By heading over to China and having some conversations with regular people, one can learn a lot that could help when it comes time to start looking at exchange traded funds (ETFs).
Tony Sagami for Money and Markets did just that and found three trends during his recent trip. He observed these things firsthand and had chatted with everyday people, not CEOs and other corporate hot shots.
- The price of oil has skyrocketed. But not the oil you think. Oil prices have taken center stage in most countries, but Chinese prefer to ride bikes, so soaring crude oil and high gas prices are not a threat. Cooking oil, however, is expensive and the price has gone off the charts. Food prices have risen 22% in China over the past year. To capitalize, Sagami suggests considering funds with exposure to anything agricultural.
- For a clue, look down under, mate. Sagami says lots of Aussies are visiting and doing business in China. Because Australia possesses lots of natural resources, China’s demand for these has enriched the Aussie economy. Consider investing in Australian companies that are booming thanks to the Chinese: BHP Biliton (BHP), Alumina (AWC), Rio Tinto (RHP). Exposure to these companies can also be found in the iShares MSCI Australia Index (EWA).
- Check out the restaurant business. Most Chinese do not live in homes with large kitchens, let alone any room to cook. China has four million full-service restaurants, seven times as many as the United States. Over the past 15 years, restaurant sales have increased 10%. Brands and companies that have expanded into China are Yum (YUM) and Little Sheep, and have remained aggressive in sales. YUM is a top holding in the PowerShares Dynamic Food & Beverage (PBJ) fund.
ETFs that can round out a portfolio’s exposure to China:
- iShares FTSE/Xinhua China 25 Index (FXI), down 18.7% year-to-date
- PowerShares Golden Dragon Halter USX China (PGJ), down 22.9% year-to-date
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.