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If you’re a U.S. stock market investor, you’re probably a much happier camper today than you were a few months ago. Since the beginning of March, the S&P 500 has rallied nearly 40 percent.
If you think U.S. stocks have more room to run, you should look at Asia’s markets. In the past three months, the Nikkei 225 has climbed 32 percent, the Shanghai Composite has jumped 31 percent, the Hang Seng Index has leaped 47 percent and the Bombay Stock Exchange’s Sensex 30 Index has rocketed nearly 70 percent.
And I see even more upside potential in Asian stocks because the economic and equity story there is a heck of a lot better and about to go through the roof.
China’s Economic Numbers
Continue to Improve
First of all, the Chinese economy is strong and growing. Chinese GDP grew by 6.1 percent in the first quarter, the fastest rate of any major country in the world.
The rest of the year should be even better because the economic numbers coming out of China keep getting better and better.
- Retail sales rose 15.2 percent in May from a year earlier, up from April’s 14.8 percent.
- Industrial output rose 8.9 percent in May on the heels of a 7.3 percent gain in April.
- May bank lending surged 30.6 percent from the same time last year, up from April’s 29.7 percent.
- Investment in factories, real estate and other fixed assets soared 32.9 percent in the first five months of 2009.
- China imported 422,000 tons of copper in April, a record high and 5.7 percent more than April.
I wouldn’t call the next item an economic data point, but it sure tells me that the Chinese consumer is alive, well and spending — China is poised to become the second-largest buyer of Lamborghini in the world behind Italy within three to five years.
That economic strength has transferred into some huge Chinese stock market gains, but as strong as the Asian markets have been … IT IS ABOUT TO GET A WHOLE LOT BETTER!
China’s IPO Spigot
is About to Open
I say that because the Chinese government is going to open up the spigot of new IPOs, and I expect them to take off like the red-hot tech IPOs of the late 1990s.
The Chinese government suspended the issuance of new IPOs in September 2008. But the China Securities Regulatory Commission recently removed that restriction, and you should look for a new stream of red-hot IPOs to come out soon.
In fact, 32 companies — such as China Construction Engineering, Everbright Securities, Sichuan Expressway Company, Ningbo Fuda Company, and Zhejiang China Light & Textile Industrial City Group — are lined up to go public over the next few months.
In particular, I expect state-owned China Construction Engineering to be a huge winner.
The company has built many showcase projects, including the National Aquatics Center (the Water Cube venue of the Olympic swimming competition), China Central Television’s futuristic new headquarters in Beijing, and the 1,614-foot Shanghai World Financial Center, China’s tallest skyscraper.
While nothing is guaranteed, I expect some of those IPOs to rocket through the roof.
More IPOs in India and Singapore
What’s even better is China isn’t the only Asian country going to issue a bunch of IPOs.
India, for example, is readying to sell a stake in state-owned NHPC Ltd., an extremely profitable oil-exploration company, and Oil India Ltd.
Rahul Khullar, the top bureaucrat in the department in charge of state company disinvestment said the government is likely to sell stakes in six to seven other Indian companies before by the end of this year.
Singapore too. “The market can expect at least one IPO of significant size in excess of $1 billion,” said Keith Magnus, Merrill Lynch’s managing director for investment banking in Singapore and Malaysia.
One of the reasons I expect the Asian IPOs to do so well is that investors are lined up to get a piece of what looks like can’t-miss profits.
Samchem Holdings, a Malaysian industrial chemicals distributor that sells more than 400 different chemicals to more than 2,000 customers that make everything from beds to detergent, went public last week, and the demand is through the roof.
Samchem Holdings, the first IPO in Malaysia in 2009, was oversubscribed by 11.2 times.
In my four years of covering Asian markets, I continue to run into readers every week who don’t own a single Asian stock.
If you’re one of those reluctant investors, I hope the prospects of hitting it big in the Asian IPO market gets you off the dime and into Asia.
I believe you’ll be VERY happy with the results.
Regards,
Tony
About Uncommon Wisdom
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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, 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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