Read below writeup about China & Gold.

 

Good for S-chips like Hongxin (retail), Miidas (Aluminium train bodies) & other selective good S-chips

Great News, Plus China, Asia, Gold …

by Larry Edelson   04-30-09

Why China Is Roaring Again

In my October 9, 2008, Money and Markets column, I told you that “other than cash, gold, and a few select natural resource stocks, the only other investments I’d make in these wild and crazy times are in Chinese companies, buying them hand over fist for the long haul.” I showed you how China was the “only economy on the planet with both short- and long-term growth potential.”

That China’s retail sales were growing at their fastest pace in nine years … that disposable income was soaring …

And that despite what all the soothsayers were claiming about plunging manufacturing in China, China’s Purchasing Managers’ Index was exploding and exports were nearly 23 percent higher than the same period a year earlier.

Plus, capital investment was surging … China’s banks were some of the strongest in the world … and that the robust numbers coming out of China were not just from the urban areas, but from the rural areas as well.

I went on to tell you that China’s “Shanghai stock market reminded me of 2002, when the world was fixated on potential horror stories in China’s economy, and clueless about the reality in China.”

Bottom line, I said: It was a great time to get into my two favorite China plays: The iShares FTSE Index (FXI), which tracks China’s Shanghai stock market, and the U.S. Global Investors China Regional Opportunities Fund (USCOX).

Since I wrote that issue, USCOX has managed to eke out a modest gain, while FXI is up more than 15 percent!

Moreover, many of China’s blue-chip companies are up as much as 50 percent!

And now, it seems that others are jumping on the bandwagon. In a recent report, Goldman Sachs raised its forecast of China’s real, inflation-adjusted GDP growth to 8.3 percent for 2009 (versus 6.0 percent previously) and to 10.9 percent for 2010.

Meanwhile, the International Monetary Fund (IMF) calls China “the one bright spot in the world economy.”

More Gains Are Coming in China And the Rest of Asia.

Here’s Why …

1. Unlike U.S. and European banks, China’s banks are lending. In fact, new lending in China has surged more than 600 percent from a year ago, with March lending exceeding $277 billion.

Money supply in China is also soaring — jumping 25.5 percent in March, the fastest pace on record.

China’s first-quarter fixed-asset investment is also on a tear, jumping 28.6 percent. In March alone, the increase was 30.3 percent year-on-year.

The Chinese are spending like crazy! Retail sales shot up 15.2 percent for the first two months of this year.

2. Unlike U.S. and European consumers, China’s consumers are spending. China’s retail sales for January and February jumped 15.2 percent overall, with urban sales up 14.4 percent and rural sales up 17 percent.

Total first-quarter retail sales jumped 15 percent in the urban areas and 17 percent in the rural countryside. Auto sales for March surged an amazing 27.2 percent!

Meanwhile, there are also signs that China’s property markets are picking back up. Luxury property prices are on the rise again, climbing 2.1 percent so far this year, while property transactions overall jumped nearly 60 percent over February’s pace.

Home sales in Shanghai totaled 1.5 million square meters in March — a whopping 91 percent increase over January.

3. Unlike the rest of the world, China’s (and most other Asian countries’) reserves continue to grow. Despite a slump in exports, almost all of Asia continues to see growth in their monetary reserves, with China’s piggy-bank just recently hitting $2 trillion.

Moreover, from China to Thailand … from South Korea to Indonesia — taxes are being cut virtually across the board … massive fiscal stimulus is being applied … and domestic consumption is being stoked, big time.

My view: If you acted on my suggestions and have some long positions in Chinese stocks or funds, hold! I expect further gains in Asia.

Gold News …

Did you see the news on China increasing its gold reserves by a whopping 76 percent, or 654 metric tonnes (23,069,171 ounces) since 2003?

It’s amazing to me that so many investors and analysts are surprised by this. I stated as early as 2002 that China would be drastically upping its gold reserves … that it would not tell anyone it was doing so for quite some time … and that eventually, China would come to own probably the largest gold reserves in the world.

China is stocking up on gold and could end up with the largest gold reserves in the world.

And in the same October 9 issue of Money and Markets that I referenced above, I stated that “the authorities in Beijing are no dummies. They also know the U.S. dollar is in a long-term downtrend. So, they have only one choice: Bolster the country’s gold reserves while they’re investing in U.S. Treasuries.”

Seems like that’s exactly what they’ve been doing — for years. And likely will continue to do.

While I suggest you stay out of U.S. Treasury notes and bonds, my position on gold remains the same: It’s one of the best investments you will ever make.

Best wishes for your health and wealth,

Larry

 

A lack of trust in published accounts for Chinese firms in Singapore has sent valuations of their stocks, known colloquially as S-chips, plunging to low-single-digit price-earnings multiples even for relatively sound companies that pay regular dividends. While analysts expect further accounting problems to emerge among S-chips, experienced investors are sifting the rubble for bargains. 

“We have found excellent opportunities among the S-chips which gives us an opportunity to get exposure to the China market at relatively low valuations,” said Mark Mobius, lead portfolio manager for Templeton's Emerging Markets Group.

 

“Our private equity funds have a few investments in the S-chips,” he added. 

 

Mobius declined to name the S-chips in his portfolio, but other fund managers and analysts cited Yanlord Land (YNLG.SI) and China Fishery Group (CNFG.SI) as being among the best among the 150-odd Singapore-listed Chinese firms. 

 

Other recommendations include China Milk (CHNM.SI) and sporting goods maker China Hongxing (CHXS.SI), which are both trading at low-single-digit price-earnings ratios despite having little debt and a large amount of cash on their balance sheets.