As the slowdown in the West intensifies, emerging markets continue to perform...
Three of the top 10 global IPOs were Chinese, and Chinese and Indian companies between them raised a whopping $12.6 billion over the first quarter.
And today, China announced that its white-hot economy beat analysts’ predictions, growing 10.6% in the same period.
Let me put that in perspective for you...
China’s been growing so rapidly that it may overtake Germany as the world's third biggest economy this year.
Since the country kicked-off its free-markets reform programme in 1978, the economy has grown in size by a mind-boggling 68 times.
What’s all the more staggering is it achieved that growth DESPITE seeing the first fall in its trade surplus since 2004.
In other words, even while China’s export growth is slowing as a result of the economic slowdown in the West, its economy is continuing to hold up remarkably well as domestic and regional demand picks up - and the country’s appetite for imports is helping the emerging markets to withstand the U.S. slump.
But I think it’ll do much better than simply ‘withstand’ the slump.
And it’ll drive money into other emerging economies at a rate of knots...
Vietnam and Africa: Two likely winners of China’s $1.5bn windfall
China now holds $1.68 trillion in foreign reserves and it is looking for profitable opportunities to pump the cash.
According to China consultants, Z-Ben Advisors, part of that plan could see China’s three sovereign wealth funds outsourcing a combined $320 billion to foreign asset managers.
These investments could be huge - Z-Ben expects the size of the individual investments to range between $750 million and $1.5 billion.
And where do you think the bulk of that money is going to end up?
Emerging Asia.
My favourite Asian market, Vietnam, is right on China’s doorstep. I believe they’re likely to be one of the big winners from China’s investment drive.
And, of course, the Chinese are investing massively in Africa as well. They’ve just offered $50 billion in development finance to Nigeria. Frankly, you’ll bump into them everywhere on the continent today.
China isn’t just a source of investment capital for the emerging markets - the country remains one of the greatest investment stories of all time and there is a lot of money waiting to get in.
Now, the Dubai government controlled investment house, Dubai International Capital, is teaming-up with Hong Kong’s First Eastern Investment to launch a $1 billion private equity fund that will connect Middle Eastern cash with China deals.
That’s another leg in the Gulf’s attempts to shift its investment focus away from the slowing Western economies and towards the faster-growing emerging markets.
‘The mother of all investment booms’
My point is that despite the economic gloom and doom that we keep reading about in the press, the growth story across huge swathes of the world remains intact.
The idea of a "credit crunch" in places like the Gulf or China or Russia right now is laughable.
The problem in these places isn’t a lack of cash - it’s that they have far too much of it.
And as they begin investing that cash in the emerging markets, I expect that we will see the mother of all booms.
Regards,
Manraaj Singh Editor Profit Hunter
P.S. The great shift in the economic balance of power from the West to the emerging economies underlies our investment strategy here at Profit Hunter. And as the current financial crisis deepens, it will only accelerate the gains to be made in the East. Click here to learn more.
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