Investing in China

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Investing in China: Guess Who Just Replaced America As the World’s #1 Exporter of IT Goods?

by Mark Skousen, Chairman, Investment U
Monday, January 16, 2006: Issue #503

In 2003, the World Summit on the Information Society met in Geneva, Switzerland, and carried banners promoting Nokia and Hewlett-Packard as leaders of IT.

Since the beginning of the technology revolution – whether you start with the telephone, the television, the computer or the Internet – the United States has dominated in the production and export of technology and telecom goods. As late as 2003, it was still #1 in the world.

But just two months ago, at the latest World IT Summit, the banners highlighted the names of Huawei and ZTE, China’s telecom-equipment powerhouses… one company at the event carried the catchy brand-name, “Great Wall.”

Not your typical household names, but it may be time to start investing in China

China’s IT Exports – $180 Billion And Growing

China has now surpassed the U.S. in exporting the most technology products around the world, according to new figures from the OECD (Organisation of Economic Co-operation and Development).

It happened last year, when China exported $180 billion in computers, mobile phones and other digital equipment. (America’s IT exports reached $179 billion.)

China is, as everyone knows, a major center of low-cost manufacturing, and its meteoritic rise is reminiscent of post-war Japan. (China, like Japan, is a great imitation of technology the U.S. invented the electronic computer and the transistor, but guess who manufactures them?)

China’s trade in tech wares has been growing at an astonishing 32% rate since 1996. And while its market share has been rising sharply, America’s continues to fall. (See chart below.)

Investing in China: Exports of Technology and Telecommunications Goods in $ billions

But Investment U investors need not lose sleep over the now awakened Chinese bear. In fact, there are plenty of profitable opportunities for the investor who wisely looks to diversify his portfolio by investing in Chinese stocks and Asian stocks.

The whole Pacific-Asia region is exploding in growth, at 8-10% rates. And stocks are earning double-digit gains. Even China, following a bearish two-years in its stock market, is coming alive this year. So the question for investors is how to profit

The Answer: Investing in China with These Two Funds

The best way is to invest is in closed-end funds, such as the China Fund (NYSE: CHN) and more broadly, the Morgan Stanley Asia-Pacific Fund (NYSE: APF), one of my longtime favorites.

For years, the China Fund was selling at huge premium to net asset value (NAV), sometimes exceeding 30%. The premium has since come down to 15%, making it a fairly good value. The fund is already up 13% in January.

The Morgan Stanley Asia-Pacific Fund is more broadly invested, including Japan (which was up 40% last year), and is still selling at a huge 10% discount to NAV. It, too, is up this year – 6%.

Happy Chinese New Year!

Good trading, AEIOU,

Mark

P.S. To get even better returns, here’s how to single out companies conducting highly profitable businesses in China (and a few more red-hot economies). In fact, this “secret stock market” is actually the safest way to buy shares of select international growth stocks. Here’s the full report, for anyone looking to get significant capital appreciation over the next 3-6 months.

Today’s Investment U Crib Sheet

What is IT, exactly? It’s a term that encompasses all forms of technology used to create, store, exchange and use information in its various forms (business data, voice conversations, still images, motion pictures, multimedia presentations and other forms, including those not yet conceived). It’s a convenient term for including both telephony and computer technology in the same word. It is the technology that is driving what has often been called “the information revolution.”

Alex Green, Investment Director of The Oxford Club, and I are so impressed with the China investing boom story that we are leading an investment fact-finding group on a five-star China-Hong Kong trip from March 24 to April 6, 2006. This extraordinary trip includes visits to the Forbidden City, the Great Wall, the life-size Terra-cotta Warriors in Xian, a three-day Yangtze River boat cruise, and Shanghai (the new financial center of Asia) and Hong Kong visits. Visit http://www.agoratravel.com/china/ for all the details, or contact Agora Travel directly at 800.926.6575, or email them at michellesedita@bellsouth.net.