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How Are The Big Economies Doing?

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japtrain Yesterday, while looking through websites to look for ideas and investment opportunities. I went looking at the macro picture of some major economies.

The website I go to for this is the Conference Board's Leading Economic Indicators. While it is not a totally foolproof tool, it provides a useful guide to the economic cycles that all countries encounter.

To sum up what is there, the US economy is having anemic growth. The Japanese economy is similarly suffering from poor growth and not doing any much better than the US.

The one economy doing well, is the Chinese economy which is chugging along and registering positive growth for quite a few years now.

I remember when I was a student more than 10 years ago studying about the Chinese economy that the lecturer gave his opinion that he suspected that there maybe some fudging of economic numbers by the economists there in China as the rest of Asia was suffering from the Asian Currency Crisis. 10 years later, the remarkable story of China's economic growth is still going on strong.

Is the Chinese stock market overheated then? Unlike in the 2007-2008 when the PE ratios of the Chinese stock markets where at the high 30-40+ range, the PE ratios of the Chinese stock market looks more normal and in tune with the rest of the world. The only difference is that it is still growing quickly at quite an incredibly consistently way still.

While I steered clear of the China listed stocks in SGX bar the China Aviation Oil stock which I bought through an IPO and sold for a quick profit a year or two later (my definition of quick may equal yours), I held the Greater China unit trust managed by OCBC for nearly 5 years. It returned more than 100% over the 5 years that I bought consistently through using dollar cost averaging. This amount now forms the $20,000 buffer that I have in my OA account which I am leaving there as a contingency fund for my housing loan in case I get unemployed and also to fulfill the minimum of $20k in the OA before you can use the sums above for investments. I am using part of my OA to dollar cost average into the Aberdeen's Pacific Equity fund.

Thus, in a way, I am still participating in the Chinese growth story, albeit in a roundabout way and not very intensive into it.

So if you are looking for a rough guide to how economies are going to be like and get a slight advantage in the stock market, the leading economic indicators is a good place to start to find out whether the economic cycle of the country you look at is at the peak or trough of the business cycle.

 

Source:

1. Conference Board Leading Economic Indicators

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2 comments:
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nile said...
November 13, 2010 at 4:36 PM  

As long as global economies followed safety nets and there was unilateral co-operation

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Lemizeraq said...
November 15, 2010 at 9:03 AM  

Hi Nile,

Yep, if the countries all go into a currency war and try to devalue their own currencies to gain an export advantage a trade war will happen. So we need some form of cooperation.

Regards,
Lemiz

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