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They say the only thing constant in this world is change. That’s certainly true in Asia where some big changes are brewing.
1.4 billion — the population of China — is a lot of people. And for the last 30 years, Chinese couples have been limited to just one child.
The problem is, like the U.S., China is worried about the size of its aging population relative to its working class. So it’s taking steps to increase its working-age population …
Shanghai city officials are now aggressively encouraging its married residents to go forth and multiply. City officials are making personal visits to homes, distributing leaflets, offering emotional counseling and even financial incentives to have a second child.
You know me. Whenever I see an important, fundamental change … I look for the investment opportunity.
And the way I see it, all of those new Chinese babies will mean more diaper sales, which is great for Proctor & Gamble who does big business in China. However, the bigger opportunity will come from the tidal wave of Chinese consumers down the road.
The best way to explain that opportunity is to show you five long-term investment strategies that others, including the Chinese, are using to prepare for the forthcoming demand …
Long-Term Investment Strategy #1:
You may not have heard of the British beverage giant Diageo. But you’ve certainly heard of some of its best selling brands: Guinness, Smirnoff, Crown Royal, Cuervo, Tanqueray, and Bailey’s Irish Cream. Just last week, China’s sovereign investment fund bought a $365 million stake in Diageo.
Asians are very label conscious, and that applies to their adult beverages. And nobody understands that better than the people running China’s sovereign investment fund.
Long-Term Investment Strategy #2:
One thing that surprised me during my last trip to China was the huge number of black Audi sedans. They were everywhere! The German carmaker recently reported that its sales to China increased by 11 percent in the first six months of 2009 to 67,000 cars. What’s more, June’s sales of 13,265 cars, set a new record and was a 28 percent increase over the same period last year.
China is one of the few countries in the world where auto sales are growing — not shrinking — and Audi is pouring its resources and money into tapping that market.
Long-Term Investment Strategy #3:
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| China’s sovereign wealth fund just put up $1.5 billion for a 17.2 percent stake in Teck Resources, a diversified Canadian-based mining company. |
Quietly, slowly and steadily China is buying access to strategic natural resources, which it needs to fuel its growth. China Investment Corporation, the Chinese government’s sovereign wealth fund, purchased a 17.2 percent stake in Canada-based Teck Resources for $1.5 billion. Teck owns copper, gold, zinc, and coal mines in North and South America.
The Chinese used 13 percent (about 1.8 million tons) of the global supply of cooper in 2000. That number shot up to 28.5 percent (nearly 5 million tons) in 2008.
By the way, China also gobbles up more aluminum, zinc, lead and nickel than any country in the world! So you can bet that the Teck purchase is far from the last natural resource investment you’ll see China make.
Long-Term Investment Strategy #4:
To fund all those natural resource purchases, China is building up its foreign exchange reserves.
In fact, China’s mountain of cash topped $2 TRILLION for the first time ever. That’s even after spending $586 billion on its stimulus plan!
Long-Term Investment Strategy #5:
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| As China’s population explodes in the coming years, you can expect consumer spending to explode as well. |
The giant Swiss cement-maker Holcim AG is buying the Australian operations of Cemex for $1.64 billion. Holcim is also investing $234 million in Huaxin Cement, the fourth largest cement company in China. Even the Australian purchase is based upon the anticipation of doing some big, BIG business in China.
I mention the Holcim investments because you should consider doing exactly what they’re doing — investing in the companies that sell what China wants.
Whether it’s natural resources (BHP Billiton, Vale S.A.) agriculture (Potash, Bunge), fashion (Tiffany’s, Nike), restaurants (Yum Brands, Starbucks), construction (ABB Ltd, Shaw Group), or pollution control (Fuel Tech) …
… get ‘long’ whatever the Chinese are buying. Because the Chinese are going to buy a lot, lot more for a long, long time.
Best regards,
Tony
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Uncommon Wisdom (UWD) is published by Weiss Research, Inc. and written by Sean Brodrick, Larry Edelson, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in UWD, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in UWD 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 Kristen Adams, Andrea Baumwald, John Burke, Amy Carlino, Selene Ceballo, Amber Dakar, Dinesh Kalera, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.
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{ 1 comment… read it below or add one }
where do i invest in gold, and in china and how much
deirdre leach