If we were certain that a country was on the threshold of development, that a great future awaited it and that it would grow at a pace the world had never seen before, thus making its citizens wealthy within a generation, who wouldn’t want to invest in it?
You could practically pick any sector, look at the leading companies, plonk your money on them and laugh your way to the bank. China is such a country, says famed investor Jim Rogers in his book A Bull In China, recently released in China by John Wiley and Sons (Asia). Rogers has not only closely observed its growth in the last couple of decades but has also travelled there extensively.
What will China need to fuel its breakneck pace of growth? Electricity, of course, so you should invest in Chinese power companies, coal companies and firms that make mining equipment. Rogers helpfully supplies a list of them. China will also require oil, and you could benefit from that trend by betting on companies such as PetroChina Co. Ltd, China National Petroleum Corp., China National Offshore Oil Corp., and so on. Rogers even provides the three-year trend in revenues and profits for each of the firms he suggests. And then there’s green energy, with companies in wind power and hydroelectricity, as the country comes to grips with pollution. A list of green companies is duly made available.
Betting on Beijing: Rogers has written his book after travelling extensively in China and observing the Chinese economy for about a decade. Nelson Ching / Bloomberg
A growing economy requires goods to be carried and that requires good roads and railroads. Why not then invest in Jiangsu Expressway Co. Ltd or Zheziang Expressway Co. Ltd? And since economic growth will see the Chinese move from bicycles to cars, surely your money will multiply in Chinese auto companies?
As the Chinese grow richer, they will spend more on leisure. So tourism will be a good sector to invest in and hotels should be a good bet. That’s true not just for domestic tourists in China, but also for the hospitality industry in neighbouring countries, as a horde of Chinese sightseers descend on them. Of course, they will need aeroplanes to travel in, so add a couple of Chinese airline companies to your portfolio. One-and-a-half-billion Chinese will need to eat, so agriculture should be a good bet. Invest in everything agricultural, from animal feed companies to those growing seeds, to juice companies. Rogers also throws in a peanut snack producer, Oriental Food (Holdings) Ltd, for good measure.
A Bull In China: John Wiley and Sons (Asia), 221 pages, Rs395.
And once they have filled their bellies, won’t they require health, education, housing, the Internet, mobile phones, retail stores, fashion? Also, once they move up the technology chain, their hi-tech and aerospace companies are bound to benefit.
And so on and so forth—this is the gist of what this book is all about. Its philosophy could have been expressed much more pithily in the old aphorism: Buy what China buys and sell what she sells.
Rogers is convinced about China’s potential, brushing aside recent worries about its dependence on the Western markets for its export-led growth model and concerns about the ability of its fascist elite to manage its politics. But then, the rise of China is now the received wisdom.
To be sure, a token genuflection is sometimes made to the problems of investing and Rogers does warn that the streets of China are not paved with gold. He writes: “If I’ve reported to you lots of rising trends and share prices, that should make you all the more wary about buying into something that’s already risen. Due diligence is already required. And luck favours the prepared mind, as other pundits and I have observed.” Doubtless, the pundits will also tell investors that you need to look at valuations, you need to study the financials of each of the companies mentioned in this book and you should know something about the competition faced by each of them before putting your money on them. Also get the pundits to tell you how much money they actually made in the last 10 years in China’s notoriously volatile stock markets.
Rogers has a point—there’s plenty of opportunity in China. But profiting from it is not as easy as Rogers makes it look.