Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Chinese Real Estate, the Biggest Mass Migration in History... Here's How to Profit

Housing-Market / China Economy Apr 16, 2010 - 05:50 AM GMT

By: Money_Morning

Housing-Market

Best Financial Markets Analysis ArticleKeith Fitz-Gerald writes:SHANGHAI, The People's Republic of China - Given what you may have heard about Chinese property values in recent months, it may surprise you to learn that Chinese real estate investors are extremely value oriented.

And so are the institutional investors I've run into during my latest investment-research visit to this country. These institutional players want to lock up some valuable land parcels before 2020. That's the date by which 500 million Chinese citizens are expected to have moved into China's cities as part of the greatest urban migration ever recorded.


You can do the math: We're talking about a group that's 1.6 times the entire U.S. population ... moving from China's countryside to its cities in the next 10 years.

The Mass Migration "Big Bang"
A population shift of this magnitude can't help but be a major catalyst for increasing real estate values - especially in such top-tier cities as Beijing and Shanghai, where I am as I write this. This massive urbanization will also significantly shift the market dynamics of second-tier municipalities - such as Chongqing, where literally millions of people are pouring in from the countryside.

Some pundits, such as noted short-seller Jim Chanos, say this is already happening. Back in January, citing the vacancies that pepper the cities I've just named and the flood of speculative capital he says has washed through them, Chanos quipped that China is "Dubai times 1,000," - a sound-bite that's kept him in the media spotlight ever since.

Personally, I find that more than a little ironic considering he's never even set foot in China and didn't even begin studying China until last summer, critics say.

To hear Chanos and others talk about their concerns about a Chinese economic bubble, you'd think Chinese real estate developers and investors are essentially playing with M onopoly money.

My experience suggests otherwise. So does some of the latest market data that I've reviewed. One study, for instance, suggests that Chinese real estate has underperformed the benchmark MSCI China Index by nearly 30%.

The point is that Chinese real estate, on the whole, appears to be significantly undervalued - even at this stage of the game - when compared to regional alternatives in Hong Kong and Singapore, two other Asian markets that are a lot further along on the economic-development curve.

The bottom line - and the point that I keep coming back to - is this: If China's real-estate market is as far out of whack as some people suggest based on vacancies, property-related prices should be falling - even cratering.

But they're not.

In fact, they're rising - and so is overall growth.

China: The White Hot Economy
Just yesterday (Thursday), in fact, China announced first-quarter gross-domestic-product (GDP) growth of 11.9%, the country's fastest expansion in nearly three years and a rate that was faster than what analysts were expecting.

China's economy had advanced at a 10.9% pace in the final quarter of last year.

Stephen Green, head of Greater China research for Standard Chartered PLC (PINK: SCBFF) here in Shanghai, told MarketWatch.com that central planners in Beijing could be faced with an asset-price bubble in the second half of the year that could trigger a sharp credit contraction in 2011 - unless they're able to throttle growth back to a more sustainable pace.

"There are signs of overheating," Green said in the interview.

Beijing is well aware of the stakes and is taking steps to manage China's growth - with some signs of success.

As part of yesterday's report on economic growth, Beijing said that March's consumer price index (CPI) for China was 2.4% higher than a year earlier. That was down from the 2.7% increase in February, and is below the 2.6% increase that surveys by both Dow Jones Newswires and Reuters showed analysts were expecting.

In the real-estate realm, Beijing is raising reserve requirements for lenders, is tightening up on permits and construction licenses, and is even taking steps to halt illegal development. In some parts of China, local developers will often construct entire buildings and never pull a permit.

As incomes increase and China's consumer class continues to emerge, such pastimes as golf become all the rage. One result: Even though golf courses aren't exactly easy to hide, there may be hundreds of illegal links operating throughout China right now, the China Daily reported in a story that I read during my visit here.

If the markets were as overbuilt as some pundits allege, there wouldn't be any competition for the best properties. Instead, that competition is as fierce as I've ever seen it - an observation that was seconded by many of the private-equity investors I talked with at the Halter Financial Summit that I attended in Shanghai. Like me, these folks have been actively investing in the Asian markets for decades.

There's a very clear trend developing. As the property prices in Beijing and Shanghai increase in expense, many companies, investors and developers are shifting their focus to the second- and third-tier cities that have yet to experience the urbanization rush of their much-larger first-tier counterparts. That's going to broaden the overall advance, creating a more-sustainable environment for real estate investing and development even if major pockets of urban overvaluation exist today. It's precisely the pattern we described and told Money Morning readers to expect several years ago.

The speculative excesses that do exist appear to be limited to very-high-end residential real estate (read that to mean ultra-luxury real estate) in the primary cities. Over -speculation hasn't meaningfully impacted the commercial-real-estate sector, or the more-mainstream housing sectors, although that could still happen . Residential projects aimed at the emerging consumer class, as well as the business-related real estate projects that are so important to a nation's economic advance, both remain in the realm of "investments" - and not speculation - which is why they continue to have very clear government support as part of central planning objectives and China's ongoing growth.

In other words, Beijing is willing to let the "Ferrari set" flame out, but clearly wants the middle class to succeed because that group's emergence will create a foundation for both social and economic stability.

No wonder the enlightened institutional investors that I've talked with here in China continue to be optimistic. They understand that they could sit on the sidelines and wait for the corrections that periodically come along. But these investors also know that the "bottom" of the next correction could easily be represented by much higher than the prices we're seeing today - and probably will be.

How to Profit From China's Mass Migration
What does this mean for you?

If you're actually "on the ground" here, and have enough money and the ability to do your own due diligence - or "DD" as the Chinese call it - you can begin hunting in the second- and third-tier cities, right alongside everybody else headed that direction. There's certainly money to be made there in private equity.

For U.S.-based investors, however, there's a much-easier way to participate. Consider investing in one of a handful of exchange-traded funds (ETFs) that offer exposure to China's real-estate market - such as the Claymore/Alpha Shares China Real Estate ETF (NYSE: TAO) and the Claymore Alpha Shares China All-Cap Fund (NYSE: YAO). The first fund concentrates specifically on real estate, while the second fund is more broadly diversified and includes banking, construction companies and developers.

A more generalized alternative is the iShares FTSE NAREIT Asia ETF (NYSE: IFAS), which is a regional play that has approximately 8% to 10% of its holdings allocated to Chinese real estate. There are also several closed-end funds that offer a similar, generalized exposure, including the RMR Asia Pacific Real Estate Fund (AMEX: RAP).

As you incorporate this sector into your overall investment strategy, it's important to keep in mind the general advice that I use as part of my own portfolio strategy for China. The Asian giant remains the biggest wealth-creation opportunity of our lifetime - in the long run. In the near term, you be certain there will be volatility, periodic pullbacks and even corrections.

And while the real-estate sector offers some of the best long-term appreciation of any China-oriented investment category, the investments I've just mentioned are all trading near to the tops of their 52-week ranges. And that means they could be poised for a short-term pull back just as easily as a long-term breakout. Position any investments accordingly.

Source : http://moneymorning.com/2010/04/16/chinese-real-estate/

Money Morning/The Money Map Report

©2010 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules