12%.</p>

Such declines around the world illustrate how far-flung markets have become correlated.





China and Core Inflation

By <strong>STEPHEN S. ROACH</strong>


<strong>THE WALL STREET JOURNAL EUROPE</strong>


April 1, 2008




<p class="times">HONG KONG -- China has a serious inflation problem. In February, consumer prices were up 8.7% from year-earlier levels -- the sharpest increase in 12 years. China's policy makers are rightfully concerned about this outbreak of price pressures. Unfortunately, they are getting bad advice from so-called experts who have been asked to weigh in on this key issue....</p>

<p class="times">...A key premise underlying this conclusion was that in both cases -- food and energy -- recent price surges were outbreaks of increasingly global forces. It quickly became conventional wisdom to refer to China's "imported" inflation problem. </p>

<p class="times">On the surface, the numbers appear to bear out this conclusion. If you strip out food, China's core inflation is holding at just 1.6%. Putting it another way, about 90% of China's annualized 8.7% inflation rate can be attributed to food alone. Take energy out as well, and the core rate drops to 1.1%. Under the presumption that these sources of inflation are likely to taper off -- if not reverse -- the experts concluded that fears over a more widespread Chinese inflation were overblown. As a result, China's domestic policy makers were urged to refrain from a further tightening of macro stabilization measures, such as monetary policy.</p>
 
Same effect as last cycle. When the US went into the 91-92 recession it spelled DOOM for the go-go tigers at that time. Never bite the hand that feeds you or root against its success
 
<p>China + 20 years = Mexico.</p>

<p>I have met a number of Chinese business people and it is basically who do you know and what can you get them. The poor will never have a chance because the rich are too busy keeping themselves rich. The government does not care about anything other than maintaining the status quo and its stranglehold on power (see Tibet and Falun Gong). Non-Chinese businesses (excluding megacorporations like Walmart and Coca-Cola) are being fleeced because the government is never letting any of the money made in China go outside of China. They want it to recirculate back into the country and to the same people over and over again. </p>

<p> </p>
 
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)_per_capita

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)



By World Bank estimates, China's GDP per capita (nominal) in 2006 is $2,034, compared to Mexico at $8,052.



If China's economy advances to Mexico's level, that would actually be an improvement, as well as putting the size of their economy on par with the US. I personally don't believe they can maintain a sustainable rate of growth to achieve that over the next 20 years.



In East Asia, it's hard to find high-paying jobs, but easier to save $. Here, it's easier to find high-paying jobs, but hard to save $.



It's very strange. In many developing countries the wealthy have a huge sense of entitlement & blew cash, while the poor scrimped, saved, and investment if they could. Here, the (non-Hollywood) wealthy are often humble (Warren Buffet, John C. Bogle) and give sensible financial advice, versus the poor have a rabid sense of entitlement to non-essential material goods.
 
Well, connections work very well, even here in the old USA...ask the Clintons.



From WSJ:



<blockquote>We can also now understand why the couple took so long to release their returns, and are still reluctant to release other information. Their political status has given them access to wealthy folks who've helped make them rich. For example, Mr. Clinton raked in as much as $15 million working as an adviser and rainmaker for billionaire financier Ron Burkle's Yucaipa firm. We're not sure what advice Mr. Clinton gave but it must have been fabulous. The former President also took in $3.3 million in consulting fees from InfoUSA CEO Vinod Gupta, who has also helped fund Mrs. Clinton's White House bid. These are not opportunities that fall into every American's lap.</blockquote>
 
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