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9 “Early Adopter” Ideas For Investing in Emerging Markets

February 15, 2013

Do you know the seasonal pattern to China’s equities during the Chinese New Year? Going back 10 years, based on median returns, the Shanghai Composite Index rose 3.46 percent, while the China H-Shares climbed 4.32 percent in the month following the week-long holiday.

Gold Production Growth vs. Per Share Gold Growth

Successful investors seek to be early adopters. They tend to quickly recognize trends and historical patterns in the macroeconomic environment in an effort to seize potential opportunities. The seasonal effect around the Chinese New Year is just one trend investors can take advantage of. Here are a few others for you to ponder:

  1. World Trade. In 2012, the country became the largest trading nation in terms of imports and exports of goods, beating the U.S. by $50 billion. According to Bloomberg, goods coming in and leaving the U.S. totaled $3.82 trillion, while China’s trade in goods rose to $3.87 trillion. China is increasingly becoming an important trade partner in the world.
  2. Oil. Urbanization is having a tremendous affect on energy demand. By 2030, China could be a leading energy importer, replacing the U.S. as the world’s largest oil importing country by 2017, says BP.
  3. Shale Gas. Outside North America, China is expected to be the most successful in the development of shale gas. By 2030, shale gas may be 20 percent of total gas production in China, says BP in its Energy Outlook 2030. To gain access to the technology and best practices, Chinese oil companies have joined forces with major international oil companies as its shale-gas industry ramps up.
  4. Urbanization. By 2020, China is anticipated to have 850 million people living in cities, which is about 60 percent of the total population, according to the Urban China Initiative. Growing urbanization should drive higher incomes and an increase in domestic consumption.
  5. Consumer Goods. While 97 percent of Chinese households had a television in 2011, only three-fourths of households had refrigerators and washing machines. However, the penetration rate of many durables is happening at an incredibly sharp pace, with Deutsche Bank anticipating that China will reach the levels of developed country by 2020.
  6. Gold. Imports of the yellow metal into China from Hong Kong reached an all-time high in 2012. The country imported more than 834.5 metric tons of gold, according to Bloomberg. The World Gold Council expects purchases of gold jewelry and investment will go on rising at a steady clip in the Asian nation.
  7. Growing Consumption of Gold. The country remains the second-largest gold consumer in the world, but growth in gold consumption should be higher than the world’s largest consumer, India, says the World Gold Council.
  8. Luxury Goods. By 2017, China is set to be the second-largest luxury market, surpassing Japan, Italy and France. While the U.S. is still projected to remain the top country in luxury-goods sales, China’s maturing retail markets means that there’s a growing love for luxury in the country.
  9. Tourism. The Chinese are not only buying luxury items when they’re at home. As one example of the tremendous thirst for brands such as Louis Vuitton and Burberry, Chinese tourists traveling through London’s Heathrow buy about 25 percent of luxury goods at the airport, even though China’s tourists only make up 1 percent of passenger volume.

Are you an early adopter of emerging market trends?

None of U.S. Global Investors Funds held any of the securities mentioned as of 12/31/12.

Net Asset Value
as of 10/31/2014

Global Resources Fund PSPFX $8.28 0.07 Gold and Precious Metals Fund USERX $5.12 -0.31 World Precious Minerals Fund UNWPX $4.74 -0.25 China Region Fund USCOX $8.13 0.13 Emerging Europe Fund EUROX $7.36 -0.01 All American Equity Fund GBTFX $33.07 0.39 Holmes Macro Trends Fund MEGAX $23.31 0.31 Near-Term Tax Free Fund NEARX $2.26 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change