Tyche

繁體 | 简体 | English

Seminar & Events

17 March 2010

Find out more

Market Truth Newsletter

Find out more

AIRCREW

Find out more

Febuary 2010

IS CHINA INFRASTRUCTURE A BUBBLE?
One of the few topics that economists and investors are deeply divided on is the question of whether the Chinese economy is in a bubble or not. While some claim that China is “Dubai times 1000”, others are of the view that the country is the strongest and most well-managed economy in the world. When we actually look beyond the chatter, and consider some hard numbers, one of the interesting developments that we can witness in China is that since the start of the recent financial crisis in 2007, infrastructure investment has increased sharply, while the growth in manufacturing investment has slowed down. Obviously, this is in good part due to the fact that the Chinese government (in response to the export slowdown) is investing in infrastructure to stimulate the economy. As a matter of fact, a similar (and very successful) infrastructure investment program was embarked on by China during/following the Asian financial crisis in 1997, albeit the focus at the time was on the modernization of highways, whereas this time around it lies on the modernization of railways. Taking the infrastructure/railway expansion program as an example, what is important to question when judging whether or not this area is in a bubble, is to consider if this infrastructure is actually a needed development, or (as some critics claim) another Japan-style ‘bridges-to-no-where ‘ waste. In this regard, a comparison of China today with the rapidly growing America of a century ago is helpful. China has roughly the same land area as America, but 13 times more people than the United States at that time. Yet on current plans it will have only 110,000km of railway by 2012, compared with more than 400,000km in America in 1916. At this time, China has one of the busiest railway networks in the world, moving 24% of global rail traffic with just 6% of the world’s tracks, i.e. China’s railways are 4 times as busy as the global average! So it appears clear, just by looking at these simple numbers, that the Chinese infrastructure and railway modernization is anything but a waste. Rather, these investments the Chinese government is engaging in are desperately needed and prudent moves laying the tracks for future sustained economic growth and development of the country. Investment Committee, Tyche Group Ltd

Do you have any comments on this issue? Or topics you would like to see covered in future issues? Would you like us to e-mail Market Truth to you every month? Please direct all enquiries to: contact@tyche-group.com

This newsletter is intended for information purposes only and should not be regarded as a substitute for professional financial advice. Tyche Group Limited shall not be liable for any pecuniary loss arising from the use of any information provided herein.

Wednesday, 17 March 2010, 18:15 registration for 18:30 to 20:00

Podium Floor, at the Central Plaza Executive Club,
Central Plaza, 18 Harbour Road

ARE CHINA TIGHTENING WORRIES OVERPLAYED?

Due to popular demand we are hosting another Forum in March on the topic of China.

For those of you that invested in China starting in Q4 2008/Q1 2009 we do not need to remind you that you will have noticed spectacular gains over a relatively short period of time.

We believe China can once again adapt and demonstrate to the world the traits that started this economic powerhouse, with innovation and growth key to the country’s continual success.

While there remains much debate about whether some sectors in China may have overheated and formed bubbles and while investors are fearful of further monetary tightening, more people are generally starting to believe that a sustainable recovery in the Chinese economy at large is possible, with a focus on domestic growth rather than exports.

The outlook for Chinese equities in particular may soon be supported by positive earnings announcements on the back of rising corporate profitability in (what has been a very good year) 2009. The likely earnings upgrades coupled with a lift in sentiment could see the market doing very well from here.

At our Forum this month our guest speaker will be a China expert who has deep knowledge and insight into these markets.

This promises to be a very popular event with a longer than normal question and answer session so that you can ask direct questions to the people who are actually at the centre of the China growth story.

Our guest presenter for this Forum will be Mr. Alan Landau, President of Marco Polo Pure Asset Management Limited, who will be discussing the China market outlook and China investment strategies.

Our seminars are often oversubscribed, so please register early for you and your friends to avoid disappointment. Please register in any of the following ways:
phone (852) 2525 3639; fax (852) 2525 3679; or e-mail forum@tyche-group.com

Clients Login

Username

Password