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Tracking China’s Deals
April 27, 2010
While the rest of the world suffered through its worst financial crisis in a half century, China went shopping. Since 2005, China has made 185 deals worth $100 million or more, totaling more than $222 billion.
The largest of these deals was the $12.8 billion joint venture between Chalco and Alcoa made to purchase 12 percent of Rio Tinto back in 2008. This deal was struck in Australia which has been China’s most popular destination both in terms of quantity and dollar amount.
Indicative of the large future the Chinese government has in store for its country, the most popular sectors for these deals have been metals and energy, respectively.
Forbes just published an interesting interactive map based on data from the Heritage Foundation detailing these transactions.
As you view the presentation, pay special attention to how the pace picks up. By the second half of 2009, China is averaging more than seven $100 million deals a month.
You can check out the full interactive version at Forbes.com
By clicking the image or link, you will be directed to Forbes.com. U.S. Global Investors does not endorse all the information supplied by this website and is not responsible for its content. None of U.S. Global Investors family of funds held any of the securities mentioned in this article as of 3/31/10. The source of this graph is Forbes. The securities identified in the graph were selected for inclusion by Forbes and may or may not be held by portfolios managed by U.S. Global Investors, Inc., whose holdings may change daily.
China’s GDP: Slow Slowing Ahead
April 15, 2010
China’s report of 11.9 percent GDP growth in the first quarter of 2010 – the fastest pace since late 2007 - has China watchers buzzing and looking for how (if at all) Beijing may respond.
CLSA, the influential brokerage based in Hong Kong, put out a research note today titled “Fast but Not Frightening.” It interprets the results as meaning that China’s domestic economy is fully recovered, and it revised its full-year GDP growth forecast to between 9 and 10 percent (from 8 to 9 percent). It foresees no big reaction from Beijing – instead just a continuation of the incremental tightening to make sure a dangerous housing bubble does not inflate and that the economy overall does not overheat.
Our own China region analysts are also among the watchers, and they offer these thoughts:
Romeo Dator, co-manager of U.S. Global’s China Region Fund (USCOX):
I think the government will take steps to slow the economy further, but it won’t be interest rate hikes because inflation is still below the 3 percent threshold that the government has reportedly set. The government already has taken steps to slow lending and will continue to do that, most likely by hiking the bank reserve requirement ratio (RRR) sometime this quarter.
Michael Ding, senior China analyst:
It is not threatening, but that is not what China wants. Given the low (year-over-year) base in 1Q09, going forward GDP may not reach 11 percent in the next three quarters, but in any case, Q1 is too high and cannot be sustainable without causing an overheated economy. The goal is to have money supply growth at 17 percent, as was the case during the 2000s. It can be reached by the end of this year. For the next couple of months I don’t see inflation threatening to reach 3 percent, at which point the central bank will likely raise interest rates. The government may revalue the RMB in the short term to alleviate any inflationary pressure and to increase domestic consumption.
China’s Internet Boom
March 25, 2010
Lost in the scuffle between Google and the Chinese government is how fast China’s Internet use is growing.
The total number of Internet users in China grew by 86 million in 2009 to reach 384 million by year-end. That’s well more than the entire population of the U.S. and Canada combined, and a 29 percent increase year-over-year.
Of that number, 90 percent had broadband connections, according to the China Internet Network Information Center (CNNIC).
Nearly 30 percent of Chinese are now Web users, and this sets the stage for explosive growth in the years ahead.
Once Internet penetration in the U.S. reached 20 percent, it took just six years to get to 60 percent. Japan needed only three years to go from 20 percent to 40 percent, and Brazil went from 20 percent penetration in 2005 to more than 35 percent by 2007.
While the highest penetration rates surround China’s largest cities, the mobile Internet is bringing the Web to rural and lower-income users. Mobile internet has lowered the cost of entry for consumers—smart phones are cheaper then desktops.
A surprising result from CNNIC: more than 45 percent of mobile Internet usage is from people with monthly income of 100 yuan ($14.65) or less.
A recent survey reported by McKinsey & Co. shows that people in China’s 60 largest cities spend around 70 percent of their leisure time on the Internet. Most of this usage is for games, entertainment and shopping.
On the commerce side, two of the biggest growth areas were online banking and e-commerce. Users who book travel online jumped 78 percent last year. McKinsey says a significant number of consumers ages 18 to 44 won’t purchase a product or service without first researching it on the Web.
As the Internet continues to expand its reach into the lives of Chinese people, keep an eye on how users leverage the technology to improve their living standards.
The following securities mentioned in this post were held by one or more of U.S. Global Investors family of funds as of 12-31-09: Google Inc.
Foreign Investors Confident in China
March 19, 2010
For the first time ever, emerging markets claimed three of the top four destinations for foreign direct investment (FDI) according to the 2010 A.T. Kearney Foreign Direct Investment Confidence Index. China (#1), India (#3) and Brazil (#4) were the headliners in a list of emerging market countries that claimed 19 out of the top 25 spots.
China remains the top destination for FDI—a title it’s held since 2002—attracting $108.3 billion from around the world in 2008. Seventy-two percent of investors see the Asia-Pacific region leading the world out of recession. Thirty-two percent see a positive outlook for China and 31 percent said the same for India.
Rounding out the top five is the United States, who regained the #2 slot from India and Germany at #5.
Poland, the only European Union member to avoid negative GDP growth in 2009, made the biggest jump from 2007—going from #22 all the way to #6. Poland managed just over one percent GDP growth in 2009 and that figure is expected to double in 2010.
Mexico jumped 11 spots to #8 and both Canada and Germany rose five spots up the FDI food chain. On the other hand, Hong Kong, Russia and Singapore suffered the biggest declines.
Nearly half of Kearney’s survey respondents say they have postponed investments due to market uncertainty and credit difficulties. This means it may be some time before we see FDI levels near the $2 trillion mark they were at in 2007.
For a detailed briefing on each country in the top 25, check out the BusinessWeek slideshow.
View Slideshow of Top 25 Countries for Overseas Investment
By clicking on the links, you will be directed to third-party websites. U.S. Global Investors does not endorse all the information supplied by these websites and is not responsible for their content. The Foreign Direct Investment Confidence Index is a regular survey of global executives conducted by A.T. Kearney. The Index provides a unique look at the present and future prospects for international investment flows.
Chart of the Week
March 18, 2010
From the latest edition of U.S. Global’s Weekly Investor Alert:
If home-buying sentiment in China has shifted toward “wait and see,” auto purchases have remained very strong in the world’s largest car market.
Even in February, the seasonally slowest month, more than 1.2 million vehicles were sold. The combined 2.9 million units sold in January and February was 84 percent higher than the same period in 2009.
Such strength is likely to be seen in March and April, which are typically strong months for car sales. This year there’s an additional motivation -- auto buyers rushing to purchase before subsidy programs come to an end.
A Chinese business site quotes an automobile trade group’s estimate of 30 percent growth in passenger car sales in March compared to last month, and 40 percent growth compared to March 2009.
At the high end of the market, Audi intends to sell 200,000 cars in China this year – this would be about 25 percent more than in 2009. If it hits that target, Audi would have more sales in China than in its native Germany.
To get more insights and perspective from the U.S. Global Investors investment team, subscribe to the Weekly Investor Alert.
None of U.S. Global Investors family of funds held any of the securities mentioned in this article as of 12/31/09.
Net Asset Value
as of 09/08/2010
- Global Resources Fund
PSPFX $8.78 +0.05 - Gold and Precious Metals Fund
USERX $17.44 +0.03 - World Precious Minerals Fund
UNWPX $20.18 -0.01 - China Region Fund
USCOX $8.61 -0.02 - Eastern European Fund
EUROX $9.11 +0.13 - Global Emerging Markets Fund
GEMFX $8.17 +0.08 - Global MegaTrends Fund
MEGAX $7.71 +0.04 - All American Equity Fund
GBTFX $20.02 +0.09 - Holmes Growth Fund
ACBGX $16.04 +0.15 - Tax Free Fund
USUTX $12.58 -0.01 - Near-Term Tax Free Fund
NEARX $2.26 -0.01 - U.S. Government Securities Savings Fund
UGSXX $1.00 No Change - U.S. Treasury Securities Cash Fund
USTXX $1.00 No Change