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Wednesday, 29 April 2009

Business:

When China and Brazil Become a Better Investment Than the U.S.

By 24/7 Wall St. Tuesday, Mar. 10, 2009

Now that most investors, both institutional and individual, have lost a large portion of their stock market holdings, all that most people want to know is how they can get their money back. The easy answer is that they probably won't get their money back, at least not over the next five or ten years. But, that kind of answer is never satisfactory.

One well-known market analyst suggests that putting money into the stock markets in China and Brazil will pay off better than keeping capital in U.S. equities. According to Reuters, Mohamed El-Erian, chief executive at Pimco, the world's biggest bond fund manager, said about China and Brazil, "The case for optimism comes from the fact that these countries entered today's global crisis with better initial conditions." 

In horse racing and boxing, experts will point out that a strong start does not mean a strong finish. China is a case in point. Its GDP has grown at a rate of about 10% a year for a decade. The government has done whatever it needed to do to keep the economy on track. It has underwritten the build-up of the manufacturing sector, the telecom and electric infrastructure, and a large and complex financial system. It has also sold parts of the nation's largest companies to the public to give the companies more access to capital. The communist central government says it will put about $585 billion into the domestic economy in order to stimulate consumption and business expansion.

Source: Reuters, www.reuters.com