CNBC FastMoney spot today on declining China growth

March 22, 2012

I did a spot today on CNBC's FastMoney where the topic was reports of declining China growth. Here are the talking points I used to brief the anchors for the spot FYI.

China is slowing somewhat this year due to

-weak growth in Europe (China's biggest trading partner and

-shrinking property market (residential property prices falling in all major markets)

-policy is also pushing fixed asset investment spending down, consumer spending up as a way of changing the structure of the economy over time

-Western observers are making too much of the slowdown. When they do, they sell China stocks. Slowdown will be modest, from 9% last year to 8-8.5% this year.

Reasons:

-income growth is strong in cities, even stronger in rural areas

-government finances are very strong (tax revenues growing 2x GDP)

-monetary policy is easing

-restrictions on owning property, mortgage loans, being eased

Investment ideas

-It's not Kansas out there. Investing in China is still very risky

-rule of law still weak (property rights, courts, judges)

-transparency still lacking (audits, financial statements, insider dealing)

-so be careful investing directly into the Chinese market

Safer way to invest in the China growth story

-buy companies in safer places that make their money in China.

-China growth is driven by flows of resources.

-natural resources from south Asia (Australia, NZ, Indonesia)

-technology from north Asia (South Korea, Singapore, Taiwan)

-capital from Hong Kong, Singapore

-build a portfolio of stocks from these areas to mirror China growth

-Stocks in my portfolio today on this theme are down big today on the weak growth news. I will be buying more. They include:
-RIO, Rio Tinto, aluminum, copper, iron, energy
-BHP, BHP Billiton, coal, iron, aluminum
-FCX, Freeport-McMoran, copper, gold
-EWY, ETF for South Korea, (Samsung is 21% of the index), Chinese cell phones
-EPP, ETF for Pacific ex-Japan, i.e., Australia, NZ, Singapore, Hong Kong
-EWS, ETF for Singapore
-CAT, Caterpillar, (China infrastructure investment moves a lot of dirt)
-PTR, Petrochina, (Chinese stock, bet on rising oil consumption inside China)
-EMR, Emerson Electric, US capital goods exports to China
-YUM, Yum Brands, US company owns KFC franchises in China

Dr. John