What Dr Marc Faber’s ‘beer indicator’ reveals about China

Tuesday, 15 May 2018
Melbourne, Australia
By Bernd Struben

  • Move over Budweiser…
  • In case you missed it…

There’s been a lot of focus on China in Port Phillip Insider over the past few weeks.

And for good reason.

China, the world’s second largest economy, continues to enjoy GDP growth of 6.8%. And that’s in a nation with 1.4 billion people.

In comparison, GDP growth in the US, with 325 million people, stands at 2.3%, according to Trading Economics.

You don’t need to be a maths whiz or investment guru to work out the tremendous opportunities right on Australia’s doorstep.

And investing in those opportunities is about to get easier.

We’ll get back to that, after the markets…


Overnight the Dow Jones Industrial Average closed up 68.24 points, or 0.27%.

The S&P 500 rose 2.41 points, or 0.09%.

In Europe the Euro Stoxx 50 index finished up 0.22 points, or 0.01%. Meanwhile, the FTSE 100 lost 0.18%, and Germany’s DAX fell 3.21 points for 0.02%.

In Asian markets, Japan’s Nikkei 225 is down 14.65 points, or 0.06%. China’s CSI 300 is down 0.24%.

In Australia, the S&P/ASX 200 is down 29.40 points, or 0.48%.

On the commodities markets, West Texas Intermediate crude oil is US$71.00 per barrel. Brent crude is US$78.29 per barrel.

Gold is trading for US$1,314.39 (AU$1,744.38) per troy ounce. Silver is US$16.55 (AU$21.96) per troy ounce.

One bitcoin is worth US$ 8,712.48.

The Aussie dollar is worth 75.35 US cents.

Move over Budweiser…

As mentioned above, gaining exposure to Chinese stocks is set to get simpler.

That’s because an estimated US$18 billion of Chinese A shares will be listed on the MSCI Emerging Markets Index, commencing on 1 June.

That represents just a tiny fraction of the total amount of Chinese stocks. And it will initially make up only 0.7% of the MSCI EM Index, though that’s expected to grow over time.

But it’s a big win for the Chinese government. And potentially for foreign investors.

As Bloomberg reports:

China’s stock market is about to go global like never before.

On June 1, MSCI Inc. will add distiller Kweichow Moutai Co., brokerage Guosen Securities Co. and more than 200 other locally listed Chinese companies to benchmark equity gauges that guide the investment of $12 trillion…

“Overall the addition of China A shares is symbolic of China’s increased liberalization of financial markets and represents a new era where China is a true player in global markets,” said Eleanor Creagh, Sydney-based market strategist for Saxo Capital Markets.’

Most analysts remain bullish on the outlook for China. That’s despite concerns about the size of China’s corporate and government debt. And a looming retirement crisis…heightened by its now abandoned one-child policy.

Even Dr Marc Faber, aka ‘Dr Doom’, spoke of the massive opportunities in China at Port Phillip Publishing’s ‘Paradox of Prosperity’ conference last month.

He asked the audience what the number one selling beer brand in the world is. The answer? Snow. A Chinese brand that’s moved up from 11th place in 2005.

And the number two beer brand? Tsingtao…also Chinese.

But more importantly than China pushing Budweiser out of the number one spot, Faber noted that China is now outspending both the US and Japan on robotics. That line was crossed back in 2013. And the spending gap continues to grow.

To highlight China’s high tech boom, Faber pointed to the number of patent applications. As recently as 2005, China lagged behind the US, Japan, Europe, and Korea.

In 2011 China surpassed the US in its total number of patent applications. By 2016 it had filed almost twice as many applications as the US, despite a significant uptick from American tech entrepreneurs.

Faber had a lot more to say about China. And he offered a lot of insight into Asia’s other emerging markets. Far more than I can share with you here.

But we recorded his every word. And every other presentation, break out session and one-on-one interview at the ‘Paradox of Prosperity’ conference. The film crew we hired is finalising the edits now. I’ll let you know when that’s available.

In the meantime, our in-house small-cap analyst, Harje Ronngard, has been all over the investment potential thrown up by China’s booming tech sector. Not by investing in Chinese companies though. But rather by investing in small Aussie companies that stand to see their share prices rocket in line with China’s tech industry.

In fact, that’s the focus of his brand new advisory service, Wealth Eruption. The service launched on 1 May, two weeks ago today.

Since then Harje’s made five ASX-listed recommendations to ride the Chinese tech surge. As of yesterday, four were in the black and one was showing a small loss. The total return for the five stocks he’s recommended to date is 11.78%. And remember, that’s in just two weeks.

Now he’s got his eye on a new stock. As he wrote to his subscribers yesterday:

It’s a stock I really believe could be a part of the future, as China continues to roll out technology all over the world. You should receive that next week Tuesday, so keep an eye on your inbox.’

If you haven’t taken the time to check out Wealth Eruption yet, you can find out all about Port Phillip Publishing’s newest small-cap advisory service here.

In case you missed it…

While we’ve been busy looking at international markets, and a possible peace accord for the Koreas, the Australian stock market has been quietly hitting new weekly highs.

At time of writing the ASX/200 is down 0.49% in intraday trading. But this morning’s open, at 6,135 points, is the highest level for the index since early January 2008.

That represents a gain of 106.6% since the low on 6 March 2009. And as you can see on the graph below, it’s up a solid 5.0% in the last month.

chart image

Source: Google Finance
Click to enlarge

How much higher can it run this year?

Veteran analyst Sam Volkering believes ‘a lot’. You can find out about his favourite plays in the market here.

Now before you log off, you might enjoy Hillary Clinton’s latest antics from The Australian Tribune:

Bitter Hillary Clinton Won’t Credit Trump on North Korea Progress

Losing the US presidential election to Donald Trump was a bitter pill for Hillary Clinton to swallow.

And she doesn’t appear to have gotten it down her gullet yet.

She’s written a book about her loss to ‘the Donald’ titled What Happened. She’s toured the world and talked about how hard it’s been to get back on her feet. She’s blamed sexism, populism, the Russians…

If you’re fed up with politically correct information, cut and pasted from one mainstream source to another then The Australian Tribune is for you.

And it’s absolutely free.

Sign up here to get The Australian Tribune delivered free to your inbox five days per week.

You can visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above now.

That’s all for today.

Thoughts…questions…comments?  Drop us an email at letters@portphillipinsider.com.au. If we publish your letter we’ll only use your first name.