We know that the U.S. stock markets won’t come back any time sooner. So where can we put our money to work?
I think China is a candidate that we can put safe money into. China’s growth rate will drop to around 8-9% in 2009, but it is still much higher than the US, which is going towards a recession. So you do not have to be a mathematician to figure out where the big money flows to in the coming few years.
Furthermore, it is seldom known to us that the Chinese banking system is much safer now – with less than 0.1% of the asset exposure to the subprime mess. Chinese banking system is dominated by four big state-owned banks, which can hardly get bankrupted. With more than $1.4 trillion in cash sitting in the banks, there’s no liquidity crisis in China.
Therefore we are sure that the smart money is flooding into China at light speed, with investors cherry-picking world-class Chinese companies for pennies on the dollar.
Based on the above reasoning, I suggest we buy into some Chinese index funds, such as ETFs for a long time gain. To name a few, FXI and PGJ.