Why you should pay attention to the rise of developing nations like China and India

By: ispeculatornew
Date posted: 09.15.2010 (5:00 am) | Write a Comment  (2 Comments)

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Today I listened to an interesting interview with former British Prime Minister Tony Blair about a variety of subjects one of them being developing nations like China, India, Brazil, Indonesia, etc. I have written about this many times in the past but I think it’s critical for all investors and individuals to think about the impacts of these changes. The geopolitics and the world economy are going to take a drastically different form within a few decades.

What to do?

Obviously, almost any individual can prepare for this new world by learning Mandarin, preparing for a new landscape or a better understanding of these developing nations. However, as you can imagine, I will focus on the investment side of the question. In that regard, there are many different investment possibilities that we have already discussed which include ETF’s that track these market indexes and also ETF’s that track the currencies. There are even some ETF’s such as ELD which track sovereign debt of these nations.

If you think outside the box…

In a world where two countries that each have a population of over 1 billion, can you even start to imagine what the needs are in terms of resources? While a country like England is debating building a new runway at Heathrow, China is currently in the process of building 70 new airports. Can you even imagine all of the material that is required to build so much infrastructure? China and others have been purchasing resources in many countries but its needs are so much more important.

That is translating into growing demand for commodities, agriculture resources, as well as food and other resources such as wood, etc. To me, demand from these countries is the best way to play the new world and in that regard, you can generally do one of 3 plays…

#1-Buying a commodity ETF

We have discussed commodity ETF’s quite often on this blog and they do generate a lot of interest but I think it’s important to remember that these ETF’s generally struggle to track over very long periods of time because of how they are created; they track futures that must usually be rolled every month

#2-Buying commodity producers ETF

A good example of such a trade would be buying gold miners. While it is a very different trade than going long on Gold, the ETF would be the equivalent of buying gold miners which will do very well in a context where emerging economies are important buyers

#3-Buying individual commodity producers

If you look in large natural resources exporters like Canada, Australia and Russia, you can find many different companies that will profit greatly from the explosion in demand in all of these commodities. Many of the mining companies in Australia for example have seen their business take off in recent years with Chinese customers willing to buy as much as they can produce. You would want companies with large untapped inventories

Do not let the train pass by you

In a decade or two, you might have large regrets about not going into this trade, there are many different possibilities but the important part is looking at what the landscape will be rather than what it is.

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2 Comments

  1. Pingback by DGB Roundup — September 17, 2010 @ 9:51 am

    […] 11. Intelligent Speculator suggests you pay attention to the rise of developing nations. […]

  2. Comment by attendance record — September 20, 2010 @ 8:38 am

    This is a very considerable article. It is logically very beneficial to invest in these developing countries.

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