It’s an exciting time to invest in China. After over a century, the country has emerged from the shadows of the world’s economic superpowers to again rank as one of the top economies in the world. Its GDP is an impressive 11.4%, a stark difference to the U.S., which had its GDP come in at a measly 0.6% in the first quarter.
The upcoming Beijing Olympics will likely be China’s coming-out party, where it lets the world know that it has arrived on the global scene as a major economic power. These are great times for change and growth in China, and although I have invested in China for many years, I’ve never been this excited about the opportunities that country now offers.
But regardless of the positive developments in China, many investors are still weary of investing in the country. It is unfamiliar territory to many investors — mysterious, you could even say. And this mystery is compounded even more by talking heads who base their opinions on outdated or untrue information, saying that investing in China is dangerous and full of pitfalls. Because of this, many investors remain highly cautious of putting their hard-earned money in Chinese stocks.
I think this is unfortunate because investors who rely on these popular assumptions are missing out on some extraordinary opportunities to invest in China. I’ve made my family fortune there, and I am now guiding a whole generation to profits there. So I’m tired of investors allowing outdated information to deter them from making their fortunes in China. That’s why I think that it is time to separate the facts from the fiction about China.
Dispelling the Myth
The biggest myth that I hear about China is that Chinese stocks are in a speculative bubble and that they are trading at dangerously high valuations. Because of this, many investors look at China’s economic growth and see only waving red flags, thinking that it’s only a matter of time before all of China’s economic success comes crashing down.
But the reality is that the Chinese government realizes that the stock market has been booming, and it has taken steps in the past year to try to cool it off. Since the Chinese stock market hit its record high in October 2007, stocks have since corrected over 40%.
Now, stocks on the Shanghai exchange are still expensive, currently trading at around 22 times 2008 earnings. But remember that it is almost impossible for Americans to invest in Shanghai-listed stocks, which is why I recommend that my China Strategy subscribers focus on Chinese stocks listed in Hong Kong or New York.
The top companies listed on these exchanges are now trading at 15 times 2008 earnings, which is a more attractive valuation than stocks on the Shanghai exchange. And companies on the Hong Kong exchange and New York Stock Exchange are growing earnings at 20% a year — much faster than single-digit earnings growth on the S&P 500.
This impressive performance is exactly why I’ve continually recommended investing in Chinese companies listed in Hong Kong and on the NYSE. This strategy has been working out well for my China Strategy members, as we have locked in some nice profits from many of these companies.
In fact, just look at the gains that my China Strategy subscribers have made on our Chinese Internet play — it’s up 49% in the past eight weeks! And I expect more profits from this company going forward, especially as it expands its business into other Asian markets. To learn more about this profitable play, join China Strategy today!
The myth about China’s stock market bubble is just one of the many rumors flying around about China. In a recent China Strategy Dispatch, I dispelled five of the most popular misguided statements out there. If you want to learn the real truth about how to invest in China and the best strategy to profit from the numerous opportunities in China, become a China Strategy subscriber today!
