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International Investments



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International Investments - Diversify in Asian Markets

By Gary Scott

International investments make more sense with the US dollar under pressure. When it comes to investing globally there are two markets, just for their sheer size and potential, that should not be missed, China and India.

These are the two economies of greatest growth potential but neither is without problems. First, one of the very things that makes them attractive also gives some concern. The attractiveness is that their currencies are likely to appreciate versus the US dollar. However if the dollar falls versus their currencies, one of their major buyers (the US) will stop buying as much as prices in dollar terms for Indian and Chinese goods will fall.

Indian and Chinese accounts and balance sheets are also a bit mysterious, more questionable than major market accounting which we know from the Enron and other such scandals is questionable enough. We must expect some scandals.

These countries are flush with money and have strong foreign reserves so there are not a lot of yuan or rupee debt investments. This leaves Chinese and Indian equities as the most logical choice.

China has better fundamentals of the two.

China has a trade and current account surplus. The Indian stock market is especially known for its volatility. India has a trade and current account deficit.

Keppler Asset Management rates China as a good value buy market, India a low value sell. Here are the numbers from Keppler’s analysis.

Country Price to Book Value Price to Cash Flow Price to Earnings Dividend Yield Return on Equity
China 2.05 6.9 12.2 2.66 16.8
India 4.39 15.2 20.2 1.25 21.8

Because of these complexities, mutual funds and Singapore companies that invest in China may be a better alternative than to invest in Chinese shares themselves.

China and India investments can also be blended with investments in Japan. This has worked pretty well this year. The Asian portfolio which our Borrow Low- Deposit High service began tracking October 21, 2005 is up 56% in seven months.

This portfolio started with four investments, $75,000 each in Jyske Invest Indian Fund, Chinese fund, Japanese Equity Fund and Emerging Bonds Fund.

The funds now are worth: JI Emerging Bonds up from $75,000 to $77,416.36.

JI Japanese Equities Up from $75,000 to $88,453.91.

JI Indian up from $75,999 to $94,254.

JI Chinese up from $75,000 to $102,591.58.

These returns are after the blood bath, we have seen in emerging markets this last month.

Not bad you might say, “a portfolio rising at a rate 56% (96% per annum rate) during one of the worst periods for such markets this decade is pretty good”. However the volatility is there. This portfolio was up 105% (180% rate) just weeks ago.

This dynamic up and down movement tells us three things. First, Asia offers excellent potential. Second, diversification within Asia is good for most investors but do not risk everything on just one country or share. Third, this is a long term play that will have its ups and downs. Either make your bet there and leave it alone for the long term or ride your Asian portfolio with careful stop losses.

You can learn more about the Jyske Asian funds from Thomas Fischer at fischer@jyskebank.dk

Enhance great profit potential with a diversified portfolio of Asian currencies through a MultiCurrency Sandwich. Learn how at garyascott.com/catalog/bldh.html

Learn about investing in emerging currencies, gold, silver, Ecuador, import-export, overseas markets and more. Join Merri, me and Thomas Fischer at our September 15-16-17, 2006 International Business and Investing Made EZ course in North Carolina. Review where to invest and do business now and learn which markets and currencies may be strong in the year ahead. Our May course was overbooked and the September session is already filling up fast. Our free accommodations are reserved on a first come first served basis so do not delay! Go to garyascott.com/catalog/ibeznc.html

Gary

June, 2006

 

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All contact copyright Gary A. Scott (1968-2006) unless noted otherwise