Dennise Williams, Staff Reporter
FITZ RITSON
INVESTING OUTSIDE of Jamaica is one of the trends developing in the local financial sector, as the Jamaica Stock Exchange (JSE) continues to provide lacklustre returns to investors hungry for growth in their portfolio.
While the typical destination for funds is North America, savvy investors are looking further afield, particularly Asia.
Financial analyst Karen Fitz Ritson explains, "The 'Chinese Miracle' is one of the world's most sought after and dynamic phenomena of our times. It is important to comprehend key macro-economic factors about the Chinese economy.
The economy has been growing at a rate of 9.3 per cent per annum for the past 25 years (i.e. three times the growth rate of the United States).
They are the world's largest consumer of steel, cement, coal, copper, gold and meat and the next largest consumer of crude oil (note that based on their consumption pattern this has driven the commodities boom in copper, steel and oil since 2002).
The combined central banks of China, Hong Kong and Taiwan have the largest foreign reserves in the world."
That said, what industries should investors consider when looking at a China investment strategy?
Ms. Fitz Ritson says, "To position yourself in investing in China one needs to also examine the cultural landscape and look at the taste and trends of the Chinese people, especially the affluent, to discover the potential investment opportunities."
Some industries of interest that Ms. Fitz Ritson points to are cellphone-related technology, solar technology and leisure activities.
That said, we turned to Bob Russell, investment manager at Mayberry Investments to explain how Jamaicans can participate in Asian markets beyond China.
EASIEST WAY
"The easiest way to do so is to open a mutual fund account with funds that have investments concentrated in the region such as CI Funds." Mr. Russell names several fund classes that invest in Asia.
"The CI Japanese corporate class funds invest primarily in companies domiciled in Japan. While this fund has exhibited relatively weak performance in the years preceding 2005, it recently had a return of 19.6 per cent in 2005 and so far for 2006 has a return of 7.1 per cent.
The CI Pacific corporate class invests 54 per cent of its funds in Japanese companies, but also has exposure to other countries such as India, Thailand, Hong Kong, China, Australia, Singapore and New Zealand.
This fund is also exhibiting good performance with a return of 21.6 per cent in 2005 and a return of 10.7 per cent so far in 2006."
However, while mutual funds provide a passive way to invest, Ms. Fitz Ritson offers some words of caution to investors.
"One of the things we need to avoid in investing in many Asian countries are State Owned Enterprises, they have low corporate governance, little to no share holder rights, lack of accounting standards, thus susceptible to corporate fraud which is not uncommon and an undeveloped legal system to gain restitution. Thus state owned companies not listed, for example, on the Hong Kong or New York Stock Exchange are the companies that you should avoid."
And so for investors who want to cherry pick Asian companies, Mr. Russell offers these points. "Other ways to invest in Asia include opening a foreign (online or otherwise) brokerage account and buying exchange traded funds Exchange traded funds (ETF) are investment vehicles that are designed to be traded like shares on exchanges, but are designed to track indices such as the Nikkei in Japan. It is relatively easy to find ETFs that track indices in China, India, South Korea etc., and it is also easy to find ETFs that track the indices that represent various sectors within these countries.?
Ms. Fitz Ritson concludes, ?One needs to fully comprehend the landscape that will promote lucrative opportunities. Cultural taste and changes in trends are always key factors to benchmark when looking for potential growth opportunities. Learn from the mistakes of others (e.g. heavily investments in state owned companies) and keenly research companies that are reputable and have sound corporate governance and business practices that will make their operations sustainable in the years to come."
