Friday, November 27, 2009

Investing in the next big thing: China

By Quang Nguyen

With the struggling US economy, it is difficult to estimate when this crisis is really over. The smart move is to invest in China, the new world class economy that is growing strong. With an annual growth of 5% to 8%, China is a great portfolio for your investment. The government of China is supporting individual investors, so you can purchase any share that is listed on the Hong Kong or US exchanges. Moreover, there are mutual funds that will help you to invest in companies within the mainland China. However, expert in the field strongly recommended you not to invest directly in China. Instead, you can invest through the Hong Kong exchanges. Chinese companies are listed as "H" shares, and "Red chips" are Hong Kong based companies that get their profits from China.

Recently, three investment firms, representing many individual investors, joined Sina Corp.'s management team after investing $180 million in the company. Sina is China's largest internet portal company. Sina could be compared as Google or Yahoo in China. Imagine spending just $180 million to control the most popular company in China, that $180 million could not even get you Facebook in the US. Since the average earning per person is much lower in China, the price to invest in good companies there is fairly cheap.

Investors also need to avoid risks. Many Chinese companies do not have good accounting transparency and corporate governance standards that you are used to see in US companies. Therefore it is much riskier to invest in China. However, high risk is compensated with high return. A country with more business traveling, more tourists, and more international brands is in high demand. The price of staying in cities such as Shanghai is getting close to New York. You need to hurry up to invest in this new market before it is too late.


1 comment:

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