Since bottoming at the end of October, the MSCI Emerging Market Index (MXEA) and MSCI Asia Ex-Japan ...
Go Where the Growth Is
11/08/2011 10:18 am EST
Asia is the only part of the world that looks economically healthy right now, says David Wyss in this exclusive interview with MoneyShow.com...although even there, some countries and sectors look far more attractive than others.
Investors may be wondering where to put their dollars these days to invest. It seems there’s bad news all over the globe, but our guest today is David Wyss. He’s here to talk to us about where there are opportunities. So Dr. Wyss, talk about specifically Asia. because I know you find that an interesting opportunity.
Yeah, it’s interesting. I’ve gone back to teaching, and one of the courses I’m teaching is on globalization and the rise of Asia. And you look at the Asian economies right now...that’s the only part of the world that really looks healthy. They’re seeing strong growth.
China’s having a bit of a slowdown. They’ve slowed down all the way to 9.1% growth. That doesn’t sound so bad if you’re sitting here in the United States or Europe.
The returns are going to continue to be strongest in these strong developing regions—East Asia, South Asia increasingly, with India doing better. From the investor’s standpoint, however, there are still things to worry about.
I think in the long run, returns are going to be better there than just about anywhere else in the world. But we’re going to have to go through an awful lot of volatility along the way.
All right. What specifically do you suggest investing in, whether it be currency or commodities, what do you suggest?
Currency is not a good place to invest in these countries. You can’t even do it for China effectively, because they control currency exchange rates. You really need to get in with substantially broad market baskets of the companies.
China’s a particular issue because the rules in China are fairly limited, i.e. there’s not a heck of a lot of protection for investors, particularly foreign investors. So in general, you want to invest in corporations that are headquartered, at least legally, in Hong Kong, because that puts you under the protection of the Hong Kong investor rules.
And fortunately, most of the large Chinese companies, for that reason, have incorporated in Hong Kong. A lot of domestic Chinese companies, Lenovo (LNVGF) being a good example, are legally incorporated in Hong Kong, even though effectively they’re a Chinese corporation.
I think these companies will pay off in the long run. But as I said, it’s going to be a lot of bouncing along the way because other people realize this. There’s a bit of a bubble there in some of these asset prices.
Now, I’ve heard that Japan has debt problems that are even greater than the United States in terms of percentage of GDP.
Yeah, for this purpose, Japan is not part of Asia. Japan is a developed country. It’s going through 20 years of extremely slow growth. I don’t see that breaking in the near future.
Interest rates are extremely low. The stock market in Japan is trading at about 20% of the level that it was at in the late 1980s. So this does not look to me like a great place to put money right now, especially given the new development problems, the rebuilding problems after the tsunami, the energy problems with the nuclear problems in Japan. Japan’s got a long way to get out of this.
All right then. I would imagine that Asia would benefit from a US recovery in the economy, with more orders, more manufacturing going to China. Will they benefit from that?
China exports a heck of a lot to us, as you may notice. The next time you buy something, look at the label as to where it’s made; a high probability it says "Made in China" somewhere on it. And if it wasn’t made in China, at least one of the components was probably made in China.
So recovery in the US would be great for the Chinese economy. The Chinese economy’s doing pretty well despite that, though. They’re still looking, as I said, at 9.1% growth. That’s actually about their 35-year average, and I think they can hold in that 7% to 10% range for an extended period, even with a relatively sluggish US.
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