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Thanksgiving May Be Over… But Be Grateful For China ETFs And Australia ETFs

02 December 2009 at 3:54 pm by Gary Gordon     Bookmark and Share    Follow EtfExpert on Twitter

In China’s latest PMI results, the country’s manufacturing grew at the fastest pace in five years. Is there really any doubt about China’s economic resurgence?

The Reserve Bank of Australia (RBA) increased interest rates for the third consecutive month to 3.75%. Technically speaking, Australians never even experienced a recession!

Many a U.S. patriot may cite American ingenuity and “core economic strengths.” Indeed, many others express a desire to live in a country with more individual freedoms than anywhere on the planet. Nevertheless, a U.S.-centric investment approach is riddled with risk.

At the “risk” of sounding unpatriotic, I’m going to reiterate what I’ve been saying all year long; that is, if I had to own stock ETFs for one country, I’d use China ETFs.

(See May 09, “Would I Rather Invest in China ETFs or U.S. ETFs.” Or watch July 09 interview on Fox Business News, “Investing In China Via GMF.”)

It’s still unclear whether the U.S. can muster a sustainable economic recovery. It would require U.S. financial institutions to lend substantially to small businesses and U.S. consumers to spend copiously. Simply put, neither banks nor consumers may be in a position to do so.

In contrast, the middle class in China and in Australia are thriving. And that means they have spending power as well as investing power.

I’m not suggesting that China doesn’t face scrutiny from emerging market partners, or that Chinese real estate isn’t frothy. I am saying that Small Cap China (HAO) has been a gift that keeps on giving.

In a similar vein, I don’t believe that Australia’s currency nor its stock market will be able to handle an eventual unwinding of the U.S. dollar carry trade.  Yet I do believe, as I have throughout most of 2009, that the CurrencyShares Australia Dollar Trust (FXA) and iShares MSCI Australia (EWA) are big-time beneficiaries of the Fed’s weak U.S. dollar policy.

While there’s no way to predict the next significant wrench in world market spokes, it is hard to fathom rapid appreciation in the U.S. dollar at any time before April 2010. And even then…

With the Fed on hold and the dollar weak, worldwide investors are likely to continue favoring the “thrivers.” Australia (EWA) and China Small Cap (HAO) still hold a spot on the marquee.

HAO SMA 100 YTD 2009

EWA SMA 100 YTD 2009

If you’d like to learn more about ETF investing… then tune into “In the Money With Gary Gordon.” You can listen to the show “LIVE”, via podcast or on your iPod.

Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company and/or its clients may hold positions in the ETFs, mutual funds and/or index funds mentioned above. The company does not receive compensation from any of the fund providers covered in this feature. Moreover, the commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.

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