Article by Dr. Peter Schroder
If you are betting on the right horses in Asia right now you can bring home huge profits compared to the poor performance of the U.S. stock market that provides nightmarish news on a daily basis. Let’s look at the reason behind the disaster: It is rather simple, the United States is simply too well off and too rich and many of its citizens (this is not only limited to the U.S. but the entire Western world) don’t do any more what it takes to be successful. In Asia this is exactly the opposite, people want to get out of poverty and enjoy becoming "capitalists". If you walk down the streets of Bangkok you see thousands of young entrepreneurs on the streets selling clothing, food, water, jewelry, electronics, computers, you name it. They work 10, 12, or 14 hours a day, sometimes 6 or 7 days a week. They are trying to get out of poverty and into the middle class and some of them will emerge as large business leaders, not only by Thailand standards. Take a trip to Singapore, Shanghai and see the magnificent buildings and buzzing cities. Singapore today is the second busiest port in the world and the Orchid Boulevard shopping district might win a competition against Fifth Avenue. The same applies for Shanghai, that is in a permanent battle with Hong Kong and tries to become the major happen to China. Ten years ago there was not one single building with more than 8 floors in the city. Today there are over 2,500. Hong Kong on the other end is transforming from a service industry to a technology and information industry/society. There is no stopping. They want to get ahead and they are doing it.
Twenty years ago when one thought of the export markets of Taiwan, one would think about plastic flowers and clothing. Today Taiwan produces more laptop computers than the United States, Great Britain and Germany together. They are the number 1 in high tech in Asia. Go to Seoul in Korea, Jakarta in Indonesia or the capital of Malaysia, Kuala Lumpur. People work six days a week, sometimes six and a half days. When you visit these exciting capitals every six months you will find the difference and see the improvements. Take a stroll through New York City, Berlin, London or Paris on a Sunday afternoon. The cities are asleep and nothing is going on. Do the same in Asia main cities and you will see construction going on, business and commerce are happening right then and there!
Asia today is like the America of Henry Ford a century ago. Henry Ford started his motor corporation in 1903 with only $28,000. Today it’s worth over 26 billion dollars and every 100 dollar originally invested is worth over 90 million dollars today. That’s the type of profit you can make when you get in at the time when a new industry is born, or a new economic super power starts to "take its first step in the global economy". China has just joined the World Trade Organization (WTO).
Let’s stay with our example Ford and the Chinese car market. Right now there are possibly 20 million Chinese families that want to buy a car and are ready to do the necessary financing arrangements but are simply not able to buy because there are not enough cars around. Take those 20 million cars and we are talking about a car market three times the size of that of the United States. By the end of this decade and after the Olympics being held in Beijing in 2008, it is expected that approximately 300 million Chinese families want to buy a new car. Investing in home grown Chinese companies we are having a tremendous competitive touch as they have in the market. They are paying the workers 75 cents an hour and there are no import cars as imported cars still pay between 75% and 100% duty. Besides these vehicles can be serviced everywhere where it is rather difficult to get foreign vehicles serviced outside of the main cities. In a large underdeveloped country like China that is a huge advantage. Imagine you had a choice of buying two cars: one you can get serviced anywhere, the other one you had to drive (or tow) one hundred miles to get fixed. Which one do you choose? Most cars are similar to Toyotas and other Japanese vehicles and are comfortable. The shares of these companies are still trading at cents, it is like getting into Ford at the times of the Model T.
Don’t forget that while Europe is stumbling and the United States is in a recession, China’s economy is booming and the one of India is even growing faster. Korea is back on the map and Hong Kong is still growing at four times the pace of the United States. Do I need I tell more? The currency reserves of Hong Kong, Taiwan and Singapore are greater than the entire reserves of the United Kingdom, Germany and France combined. As an investor you should be interested where wealth is being created and where it is being held. Wealth today is being created in Asia and held offshore.
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.