 |
Did you see Visa’s smoking-hot IPO last week? The stock surged from its $44 IPO price to more than $60 at the close of last week’s trading.
However, you had to be a whale-sized institutional investor with good connections to get any Visa shares. As you can guess, fund giants like Fidelity and T. Rowe Price got a bunch of shares.
But so did Chinese insurer China Life, a company I’ve told you about in past issues of Money and Markets. It got its hands on $300 million worth of Visa stock!
On paper, China Life made a cool and very fast 100 million bucks on their investment! Not bad, eh?
What’s more …
That’s Just the Latest Great
Piece of News from China Life
It was only a few weeks ago that China Life, the largest life insurance company in China, reported spectacular results for 2007. The company’s profit soared 95% to $5.5 billion!
The reason for the skyrocketing profits is simple: China Life has it made in China. The Chinese government controls the entrance of new insurance companies and strictly regulates competition.
 |
| China Life made a big paper profit from Visa’s IPO! |
Remember, China is still a Communist command economy and they can do whatever they want. Heck, the government still owns 72% of China Life’s outstanding shares!
The Chinese life insurance industry is dominated by three companies: China Life, Ping An, and China Pacific.
China Life is the biggest by far. With 640,000 agents, it has more than Ping An and China Pacific Life, which have a combined 450,000 agents. China Life has a 43% share of the life insurance market.
That makes the company every bit the powerhouse as any American insurance giant, and a company that I pay careful attention to.
So I was especially interested when China Life’s Chief Investment Officer, Liu Lefei, said the company is going to cut its allocation to global equities this year, noting:
“We will probably take some measures to reduce the percentage of stocks and stock-related assets in our portfolio because … global stock markets will see big swings in 2008.”
| Internal Sponsorship |
|
Three opportunities to turn this long-term Opportunity #1: When the U.S. dollar dives, these little-known investments automatically soar. Opportunity #2: With the Fed beating the dollar like a red-headed stepchild … oil, gold and other natural resources are making investors rich! Opportunity #3: More than double your money every year with global ETFs. |
Let me translate “big swings” for you — that’s the polite Asian talk for a bear market. I think Mr. Liu is absolutely right with one big clarification …
The Bear Market Will Continue
For U.S. Stocks, Not Those in Asia
Since peaking in October of last year, the Shanghai Composite index has lost a little over 40% of its value. By my figuring, the Dow Jones Industrial Average would have to fall all the way to 8,500 before it could claim a similar percentage-sized decline.
Now, I’m not ready to say that the sky is falling, but the U.S. market has a lot farther to fall, in my opinion. Think about all the headwinds our economy is facing: tumbling real estate prices, $100-a-barrel oil, massive budget and trade deficits, a severe credit crunch, and a stumbling economy that is bordering on — if not already in a — recession.
Meanwhile, after its 40% decline, I have to believe that most of the downside risk has already been wrung out of the Chinese stock market.
 |
| Wen Jiabao says China will make efforts to promote the country’s stock market and protect small investors. |
Not only has most of the risk already been priced into the market, but the Chinese government is going to put its considerable muscle behind a stock market rally, too.
Chinese Premier Wen Jiabao said the Chinese government will make efforts to promote its stock market by protecting the interests of small investors by maintaining a stable market without sharp fluctuations.
That’s easy for them to do, because not only do they make all the rules, but they are sitting on a $1.4 trillion war chest of cash.
And as Wen pointed out, “the fundamentals of China’s economy are good.”
This Is the Time to Evaluate How Much
To Invest in the U.S., and How Much to Invest in Asia!
I don’t know about you, but I believe there is a lot more risk in a market that has yet to substantially correct than a market that has already gotten clobbered.
If that’s right, it means that the less risky place to park your equity dollars would be across the Pacific Ocean in China and its neighbors.
And in my book, if you don’t have at least 10% of your equity portfolio allocated to Asia, you are missing out on the best risk-reward trade-off on the planet.
Unfortunately, I seldom run into any individual investor with more than a thimble-sized exposure to Asia. The most common excuse I hear? “It’s too difficult to invest in Asia.”
Nothing could be further from the truth!
There are almost 100 Chinese stocks traded on the U.S. exchanges, which means that you can buy shares in companies like China Life just as easily as Allstate.
If you’re more of a mutual fund-type of investor, there are several China-focused funds such as the U.S. Global China Region Opportunity (USCOX).
And if you like exchange traded funds, you can use them, too. Check out the iShares FTSE/Xinhau China 25 (FXI).
Not only is investing in China easy, I believe it will be the most productive part of the world to invest your money over the next decade.
Best wishes,
Tony
About Money and Markets
For more information and archived issues, visit http://legacy.weissinc.com
Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Sean Brodrick, Larry Edelson, Michael Larson, Nilus Mattive, Tony Sagami, and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include John Burke, Amber Dakar, Adam Shafer, Andrea Baumwald, Kristen Adams, Maryellen Murphy, Red Morgan, Jennifer Newman-Amos, Julie Trudeau, and Dinesh Kalera.
Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph:
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://legacy.weissinc.com.
From time to time, Money and Markets may have information from select third-party advertisers known as “external sponsorships.” We cannot guarantee the accuracy of these ads. In addition, these ads do not necessarily express the viewpoints of Money and Markets or its editors. For more information, see our terms and conditions.
|
© 2008 by Weiss Research, Inc. All rights reserved. |
15430 Endeavour Drive, Jupiter, FL 33478 |
