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I’m in Asia right now. And I can tell you firsthand that things here are far more vibrant than most in the West seem to think.
In a small, luxury housing development just 15 minutes from Bangkok’s bustling Sukhumvit Road, 12 of the 19 $750,000+ homes have sold in just six months, and prices have jumped more than 15 percent since then.
Along Sukhumvit Road in the heart of downtown Bangkok, three new hotels are under construction and two new condo developments have sold out in just two months.
In Singapore, a short, two-and-a-half-hour flight from Bangkok, real estate prices are turning up and residential construction activity is bustling, soaring nearly 20 percent in the second quarter.
In China, more than 275,000 construction projects are now under way, the result of China’s incredible rebound and virtually non-stop economic growth.
Indeed, the pundits who pan Asia have been proven wrong, time and time again …
After the 1997-98 Asian financial crisis, they warned of a deep slump in Asia that they said would be the worst for the region since the Great Depression.
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| Home prices are rising fast in Bangkok’s Sukhumvit Road area. |
And what happened? Asia cleaned up its debt problems … came roaring back … and grew more rapidly than ever before.
In the aftermath of the tech wreck of 2000 and 9/11, they claimed Asia was toast, and that there was no way its blistering economic growth would continue, the result of a slump in the U.S. and the consequences of the new war on terror that was supposedly hitting Muslim-based Asian economies the hardest.
And what happened? Asia’s economic growth exploded higher yet again, led by a massive leap forward in China’s and India’s economies.
Even today, after being proven so incredibly wrong on just those two prior crises, the pundits in the West — mostly those who have never set foot in Asia, let alone China — claim Asian economic growth is a thing of the past. Asia’s export-based economic model, they say, has not been replaced by domestic consumption, and hence the glory days for Asia are over.
And what’s really happening?
While the U.S. was shrinking at an annual pace of 6.4 percent in the first quarter of 2009, China’s GDP was growing at an annual pace of 6.1 percent.
In the second quarter, while the U.S. was shrinking at an annual pace of 1.1 percent, China was expanding at an annual rate of 7.9 percent.
New loans made by China’s banks are exploding higher, up 201 percent for the first half of ’09, while capital investment in both the urban and rural areas is also soaring, up over 33 percent.
Through June of this year, auto sales in China increased a record 17.7 percent to 6.1 million vehicles, compared to only 4.8 million in the U.S.
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China’s retail sales continue to rapidly grow, with July showing a 15.2 percent year-on-year rise over last year. And despite a slump in exports …
China’s industrial production has risen for five straight months, rising 10.8 percent year-over-year.
Meanwhile, of the four large emerging Asian economies that have reported GDP figures for the second quarter — China, Indonesia, South Korea, and Singapore — GDP is growing by an average of more than 10 percent, while western economies are contracting by an average of 3.5 percent!
India’s industrial production jumped a seasonally adjusted rate of 14 percent in the second quarter.
South Korea’s GDP grew an astonishing 10 percent in the second quarter.
Taiwan’s industrial output jumped by an amazing annualized rate of 89 percent.
In Singapore, second-quarter gross domestic product jumped an annualized, seasonally adjusted 20.7 percent, on the back of a gigantic 49.5 percent surge in manufacturing activity.
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| Singapore’s GDP is skyrocketing! |
Clearly, it never pays to underestimate Asia’s growth!
Bottom line …
1. Asian stock markets are unequivocally in strong, long-term bull markets. While volatile right now and in pullback mode, Asian markets — based on my analysis — are much healthier in terms of just about every stat you can think of: valuations, volume, price-to-book, growth rates, cyclical outlooks, and more.
In fact, here’s one for the record: I ultimately expect the Shanghai Composite CSI Index to eventually surpass the Dow Jones Industrials in nominal and real values — meaning the capitalization of the Chinese stock market will eventually be bigger than the U.S. stock markets.
Indeed, China’s stock market is now already the second largest in the world in terms of market value.
I continue to favor Asia stock markets over both the United States and Europe.
But, this also means …
2. Most natural resource bull markets are very much intact. I’m talking about oil, gold, base metals, and foods. Huge, almost relentless demand for natural resources — largely due to Asia’s rise — virtually guarantees higher prices to come for the world’s most precious resources.
Especially when you consider the following forces …
First, the U.S. dollar’s prospects are horrible. Short term, the dollar is hovering just above record lows, trying to bounce a bit. But any rally in the dollar will be shallow and short-lived.
Although we are in a low-interest-rate environment all over the world, U.S. rates are lower than rates found in the Euro zone, in Asia, and in Latin America. So, interest rates are not about to support the dollar any time soon.
Moreover, the U.S. economy is suffering from a structural decline that is pervasive, affecting not only the real estate markets, but the job market, job productivity, the credit markets, pensions, social security, Medicare, and more — largely the result of decades of misallocated spending.
And we all know about the debt disasters, where, until recently, even your pet could get a credit card in the United States.
These problems will not be solved overnight. It will take decades to correct. In the meantime, as Asia rises, more and more capital will flow from the West to the East, causing the dollar to slide even more, and Asian economies to rise even further.
Second, our central bank stands ready to print more money and extend credit like there’s no tomorrow. They’ve already printed up at least $300 billion — and they have backed their promises with another $14 TRILLION in liabilities.
Moreover, they can print that money to fulfill those promises at any time, at the push of a button, and will not hesitate to do so.
In the end, this too will benefit Asian economies, and, most noticeably, the prices of natural resources, and, ultimately, inflation.
My view: Stick with mainly Asian-based investment opportunities, with a very heavy emphasis on natural resources that Asia, particularly, China, is consuming — and will consume for decades to come.
Staples such as oil and gas, gold, food, and base metals such as copper, aluminum, zinc, nickel, and more.
For a full, detailed analysis of what exactly China is buying … how much it is buying … how much it is spending … and where around the globe it is hunting down natural resource assets — including my latest recommendations on how to profit from it — see the August issue of Real Wealth Report, which was just published last Friday.
Source : HoweStreet.com : 25 August 2009
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