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Emerging markets
, , , ,Himanshu Neha Kinshoo Anish Sethu
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Contents
Definition Why invest in Asian Markets
Why China
Revaluation risk
Conclusion
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efinitionEmerging markets are countries that arerestructuring their economies along market-
oriented lines and offer a wealth ofopportunities in trade, technology transfers,and foreign direct investment.
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INVESTING IN ASIAN MARKETS
Strong & sustainable sources of
yield Synonymous with growth- growth in
the region is now forecast at anannualised rate of 7 per cent over
the next five years High dividends due to
better capital management
improved corporate governance
Investment strategy- focus on
dividends of companies/stocks.
: :// . . / / +Source http www asiaone com Business My Money
/ + + + / + +Building Your Nest Egg Investments And Savi
/ / - .ngs Story A1Story20091125 182237 html
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China remains favorite.
China's economy is growing at anannualized rate of 9-10 percent while theUS economy is at 3-5 percent "normally".
The Chinese stock market, as often
measured by Shanghai stock exchangecomposite index, has been the best
performing stock index in the world so farthis year
Better Corporate Governance. Eg. ChinaSecurities Regulatory Commission
(CSRC)
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Political condition
except for 1989 never faced any seriouspolitical competition.
A recent regulatory change which allowed
large chunks of savings to be invested inthe stock market .
Tax- incentives to attract ForeignInvestment.
Opening up of Govt Sector. Eg. China LifeInsurance Company, parts of thesecompanies are spun out to publicshareholders to raise funds for expansion
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Geographical Reasons..
the existence of natural resources,
access to the seaports and inlandwaterways.
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Economic conditions- China
The Chinese economy continues to grow --it expanded by 7.9% in the second quarter
Bank lending is at high levels
Interest rates are low
Buying out of the money call options-most likely to benefit
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Attractive Economic factors..
China ranks above other emerging markets inthe World Banks Ease of DoingBusiness annual ranking.
Top 5 global destinations of FDI Chinas economy will continue to be over-reliant
on exports. Chinese Gross Domestic Savings continue to be
high.
Chinas share of inward capital declines &outward capital increased. Leading destination for portfolio equity
investment.
Source: National Bureau of Statistics of China, World Bank, Global
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Investment Risks
Volatility is one big risk in the Chinese stockmarket
e.g..9% stock market sell-off in China on Feb.
27, 2007. China still limits foreigners' purchases of the
Yuan-denominated stocks that make up thebiggest share of the markets.
Revaluation Risk of China Currency. China is still a communist country, the rules
and regulations for public company tradingand reporting are extremely different
REVALUATION RISK
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REVALUATION RISK
The official currency of the People's Republic of China (PRC) isRenminbi
During the previous decade, Mainland China's Currency was peggedto the U.S. dollar at 8.28 RMB.
On July 21, 2005, it was revalued to 8.11 per U.S. dollar, following
the removal of the peg to the U.S. dollar.
The PRC government has resisted pressure to increase the value ofthe RMB
Appreciation of the yuan would cause the PRC government to buy
fewer United Statestreasury bonds
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Conclusion
In recent years, China has boasted arapidly growing economy. The odds thatChinese companies will continue to do
well seem good, but there are a numberof pitfalls for the individual investor.Before investing in a Chinese company,
be sure to find out how it operates andwhether it is likely to act in the bestinterest of its shareholders.
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