Stock market investment blog

Investing in China – Do you know enough to invest successfully?

In this article, we'll look at US stocks with exposure to China as a possible alternative to directly investing in the Chinese market where information can be difficult to find.

Do you know enough to invest intelligently in China or any other foreign market for that matter? It depends. Are you doing your research? And if so, who are your sources and who are their sources? Media is difficult enough to trust on government actions in our own country, much less a burgeoning economy still building regulations.

Having said that, however, China’s economy grew by 9.5% and is expected to drop only to 8.5% in 2005 and then to 8.0% in 2006. Despite the fact that the growth is expected to decrease, it is still growth and therefore a money making venture. In fact, IMF has said that growth around the world is dependent on China as well as the United States.

The problem is that even in the United States, investors rarely rely on bits of information culled from the new when making investment decisions. They go online and examine quarterly reports and annual reports that US companies are required to file with the Security Exchange Commission. There are investment magazines and web sites and newspaper sections devoted to changes in corporations and their alliances. Do you have access to any of that information on any Chinese companies? And if you did, do you speak Mandarin or whichever Chinese dialect that the information is published in?

Chinese companies that open IPOs here are required by the SEC to file the same reports as a US company. If that is the case, then you do have access to some of their earning reports. However, China’s expansion is so new that chances are that you won’t find much of a history to research.

If you would still like to cash in on the great expanding Chinese economy, try something closer to home. There are plenty of American companies with a great deal of presence in China and around the world. You have well performing stocks including McDonald’s (NYSE: MCD), Coca-Cola (NYSE: KO), Microsoft (NASDAQ: MSFT), and Intel (NASDAQ: INTC) among many others to choose from.

A good idea is to limit any foreign investments to under 15% of your portfolio to mitigate unexpected losses. However, US companies like Microsoft would not normally be counted against that 15%. As always, remember that diversity is important for any investment plan but especially necessary when foreign markets are concerned, including China.