Made in China, Spent in Hong Kong 

10/15/2009 2:44 pm EST

Focus: GLOBAL

Igor Greenwald

Chief Investment Strategist, MLP Profits

One hundred and thirty Chinese billionaires surfaced this week in a Beijing survey (brought to you by the developers of a luxury south China resort aiming for three golf courses, six hotels, and two yacht clubs.)

In a year or two, unfathomably rich Chinese will outnumber their peers among Americans. And while a headcount of the recently and crassly flush is a dubious point of national pride, it does show where great fortunes are made most readily these days.

Six years ago, there were no Chinese billionaires. Three years ago, there were 15. And now the man responsible for the survey guesses the actual number might be double the known 130. Anonymity has its charms: Last year's reputed richest man in China is under arrest on market-manipulation charges, while the runner-up lost control of his steel mills in a hostile takeover by a state-owned rival.

But this has hardly made mainland tycoons circumspectthe day the Dow Jones Industrial Average clambered back above 10,000 again, one of them spent a world-record $57 million on an apartment overlooking Hong Kong harbor. The territory's chief promised to free land for development so as to allay "concern about ...  the possibility of a property bubble."

In a closely related development, China reported rapid growth in money supply, bank loans, commodity imports, and hard-currency reserves. The Shanghai Composite is up a festive 7% since trading reopened Friday after a weeklong holiday. Hong Kong stocks have appreciated 9% since October 5th.

Russian equities are up 16% over the same span, warming to costlier oil and metals. Eastern Europe and Latin America are also on a roll. The returns from those places have looked better still when translated into depreciating dollars.

Europe applauded upbeat earnings reports from electronics maker Philips (NYSE: PHG) and chemicals giant BASF (Xetra: BAS). Industrial output and business confidence continued to rebound. Job losses slowed in the UK.

Further recovery would benefit the quartet of London value stocks that have trailed the recent gains, writes Peter Shearlock. As is, entertainment retailer HMV (LSE: HMV) was recently yielding more than 7%, while telecom Cable & Wireless (LSE: CW) had run its annual dividend to nearly 6%.

And as long as the dollar continues to decline, as Eoin Treacy expects, emerging markets should continue to attract fresh money. That's true not only for stocks but for government and corporate bonds as well. Their issuers' finances are in better shape than those of many developed countries, notes emerging-market bond fund manager Michael Conelius in this week's Q&A.

While the US market was running in circles over the last decade, Conelius achieved average annual returns of 13% on debt issued by the likes of Serbia and Iraq. He says such credit risks are no longer glaringly cheap. But those countries' finances—and politicshave also come a long way in a short time. And they're not done chasing normalcy.
 

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