David Kuo: Put a piece of China in your share portfolio
Sunday 27 June 2010
China hinted last week that it is now willing to allow its currency to appreciate in value against other world currencies and, most relevantly, the US dollar.
Precisely what it meant was unclear, but that didn't stop the world's stock markets rallying on the news. Nevertheless, China can expect to be pinned down to something more specific at this weekend's G20 summit in Toronto. A knowing nudge and a wily wink are unlikely to satisfy the G20 leaders.
By seeing the value of the yuan rise, the Chinese government hopes to keep its inflation in check by cutting the cost of imported raw materials. It will also calm the tempers of some in the US Congress who have for years complained that the low value of the yuan has kept Chinese manufacturing goods at an artificially low price, costing American jobs.
A stronger yuan would also increase the purchasing power of the Chinese, which would help reinflate embattled global economies. For that reason, investors should try to have some exposure to China in their share portfolios.
Investing in China need not be difficult. Just investing in companies such as Vodafone and HSBC will give you some exposure; both firms have stakes in Chinese firms. So you are already indirectly investing in China if you have an index tracker that tracks the FTSE100, or even a pension.
Investors who prefer to have greater control over their Chinese investments can soon do so through Exchange Traded Funds such as the iShare FTSE/Xinhua China 25. This ETF, which invests in "red chips" and "H" shares listed on the Hong Kong Stock Exchange, can be traded inexpensively, just like ordinary shares. This makes them ideal for private investors. They can also be included in your Share ISA or Self-Invested Personal Pension, which will shelter any investment gains from tax.
You can also invest in the large number of Chinese firms listed on the London Stock Exchange's AIM. There are around 50 such companies, with a combined market capitalisation of £4.5bn. The range of companies is vast. Central China Goldfields, for example, started as a gold and copper company, with a Chinese focus. It has now turned its attention to other parts of Asia. It has yet to strike gold and register a profit, though. However, China Wonder does make money. It makes and sells packaging machines for the Chinese confectionery and pharmaceutical industries. Last year, it reported a profit of £600,000, which values the £2m outfit at around three times historic profits.
Another firm, Asian Citrus Holdings, is not only the largest orange plantation owner in China, but one of the largest Chinese companies traded on AIM. It pays a small dividend, and yields 1.4 per cent. The payout has risen steadily since 2006 and may reflect the little-known soft spot that Chinese managers have for raising dividends. Often, instead of an aggressive pursuit of growth, they prefer to return cash to investors because it is seen as proof of success.
David Kuo is director of financial website fool.co.uk
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
New UK station Russia Today gives a very bizarre view of Britain
By performing as African Americans or Indians, white people get to play act a kind of 'imaginary liberation', writes Michael Mark Cohen
Top Gear presenter is no stranger to foot-in-mouth controversy
New essay by JK Rowling went live on Pottermore site this morning
Review: Mike Leigh's biopic is a rambling, rich character study
Mark Dampier: Woodford’s young companies could be the stars of the future
Shareholders can hold a company to account
10 tips for taking out a personal loan
Santander's new current account is not quite as easy as 1, 2, 3
Weekly Money: Round-up of the personal finance stories you may have missed 13-17 October
- 1 'Nasa Confirms Six Days of Darkness in December': No, they don't - it's a hoax
- 2 Canadian actor punched in face after 'Islamophobia' experiment goes wrong in wake of Ottawa shooting
- 3 Topshop at centre of row over body image as 'shocking' skinny mannequin photo goes viral
- 4 If you think Russell Brand’s new book is confused, you should read what his critics have to say about it
- 5 Kentucky gang rape: 15-year-old boy left in critical condition after sexual attack by group at party
Pope Francis declares evolution and Big Bang theory are real and God is not 'a magician with a magic wand'
Huge surge in Ukip support after EU funding row, according to new poll
Ukip ‘exploiting grooming scandal’ to secure party’s first police chief
Nigel Farage: 'There’s nothing wrong with white people blacking up'
Maureen Lipman says 'she can't vote Labour while Ed Miliband is leader'
Muslims, immigration and teenage pregnancy: British people are ignorant about almost everything
iJobs Money & Business
£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...
£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...
£20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...
£40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...
Day In a Page
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000