Tremendous China gains still ahead
Translation: Don't believe the bubble-sayers
By Thom Calandra, CBS.MarketWatch.com
Last Update: 12:56 PM ET Nov 5, 2003
NEW YORK (CBS.MW) -- If you're selling the China (and Mongolia) commodities rally right now, you'll be leaving a heap of money on the table.
This is financial journalism rule No. 1 (in my book, anyway): Whenever the world's leading fiscal writers and seers start using the words "overheated" and "bubble," it's almost always because they don't own the stuff themselves.
"China, and the rest of Asia, are areas you want to be buying whenever there's weakness," Marc Faber, Hong Kong-based asset manager and Swiss-trained economist, just told me. "This is tomorrow's gold." That, by the way -- "Tomorrow's Gold" -- is the name of Faber's latest book, and it's a doozy. See: Dr. Doom, we presume?
The financial press -- and traditional economists -- are worried that China's booming demand for raw materials (copper, gold, nickel, steel, energy, textiles, lumber and so on) will lead to "overcapacity" and a burst bubble across Asia.
Don't believe it. The melt-UP in the prices of copper, platinum, nickel, iron ore, even zinc, will benefit commodities investors, and their descendants, for a very long time. The biggest beneficiaries right now, in the world of investors, are the metals equities, and in specific instance, energy exploration companies. See: The Calandra Report.
"Commodities demand," writes Jason Rotenberg at Bridgewater Associates, "is growing very fast and much of that demand is coming from China." China, for instance, now accounts for 25 percent of the demand for iron ore -- "and over the last 10 years has contributed to roughly 85 percent of the world growth in demand for iron ore. China imports half of its ore and is now reaching out to countries as far away as Brazil.
Jack Jones, the metals equities analyst in London who is zealous about copper, tells me the China story will keep running at a major investment theater near you.
"China imports 80 percent of its copper and 100 percent of its platinum," Jones says fresh off a mining conference in Kunming, China. China's domestic metals supply is unlikely to see any significant increase in the foreseeable future. This suggests that China will remain a major importer of metals and a key driver of both metals prices and mining share valuations."
China's walk on the wild side, as it constructs roads, bridges, hotels, factories, indeed, entire cities as is the case with burgeoning Bao-Tao not far from the Mongolia-China border, is sending the copper price up steadily this year. Copper, the purest gauge of global manufacturing health, is at 94 cents a pound vs. an average of 75 cents in this year's first six months.
More ammo? The newly created Shanghai gold exchange has seen daily transacted volume rise six-fold since its October launch. China consumers are subscribing to newly created metals equities -- the first ones are gold mines -- by the hundreds of thousands.
U.S. Global Investors' Global Resources Fund (PSPFX) is focused on the resource play in China, funds chief Frank Holmes tells me. The resources fund is off the charts, up more than 70 percent this year.
Oh, and folks, it's got a lot of room left. Not just metals. Land, too.
Repeat after me: Wealth creates new wealth. With something like 200 million farm households earning ownership rights to more than 100 million hectares of land, the China wealth transfer will spark a ton of profitable developments based on rural economic growth.
The Calandra Report
Well, the Ivanhoe Energy story -- Iraq, China, Wyoming -- is happening as forecast in subscription service The Calandra Report. But beneath (or above?) the radar screen of 98 percent of the planet's investors are the 15 or 20 Mongolia, China, Eritrea, Argentina, Peru and Canada natural-resource investments that have created vast wealth for the TCR audience -- a.k.a. The Calandra Report Recommended List.
Just ahead -- in a TV segment to be televised this weekend on our show "CBS MarketWatch Weekend" -- are two companies, one a penny stock active in far-north Canada diamonds and the other a South American-Australian marriage of gold mining and pioneering modular gold-plant technology -- that I personally own and fully expect to set the natural resources world on fire in coming weeks and months. See: The Calandra Report.
Thom Calandra's StockWatch is CBS MarketWatch's flagship column. The regular report is in its eighth year at CBS.MarketWatch.com. Thom Calandra is also author of subscription service The Calandra Report. Thom owns shares of Ivanhoe Energy and discloses his ownership positions in The Calandra Report. |
