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CHINA…UP, UP AND AWAY

CHINA…UP, UP AND AWAY

As a child I used to watch Superman on TV, his motto was "up, up and away!" as he leaped into the sky and flew off.  Perhaps the leaders of China also have seen some Superman re-runs.  Their economy is exhibiting many of the characteristics of the ’man of steel’; durable, with fast movement in an upward direction and a very muscular success at accomplishing national goals.

CHINA’S GROWTH IS ACCELERATING

China’s economic statistics for the first quarter ending March 2007 were astounding.  After years of rapid growth, China’s growth is accelerating.  Their GDP rose by 11.1%, and some other economic results for the first quarter are as follows:
• investment growth was up 25.3%
• exports grew by 27.8%
• industrial output grew by 18.3%
• retail sales improved by 15.3%
• inflation grew by 3.3%.
This means that the average industrial organization probably grew by about 21.6%, or 18.3% plus 3.3% (assuming they passed along cost increases).  The average retailer grew by 18.6% (15.3% plus 3.3%).  Good companies probably grew a lot faster.
By contrast, what we consider big growth in the West is 3% growth plus 2.5% inflation for a total of about 5.5%.  No wonder China’s stock market is rising.

CHINA WILL REVALUE THEIR YUAN AGAINST THE US DOLLAR BY MORE THAN 4% IN 2007

Another currency which will rise versus the dollar is the Indian Rupee.  In recent weeks, the Indian Rupee has joined the parade, and begun to rise fast against the U.S. dollar.

We remain very bullish on China, India, Asia, Europe and gold.  Within the developed world, we like base metals mining, gold mining, energy, transportation related, farming related and global financial intermediaries.  We remain bearish on the U.S. dollar.


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