If we see higher risk assets further over-valued, do not chase the move, but rather sell into price ...
Stick with China
12/09/2005 12:00 am EST
Donald Straszheim, former chief economist with Merrill Lynch and Straszheim Global Advisors, is a leading expert on investing China. Here, in an interview with Paul Kangas, he offers his latest update on the region as well as his top investment ideas.
Paul Kangas: As an acknowledged expert on China and one who has defied the consensus and correctly predicted over a year ago that China's growth will not be slowing down to any extent, do you see any change in that now?
Straszheim: No. China's economy is still growing about 9% a year. That is a sustainable pace for I think a long time to come in China, the fastest in the world. And it provides great investment opportunities for everybody, much more of an opportunity for America than the threat.
Kangas: All right. Now you were Merrill Lynch's chief economist for a dozen years. So using that expertise, tell us what is happening to the U.S. economy and where is our stock market headed?
Straszheim: Well, we've still got solid growth. We've had 10 or 12 quarters in a row now of growth over 3%. I don't see that ending in the next few quarters. We've got some problems. The inflation rate is up a little bit. That is an issue for the Fed in particular. Interest rates are up. They are going to come up a little bit more. But earnings are very solid and I think we`ll continue to have good growth on into 2006.
Kangas: What about the market, stock market?
Strasheim: Well, I think the stock market, quite frankly, is going to be very choppy, really kind of headed nowhere, just like we've seen the last few months. Some big up days and some big down days, a lot of volatility.
Kangas: On your last visit with us in late April, you recommended the iShares Hong Kong (EWH ASE), which are up 3.7%.
Straszheim: Yes, I liked them then and still do right now. The iShares Hong Kong are the best way, really, for people in America, and a lot of other places to play China.
Kangas: You also picked Yum Brands (YUM NYSE), which is up 6.7%. Still like it?
Straszheim: I still like it. The firm is doing a great job in China, and is easily the best fast food operator there and a great job here as well.
Kangas: Any new recommendations?
Straszheim: I would simply reiterate the iShares Hong Kong. It's a cheap way to play a market. It`s very much suited to the individual investor and Hong Kong is a big beneficiary of China.
Kangas: Let's have another choice.
Straszheim: Sinopec (SHI NASDAQ) is a refiner and processor and marketer of oil and gasoline and gas products in China. It`s kind of like an ExxonMobil. They are going to be a big beneficiary of the ongoing growth and the reforms in China allowing prices to rise.
Kangas: We have time for one more
Straszheim: Ctrip.com (CTRP NASDAQ) is an online and kind of normal travel company, dominates the market and travel is going to be a big deal in China for a long time to come.
Kangas: Thanks very much for your observations, Don. Good to see you
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