Reading Chinese tea leaves

No, this is not the method I use to foresee good investment opportunities. For this, I depend more on my financial education and current analysis of future trends. I'll give you my thoughts on an easy idea that may help you save enough money to enjoy the best teas during your retirement.

The first fact is that ETFs are probably the most cost-efficient way to invest in the stock market and get a fair return (not much more or less than the index). Just bear in mind that 80% of the professionals stock pickers don't beat the market, and you'll understand why they become so popular.

The second fact is that China has been booming for 20 years and will probably continue to do so for a number of years. Growth has averaged 9 percent and its economy will overtake the US in 25 years. Actually, it is already the second economy in terms of consumption of physical goods. There may be a fever associated with China's rise and the growth will also know bumps, but the trend is based on the whole eastern coast and not just on a (silicon) valley like in 2000 in the US.

The third fact, is that China is now facing such a bump in its equity markets. On June 3, 2005, they hit a 8 year low. The Chinese State wants to privatize more companies (without relinquishing its power). Investors don't want to risk their money without having a say in the business. Liberalization can't be partial. Eventually, the government will have to go all the way to keep the growth going.

The last fact is that the Chinese currency is widely looked at as undervalued. It seems the US is determined to make the RenMinBi flexible, even if it means reducing Americans' purchasing power. This means that Chinese tea is posed to become more expensive in the future.

My financial advice for Chinese tea lovers is to get exposure to the Chinese growth and currency now that the stock market is reasonably valued. Barclay's has a Chinese ETF that can let you do so cheaply.

Disclosures: I'm not -yet- a owner of this ETF. Living in Taiwan, I find that Taiwan's ETF 50, where I own a few shares, already gives me some exposure to China. I am not related to the Chinese government in any way, and not to Barclay's either!!