ETFs: How To Invest Like A Chinese Millionaire (TAO, FXI, GXC, PGJ, YAO, EJ)
Tony Sagami: You’re probably reading this column because you want to make money, and you’re probably not a millionaire … yet.
One of the best ways to become rich is to copy the most successful people in the world by becoming a student of studying success.
One publication that knows the millionaire/billionaire market better than anybody else is Forbes magazine. Every year, Forbes publishes a list of the 400 wealthiest Americans. This year, Bill Gates and Warren Buffet top the list with a net worth of $54 and $45 billion, respectively.
Forbes also lists the world’s billionaires. There are 1,210 billionaires this year, up from 1,011 last year.
What I find interesting is the geography of where those billionaires live is changing. The United States continues to dominate, with 396 billionaires, but Asia is a close second with 332.
While the United States has more billionaires than any country in the world, I am sure you can guess which country is #2? Of course, it’s China.
With 72 billionaires — that’s up from 28 a year earlier — China has the second most billionaires in the world, and it is creating more wealth than any other part of the world.
Here’s a list of the China’s top billionaires:
Number 1: Li Ka-Shing, the Warren Buffet of China, is worth $26 billion. Through Hutchison Whampoa and Cheung Kong Holdings, he is the world’s largest operator of container terminals and the world’s largest health and beauty retailer. His companies make up 15% of the total market capitalization of the Hong Kong Stock Exchange.
Number 2: Thomas Kwok is the managing director of Sun Hung Kai Properties, the largest property developer in Hong Kong.
Number 3: Lee Shau Kee, worth $19 billion, is a property developer and majority owner of Henderson Land Development, a property conglomerate with interests in properties, hotels, energy and internet services.
Number 4: Robin Li is the founder of Baidu.com, the ‘Google’ of China. With a net worth of $9 billion, he is the richest man in mainland China.
Number 5: Cheng Yu-tung is a Hong Kong billionaire and owner of New World Development, one of Hong Kong’s largest conglomerates, with interests in real estate, infrastructure and hotels.
Those five have a lot of company in the Chinese millionaire club. Most Americans have never heard of the Hurun Wealth Report. The Hurun rich list is the Chinese equivalent of the Forbes list.
Founded in 2009 by Rupert Hoogewerf in Shanghai, the Hurun Wealth Report tracks the richest people in China and releases the results annually.
The recently published list shows that China has 960,000 millionaires. That is a 9.7% increase in the number of millionaires from last year and a 135,000 increase from the 825,000 millionaires two years ago
Of those 960,000 wealthy Chinese, 60,000 are considered super rich with 100 million yuan ($15 million) or more in wealth.
What is more interesting than the number of millionaires is who they are:
- The average age of the Chinese millionaire is 39 years, which is 15 years younger than those in the United States and Europe.
- 30% of the Chinese millionaires are women.
- The super-rich Chinese with a net worth of at least 100 million yuan are bunched in three cities: Beijing with 10,000, Guangdong province with 9,000 and Shanghai with 7,800.
The most useful information is how those Chinese millionaires got their money:
- 55% of Chinese millionaires got their wealth from private businesses,
- 20% are property investors,
- 15% got their wealth from the stock market, and
- 10% are high-income executives.
You, too, can participate in that phenomenal wealth creation by investing the same way and including a heavy dose of Chinese stocks in your portfolio.
You should have noticed that real estate is the source of many of Chinese richest. Chinese real estate has been on fire. In 2010, housing prices went up in the country by 13.7%, and luxury property prices rose even faster.
There are two Chinese real estate stocks listed on the NYSE: E-House (NYSE:EJ), which is the Century 21 of China, and Guggenheim China Real Estate (NYSE:TAO), an exchange traded fund that invests in Chinese real estate companies.
If you just wanted to add some broad exposure to the booming Chinese economy, here are four ETFs to look at:
iShares FTSE/Xinhua China 25 Index ETF (NYSE:FXI) owns the 25 largest and most liquid Chinese companies, so think of this as investing in the Dow Jones 30 Industrials of China. The top 10 holdings make up more than 60% of the fund so you will be heavily weighted with China Mobile, China Construction Bank, Industrial and Commercial Bank of China, China Life Insurance, and Bank of China.
SPDR S&P China (NYSE:GXC) is managed by State Street and is also a large-cap fund with emphasis on financials as well.
PowerShares Golden Dragon Halter USX China (NYSE:PGJ), isn’t as heavily weighted toward large-cap financials. It owns a lot of energy (21%), technology (18%), and telecommunications (16%).
Claymore/AlphaShares China All Cap (NYSE:YAO) focuses on small caps.
As always, you need to do your homework and decide whether any of these securities are appropriate for your personal situation and financial goals. And as you know, timing is everything when it comes to investing, so you should wait for these to go on sale before jumping in or wait for my buy signal in Asia Stock Alert.
Uncommon Wisdom (UWD) is published by Weiss Research, Inc. and written by Sean Brodrick, Larry Edelson, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in UWD, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in UWD are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Andrea Baumwald, John Burke, Marci Campbell, Selene Ceballo, Amber Dakar, Roberto McGrath, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Marty Sleva, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.
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