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To Invest


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To Invest

  1. 1. China’s economy is jumping, but investing in individual stocks remains risky. Here are nine funds and three ETFs that can give you a piece of the action.This is clear: Business in China is booming.This gets complicated: Translating that growth into investment gains.But that’s not to say it can’t be done. And with China giving every indication of becoming the world’s next economic giant, it’s time to consider whether and how to expose your investment China portfolio to that country’s high-revving growth engine.The statistics are startling. China’s gross domestic product is growing around 10% annually, compared to 3% or so in the United States. The consumer’s wide-open wallet is driving the U.S. economy, but consumer-spending growth in China clocked in at 13% last year, compared to 8% in the United States military connector. China’s middle class, now estimated at 150 million to 200 million people, is expected to double in size in the next five years.Investors who have taken the plunge in China in recent years have been well rewarded. The average mutual fund that invests in China and the nearby Asian Tiger nations has gained 17.5% over the past three years, far better than the S&P 500’s ($INX) 5.4%.But this isn’t the first time China has seen rapid growth. The country experienced a major investment boom in the early 1990s. But China added too much nail products manufacturing capacity, too fast, and the bubble burst in 1994-1995, sending the economy into a tailspin. The Hong Kong-based Hang Seng index lost 31% in 1994 alone.Is it too late to catch this phase of China’s growth? Some analysts say it’s different this time around, and thus this boom won’t go bust. “There’s much more to the Chinese economy than in the 1990s,” says Edmund Harriss, manager of the Guinness Atkinson China & Hong Kong Fund (ICHKX). Back then, the economy “was under the government’s thumb, and the emphasis was strictly on growth.” This time, “it’s about profits, too.” In the 1990s, the government owned almost everything, while “much of the growth this time is coming from foreign investment and Chinese public corporations as well as privately-owned bag filter companies,” Harriss says.China’s growth story is enticing, but profiting from that growth isn’t as simple as buying China’s version of Google (GOOG, news, msgs) or General Electric (GE, news, msgs). Just like in the United States, fast-growing, high-profit sectors draw competition like flies. So, just like in the United States, yesterday’s highflier could be tomorrow’s busted stock. But unlike United States stocks, information on Chinese stocks is hard to come by. Most have no analyst coverage, and, depending on where they’re listed, the financial reports might be of dubious quality.Bottom line: Unless you live there or have a staff of analysts that does, making consistent money buying individual Chinese stocks is a tough game.Mutual funds
  2. 2. and exchange-traded funds are the only practical way you can get unfiltered access to China’s boom including seo firm . Since China is a hot item with U.S. investors, investment managers are rolling out new funds and ETFs to capitalize on the trend. So far, though, I know of only nine mutual funds and three ETFs that focus on the country. Here’s a list of those options (one ETF is too new to include — more on that below) plus the additional information I consider most relevant for pinpointing the best prospects. China’s fast growth, political structure and uneven disclosure make investing there a risky business. All sorts of things, from currency revaluations to economic overheating, could go wrong. Thus, successful investing in China requires a long-term view. Commit only two-year money to China. That will give you time to ride out the inevitable downdrafts. Also, don’t put too much money at risk. Most investment advisors recommend putting no more than 5% to 10% of your investment dollars in this sort of an emerging market.