ETFs to Benefit from Growth in the Dim Sum Bonds Markets

Feb. 29, 2012 - PRLog -- Aided by its large population, China has been the fastest-growing major economy for the past 30 years, with average annual GDP growth of more than 8%. Private consumption has the biggest contributor to China’s GDP. Retail sales have been climbing into double digits. Additionally, the country’s government debt is relatively small at about 20 percent of GDP, which means that a lot can be accomplished without straining the system.
Companies have been taking advantage of the booming growth in China’s economy by issuing record levels of corporate debt to finance expansion plans.  The return on these bonds is often offered at more attractive rates than available elsewhere on a risk adjusted basis.

Although this new market presents opportunities for investors, risk must still be taken into consideration. For instance, dim sum bonds behave very differently from onshore RMB bonds. Besides having lower yields, their prices often move in the opposite direction of domestic Chinese bonds. On the other hand, the eventual appreciation of the RMB will reward investors, although the timing of this development is further away.

The findings are the result of a continuing investigation into ETF stocks and investments by industry analyst Benjamin Shepherd for his investment advisory service, Global ETF Profits. The results are summarized in his refreshed report, Top ETFs to Own Now–one of the 15 special investment advisory reports presently available for free on InvestingDaily.com.

“It’s interesting to see this resilience in Chinese consumption, especially as the global economy remains fragile. And because of strong wage growth, higher inflation and governmental efforts to stimulate domestic demand, expect this trend to continue” said report author, Benjamin Shepherd.

The report also states that although this new market presents opportunities for investors, risk must still be taken into consideration. Dim sum bonds behave very differently from onshore RMB bonds. Besides having lower yields, their prices often move in the opposite direction of domestic Chinese bonds. On the other hand, the report concludes that the eventual appreciation of the RMB will reward investors, although the timing of this development is further away.

“We believe that this market provides an interesting opportunity for global investors. We updated our report to provide individual investors with a comprehensive guide that will allow them to invest confidently in this growing market through ETFs” added Benjamin Shepherd.

In addition to including a new ETF stock pick to reflect the growing Dim Sum Bonds market, the report also maintains buy recommendations on four other ETF stocks picks in various sectors.

The report can be accessed by visiting: http://www.investingdaily.com/glp/31287/Top-ETFs-for-2010...

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