Sell Asian Stocks

Is it time to sell Asian stocks? Value based stock investing focuses on the intrinsic value of stocks. This is the prospective income stream that a stock will generate. Today there is a great deal of concern about the Chinese economy. This is a large export driven economy with links to the entire world. As Chinese economic growth falls, so do the economies of many other Asian nations. At the prospect of reduced economic activity in China and the rest of the Orient oil prices are falling as well. Are things going to stabilize or is it time to sell Asian stocks and wait for things to sort themselves out?

Investing in China, or Not

Investing in China, or not, has often been a hot topic. But it may well be time to sell Asian stocks and not just Chinese stocks if speculation about the size of China’s debt is true. The issue is one of hiding debt or reclassifying debt so that it shows up on a different balance sheet. Investing in debt and growth fits China as the nation has become an industrial powerhouse and borrowed along the way. China’s growth has attracted a lot of foreign investment. However, fundamental analysis of investment prospects is difficult when large amounts of debt are hidden from the public eye and that of the accountant. Today it appears that the Chinese leadership is trying to put the brakes on growth and effectively deal with debt issues. Whether you choose to sell Asian stocks will depend upon whether or not you believe they will be successful in the short term.

How Bad a Problem and How Long to Recovery?

If the Chinese economy goes to heck in a hand basket, how long will it take to recover? A useful comparison is Japan. In the 1980’s it appeared as though Japan was set to take over the entire world. Then its own debt issues came to the fore, back room handshake deals that no one had been aware of. It has taken twenty years and now, finally, the new leadership has found ways to devalue the Yen and stimulate Japanese growth. Nevertheless, Japan and China do a great deal of trade and if China goes down it will hurt Japan as well. When you choose to sell Asian stocks you might want to include stocks in the recently recovered Japanese market as well.

Investment in Asia

The prospect of being in huge and growing market has encouraged many to buy Asian stocks, especially Chinese stocks. But it has always been wise to beware of investing in a nation with big transparency issues. Additionally, China is getting older. The country has had and enforced a one couple one child rule for decades. This policy has slowed growth in the world’s most populous nation to where India recently passed China as the nation with the most people. The traditional means of supporting the old in China is gone with its large families. Although the Chinese are big savers the government has no retirement programs and no health insurance programs for the elderly. Old age costs will come out of savings. The high savings rate in China will not come to the government’s rescue in a time of high national debt. It will go to caring for the elderly. Those interested in stock investing in China today will need to look carefully at tax rates and social needs as they affect business growth in the nation, as well as the possible burst of a real estate bubble and decreased demand for exports and higher wages drive manufacturers elsewhere. Our take on things is that it is probably time to sell Asian stocks and adopt a wait and see attitude. As always before you buy or sell Asian stocks do your own fundamental analysis !

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