An asset that never decreases in value is an investor’s holy grail. Few find it. But it exists in Asia, and right now, it’s the best time to buy it. In China, the government (the Party) controls the economy, including the country’s capital market. That’s the stock market, the bond market and the banking system. “Stability” is the Party’s priority. Under these conditions, default risk in China’s bond market falls to zero. As an investor, Chinese bonds are your free lunch: high yields, with zero downside risk. High yields Chinese […]

As the U.S. retreats from the world stage, China is concocting a powerful policy cocktail to boost global trade and security in its favor. Behind China’s trillion-dollar One Belt, One Road initiative is a lending program of unprecedented breadth and investment opportunities are opening up in everything from transportation and industrial manufacturing to healthcare and telecommunications. But can China afford it? Absolutely.  Over its 5,000 year history, China has seen extreme periods of wealth. One of those periods was during the Han dynasty. “The granaries in all the towns are […]

Welcome to the latest edition of The Great Investment Frontier (TGIF) report. So far in this series, we’ve uncovered the tensions and tipping points in the South China Sea, and how the United States and China are using all the weapons at their disposal in this global power struggle… from debt and credit to conventional weapons and digital espionage. This week, we delve into the future of trade in the region… and pick through the wreckage of what would have been one of the biggest trade deals on earth (until […]

If you’re not invested in Asia’s banking sector, you are missing out. But with so many state-owned banks in the region, how do you know which banks make good investments? In this article, we’ll tell you where Asia’s banks are headed and three things to watch out for when investing your hard earned cash.   If you’re thinking about adding Asian stocks to your portfolio, this article is a must read. Traditional sources of revenue declining in Asia Normally, banks get most of their revenue from receiving deposits and granting […]

Governments in Asia intervene in the market – a lot. China, the region’s largest economy, is no exception. It has a long history of planning (and distorting) its economy. Despite the many problems that originate from governments trying to control markets, not to mention the moral dubious events that go along with these actions, choosing to invest in sectors that a government ‘attempts’ to grow is a reliable way to gain profits. Recently, China has begun rebooting its agricultural industry, with tremendous public and private investment flowing into this sector. […]

China’s rags to riches story is the envy of every developing country. In fact, China’s massive population and total economic product makes it the largest emerging market. China is also considered the world’s heavyweight for manufacturing and industrial production. These sectors account for 40 percent of its GDP. China is undoubtedly the top dog for exporting and second for global importing. And don’t forget, the planet’s fast-growing consumer market lives in China too. Feeling intimidated yet? If China’s economic growth was a person, it would be Usain Bolt. As the […]

The race of the century is happening right now – investors everywhere are fighting to be the first to “crack” the Asian investment code. In order to win big in the world’s most dynamic market, you need the right tools of analysis. We call these models – they are how we think and how we understand the world. They help make economics and finance simple. We use models in our approach because the systems so commonly used in the West are basically meaningless when applied to the East. Let us […]

Capital markets: the bread and butter of every economy. Without them, you couldn’t buy a stock or bond, or take out a bank loan. They drive job creation, innovation and financial security. Most importantly, they drive economic growth. Just as we’ve written how Asia Pacific’s development model, debt composition and banking system are very different from the West’s, capital markets in Asia have their own unique flavor, too. In this series, we’ll deconstruct Asia’s curious capital markets, show you who owns them and where “money lying in the corner” opportunities […]

Competition within China’s banking sector and majority foreign ownership of Chinese banking assets were unimaginable events a decade ago. But last week – coinciding with Trump’s tour de Asia – they became reality. Investor’s worldwide are taking notice; it’s time to buy China’s financial sector. On November 10, 2017, the day that U.S. President Trump left China, (following a high profile visit with Chinese Head of State, Xi Jingping) it took a huge step toward opening its financial system. Officials announced that the country will remove foreign ownership limits on […]

Welcome to the first edition of The Great Investment Frontier report (TGIF). Each week, we’ll be taking a look at one of the global issues shaping the world of international finance and investment. Over a series of 10 articles (1 every Friday), we’ll go behind the scenes to uncover the secret trends and shadowy figures behind enormous global capital flows. And show how to profit. The first of our “special reports” looks at one of the most combustible and war-torn regions on earth. It’s home to some of the fastest-growing […]

Many Western investors have totally misunderstood Asia. Even those within the area have difficulty grasping regional differences. The old ways of investing that made billions on Wall Street don’t work here. Economies in Asia have grown differently from the rest of the world, and so have their stock markets. A new world order is being created and must be understood, otherwise you are in for a rough time. Whether you are an individual investor, financial services expert or government policy maker, it’s vital to understand how Asian economies are built; […]

By now you’ll have realized that banking in Asia is quite a different animal from the traditional western beast. Let’s recap on what we’ve learned from this series of publications. First, it’s important to understand that big business in Asia depends more on banks than other areas of the world. Since capital markets are immature and underdeveloped in this region, Asian industry relies heavily on bank credit to support operating activities. Dependence on state-owned financial institutions for capital stems from government-backed banking reform. This is integral to executing an Asian Capital […]

Governments interfere with the free market, and Northeast Asian governments are serial offenders. But one secret tool of manipulation isn’t even mentioned as official policy. So what is it? And how does it affect your portfolio? Well, if you are investing in Asia, understanding ‘window guidance’ is key to making informed decisions. How did this powerful instrument of governance come into being? Survivors of the nuclear bombings in Hiroshima and Nagasaki remember the event as a living hell on earth. With burn scars for life from the explosions, Sunao Tsuboi told the […]

In the last few decades, Asian manufacturing companies have dominated the international playing field. Now, it seems everything is made in Asia. But it wasn’t the free market that created the region’s global behemoths. It was governments. And they’re trying to do it again, but this time in services. In this article, we’ll tell you all about Asia’s secret “battle plan” for market domination, so you can get ahead of the investment curve. The most important thing to know about Asia is that free market rules do not apply. Governments […]

Picture the “average Joe”. He has a regular job and earns a decent wage. He has a house in the suburbs and a college diploma. He has a car in the garage and a set of golf clubs in the trunk. But the house is mortgaged and the car is leased. His student loan is still being repaid. And the golf clubs were bought on credit. Like most of us, he has debt. In good times, this isn’t a problem. Joe earns enough to service the debt and still put […]

Capital markets are the natural choice for large corporations looking to raise funds for expansion. This, however, can only occur in countries with advanced financial systems. In places where capital markets are underdeveloped, often the only option for financing is from large state-controlled banks. There is growing concern over the levels of bad debt Asian banking institutions are incurring as they attempt to satisfy corporate credit demand.  Governments typically have large stakes in these banking enterprises, and the institutions’ sheer size means that any failure would create widespread economic catastrophe. […]

When an economy is closed, the government can exert more control over the economy and “manage” its growth. But directed economies have small bond and stock markets, which hamper long-term economic performance. Eventually, capital restrictions must be lifted and usually an influx of foreign capital follows. We’re seeing this happening in China now. To build something great, conditions must be controlled. China’s famous (or infamous, depending on who you talk to) Three Gorges Dam is a modern feat of hydroelectric construction. Taking almost a decade to complete, the 600km-long reservoir reached its […]

Time and time again, centrally-planned economies have led to market distortion, inefficiencies, and even bankruptcy. Asia’s economies have a lot of government intervention, mainly in the form of state-owned enterprises and subsidies. As we shall discuss in today’s daily, subsidies can be an indication of which sectors or companies act as bloated debt whales, dragging the economy down. Avoiding these credit-dependent Moby Dicks is vitally important when investing in Asia. The paradox of planned economies It wasn’t the Cold War or an arms race that ultimately finished the Soviet Union. […]

We hope that you enjoyed our series on capital markets in Asia. They’re the bread and butter of every economy. Without them, you couldn’t buy a stock or bond, or take out a bank loan. They drive job creation, innovation and financial security. Most importantly, they drive economic growth. Just as we’ve written how Asia Pacific’s development model, debt composition and banking system are very different from the West’s, capital markets in Asia have their own unique flavor, too. In this series, we’ve shown you who owns Asia’ s capital […]

Over the past few decades, mainland China has created and implemented a unique set of policies that have transformed the economy from poverty-stricken to second largest in the world. But bureaucrats in Beijing don’t deserve all the credit. A special “gift” from the U.K. was key to funding China’s impressive growth story. When Prince Charles and the then-U.K.-prime minister Tony Blair traveled to Hong Kong in 1997 to return the city to Beijing, they weren’t giving back the same fishing village their predecessors had colonized 156 years ago. Under British […]

Chinese banks aren’t internationally competitive. Years of protective isolation has produced institutions wholly reliant on government-orchestrated instruction and support. But cracks are already starting to appear in the country’s financial infrastructure. And when a financial earthquake does come, China’s system will be shaken to its core. Ahead, we’ll tell you about an upcoming “tremor”. On May 12, 2008 a magnitude 8.0 quake struck southwestern China, destroying several villages in Sichuan Province. Surprisingly, it wasn’t the quake itself that killed more than 70,000 and left another 18,000 missing … it was […]

If you look at the regional leaders in Asia, almost all have gone through serious social reform. Agriculture and banking were built together to strengthen economic foundations, but land reform created a singular moment, defining both where the region stands today and the places that have the highest growth.   You Own Your Home In the West, property rights are taken for granted. It may come as a surprise that only recently the trend was adopted in Asia. It is a major factor driving regional GDP growth. We may see our […]

Welcome to the latest edition of The Great Investment Frontier (TGIF) report. So far in this series we’ve seen how tensions in the South China Sea are bubbling closer to the surface as old peace treaties become ever more fragile. The rising power of China and the aggression of North Korea have brought the region to the brink and created an unprecedented arms race. Now, the world holds its breath… But if a full-blown conflict is the last resort… and if China dumping the dollar does not lead to a […]

China, China, China. The word is almost as inescapable as “Trump” in today’s world. And yet, to many, the massive country and its rising economy remain a mystery. Mystery or not, leaving China out of your portfolio is a big mistake. We at One Road Research know it can be hard to understand, let alone trust, opportunities in China. But that’s why we’re here to help you with the cross-over. So you can make informed and profitable investment decisions in the times ahead. After finishing up our series on capital […]

Welcome to the latest edition of The Great Investment Frontier (TGIF) report. This is the penultimate edition of our special series on the South China Sea.  It comes as U.S. President Donald Trump finished his tour of Asia – the longest official tour of the region since George H.W. Bush in 1992. And it brought the issues we’ve been discussing over the past few weeks to a head. This week, we catch up on the president’s visit to Asia… and what it means for trade and investment in the region. […]

What Happens to Debt During Periods of War? We’ve talked before about how many governments around the world play fast and loose with public finances. In many democracies, money creation and government spending is often utilized as a political tool to enhance party popularity and retain office. However, this just amounts to bribing people with their own hard-earned cash. But what type of situation forces a government to borrow at levels higher than could ever be suggested in party manifestos or infrastructure plans? The answer is, of course, all-out war! […]

Asia’s recent economic boom has been debt-fuelled and much of the credit has been directed toward unprofitable companies and banks. In order to write off the bad debt, governments manipulate interest rate margins using capital controls. But like all rules, people are figuring out ways around them and it’s weakening the foundation of an already stressed financial system – fundamentally changing the way we invest in the region’s largest economy. China’s Debt Disappearing Act We’ve previously talked about how governments in Asia, especially in China, use wide interest margins to […]

This is the second edition of our TGIF series covering One Belt, One Road (OBOR), China’s trillion-dollar plan to take over Asia and beyond. OBOR is an extensive long-term infrastructure initiative modernizing the original Silk Road trading routes that made China one of the world’s superpowers many, many years ago. Billion-dollar contracts are being handed out to companies around the world. By investing in these companies, your portfolio can grow with the largest infrastructure project the world has ever seen. If you missed the first OBOR story, click here, to […]

What if one-fifth of your country’s economy was unproductive and corrupt? In the U.S., for example, that would be like the financial and property sectors combined – dragging the economy down. In China, this is really happening. About 20 percent of China’s economic output comes from State-Owned Enterprises (SOEs). SOEs worldwide are notorious for being inefficient, corrupt and poorly managed. So it’s no surprise that they have worryingly high debt levels and decreasing returns. Overhauling the inefficient state sector is Beijing’s toughest challenge as it seeks to revive a slowing […]

China is where patents go to die. If you walk down any street in China, you’re likely to see fake Prada bags, counterfeit Rolex watches and Apple products that aren’t really made by Apple. More than half of the world’s counterfeit goods originate from China — a big chunk of an industry worth half a trillion dollars per year. In the midst of so much deception, it’s a fair question to ask if China’s stock market – with a market cap of almost US$10 trillion is real … or simulated. […]

When we think of money we see coins or dollar bills, but these are only mere mediums placing a tangible value on debt. Many believe that money is created by the government or a Central Bank to keep up with the growth of goods and services within an economy. However, the majority of funds within our societies are borne through commercial banks, each and every time they issue a debt based product, such as a home loan, overdraft or credit card. Money being created from thin air may seem a […]

Part of the difference in prosperity between Northeast and Southeast Asian economies boils down to whether their leaders – at pivotal points in economic development – read the right books or not. Despite public confidence, some people are just not up to the task at hand. In our following article we’ll outline the mistakes aplenty made in SE Asia and of course, how to find investment opportunities despite botched government policies. A Lack Of Focus Really, what happened to make Northeast Asia’s economic miracles and Southeast Asia’s paper tigers so […]

The world has come a long way since the 1950s when American parents would say “eat your food, there are starving children in China”. Chinese economic growth hit the world like an asteroid crashing into prehistoric times: with unexpected speed and astonishing, world-altering results. An underdeveloped country, characterized by mass hunger, took over the world’s production. It became an economic powerhouse in less than fifty years. China has the fastest, sustained growth rate of any large nation, ever. What is its secret?   China has three major circumstances to thank […]

Welcome to the latest edition of The Great Investment Frontier (TGIF) report. This week, we go undercover in the world of secret digital espionage… and show how to profit from hackers. The world is full of David and Goliath stories. Tales of underdogs triumphing against the odds. Over the centuries, determined soldiers have overcome much larger opponents. The movie business makes millions from this familiar trope. But most of the time, the strongest kid in school tends to take the most lunch money. So how can small forces hope to […]

Throughout our daily lives we are constantly bombarded with news headlines featuring stories of death, destruction and natural disaster. But some argue that there is a silver lining to misery. A country must be rebuilt, after all, boosting economic productivity and growth. Indeed, powerful manufacturing economies have emerged from the ashes, like Japan, South Korea and even America. But does it really mean that disasters are actually an economic benefit? The Broken Window Parable Someone breaks a shopkeeper’s window. Angry, the shopkeeper must buy a new window. But a crowd of people […]

The concept of ‘Path Dependence’ explains how our current decision making capabilities and shaped by previous events and experiences, even though past happenings may no longer be applicable. At One Road Research, we have deciphered that the path to the supposed economic prosperity in Asia is dependent and deeply rooted in the origins of the state, central banks and banking reform. Asia presents hybrid features of commercial banks, and the power of the state to intervene in the economy to orchestrate positive economic outcomes. It should also be noted that […]

The One Road Podcast, broadcasting financial streams of consciousness One Road Podcast uses relevant excerpts from Peter Pham’s excellent Big Trade podcast series and combines the excerpts into a nuanced take on our investment newsletter content. Who could have thought that games would have so much in common with our economic systems! On this unique One Road Podcast, Peter speaks with Ole Bjerg about the parallels between poker and capitalism. Following a discussion on the history of the two and how they are related, Ole speaks about what makes a […]

Welcome to the second series of The Great Investment Frontier report (TGIF). Each week, we’ll be taking a look at one of the global issues shaping the world of international finance and investment. Over a series of 10 articles (1 every Friday), we’ll go behind the scenes to uncover the secret trends and shadowy figures behind enormous global capital flows. And show you how to profit. Our previous series helped our readers position their portfolio to gain from conflict in the South China Sea. If you missed it, click here. This […]

Many foreign investors dream about setting up shop and expanding their activities in China’s booming economy. But that’s easier said than done. In China, some industries are riddled with obstacles and restrictions for foreign investors. The best-known restrictions are the so-called “Sino-Foreign joint venture only” rule and the “majority Chinese ownership or Chinese party controlling” rule. The former prevents a foreign investor from carrying out their business without a Chinese partner to create a joint venture. The latter prohibits foreign investors from holding more than 50 percent of a company’s […]

As we discussed in our previous daily, Japan’s debt is in uncharted territory. By now you know that the government’s dependence on debt is fueled by its insistence that the Japanese population continue to purchase JGB’s (Japanese Government Bonds). In contrast to other developed countries, the Japanese private sector enables the government to borrow and spend like ‘a drunken sailor’ via a ceaseless acquisition of new debt issuances. On its current trajectory, it won’t be long until nearly all of the private wealth held in Japan is contained in the form of […]

We are concluding our series on China’s incredible growth and it’s subsequent investment opportunities. Throughout this series, we have provided the essential tools and information you’ll need to invest in China’s opening economy wisely and proficiently! But let’s just take a second to recap what we learned from the series: As you know, China rose from extreme poverty to become the second largest economy on Earth. The country has the fastest, sustained growth rate of any large nation, ever. China engineered its economic growth by implementing ACD policies. It strategically […]

Answers are no longer important – A.I and search engines hand them out for free. But questions… questions are the real source of information. From your question we can discern quite a lot about you. At One Road Research, our approach begins with inquiry-based learning. It is the questions themselves and their quality that determines what you know and need to learn more about. Having worked in various financial institutions over the years, we have become continually frustrated with how daily articles and reports are released and disseminated. Far too […]

As a result of huge amounts of government spending and private speculation in the 1990s, the so-called ‘tiger economies’ in Asia started to overheat. Sectors and industries that received a lot of money – hot spots – bubbled on foreign debt. These developing economies were over-exposed to the international money markets and when things took a turn for the worse, the ‘tigers’ crashed. In the end, their stock markets and currencies lost about 70% of their value. But if you got into the market at the right time, you could […]

Most of us go through life thinking capital is money. But this isn’t true, and misunderstanding the concept of capital will hurt your portfolio, especially if you invest in Asia. In the East, capital still needs to be “unlocked” and this requires either private ownership or ownership by the state. Western countries have gone through this process, whereas developing countries are just catching up. In Asia, private property ownership takes on a whole new meaning. In this article we’ll tell you how Asia is just starting to build its wealth.

The fundamental concept of debt is understood by relatively few individuals. This may strike you as strange seeing as everyone on the planet deals with it on a daily basis. In this article we want to let you in on a simple secret that many financial experts and scholars fail to incorporate into their investment decision making, either through lack of understanding or alternatively, by consciously ignoring it. Throughout this article we will reveal how the money in your pocket is effectively a debt coupon that relies solely on your confidence in the […]

A fair warning to our readers: The term ‘financial repression’ is going to be mentioned a lot throughout our upcoming publications. It is essential that you have a solid understanding of this practice, as its influences have global implications The biggest offenders of financial repression in Asia are undoubtedly Japan and China. But the way in which they run their economies is at opposite sides of the spectrum. The term was first coined by Stanford economists Edward S. Shaw and Ronald I. McKinnon. Simply put, it means that governments effectively rob the private […]

What do salt, cheese and cocoa have in common? Yes, all of them are edible. And, over the centuries, all of them have been used as currencies. In the Middle Ages, salt was used throughout East Africa. The Aztecs spent cocoa beans, which were considered more valuable than gold. And since 1953, Italian bank Credito Emiliano has accepted parmigiana cheese as collateral. (One cheese wheel is worth around US$350). In Asia, tea bricks were used in China, Mongolia and Tibet; and right up until World War II in parts of Siberia. Some […]

The economic balance of power is shifting from West to East. Global investment is in chaos. While the mainstream media, investment firms and wealth managers play “catch up”, now is the best time to get ahead of the pack and buy Asia. Undiscovered equities in the region are due for major growth. Indeed, many are already growing. But to understand why the next 100 years of investment will be in this region, we need to know the origin of Asia’s wealth.  Let’s step back to see why Asia was the […]

Welcome to the second edition of The Great Investment Frontier (TGIF) report. (Missed the first edition? You can catch up here.) This week, we’re continuing our in-depth look at conflict in the South China Sea. The South China Sea is bathed in blood. For centuries, the region has been home to some of the deadliest conflicts on earth…  from genocidal purges of the Khmer Rouge to nuclear mushroom clouds over Japan and British occupation during the colonial era. Countries in the South China Sea have been invaded, colonised, liberated… and […]

Unlike open economies, China’s mainland stock markets in Shenzhen and Shanghai don’t capture the value of the country’s tremendous growth story. Lax regulation, speculation and a heavy government hand all make Chinese markets risky places to invest. After years of waiting, the world’s most important index provider, MSCI decided to include mainland Chinese stocks in its index, starting in 2018. That’s a huge deal. MSCI’s decisions affect trillions of dollars of trading in the stock market. Fund managers and investors use MSCI-controlled indexes as a benchmark to build exchange traded […]

China’s entire financial system is held together by (1) the confidence of its citizens, (2) high private savings, and (3) monetary control. It’s in China’s interest to keep these pillars intact. But as its citizens become wealthier and forces abroad threaten its closed economic system, cracks are starting to show.   Huo zai dang xia: “living in the moment” Today’s global financial system is almost wholly reliant on the heroic savings rates of the Chinese people. But younger generations are racking up more debt. Instead of following in their parents’ […]

When a product has a “Made in China” tag, what do you think? Most people think of low-quality, low-cost production. But that’s all about to change. The Chinese government wants to upgrade China’s image abroad. Beijing no longer desires to mass-produce cheap goods for the world. It wants to be known for quality, innovation and new technology. Here’s how they’re doing it… and how to invest in China 2.0.   Moving up the value chain Industrializing countries across the world tend to move from low-cost into high-quality manufacturing. This was […]

Tech giants like Google, Apple and Facebook might seem completely cemented into today’s world. But what if I told you their global tech monopoly is actually wavering? The tech beasts of the West are being stalked by Eastern tigers, positioning themselves to become the new kings of the internet jungle.   Chinese tech stocks are incredibly profitable investments. Returns are soaring and there’s no end in sight for continued growth in China’s “new economy” – led by booming tech and service sectors. Not even wildcard President Trump can stop this […]

MSCI announced last year that it will be adding mainland Chinese stocks (A-shares) to its Emerging Markets Index for the first time, ever. History shows that a country’s market usually pops after it joins MSCI’s elite club of emerging markets. Skyline of modern buildings in Beijing’s Central Business District at dusk. Expect more buildings like this popping up across China’s major cities. (Shutterstock) China is one step closer to joining the global financial elite Four years ago, China began negotiations with MSCI to join the Emerging Markets (EM) Index. They […]

Asian countries – especially China – have been hesitant to adopt free markets. They are unstable and difficult to manage. As the West’s liberal free trade policies that set the stage for yesteryear’s economic growth burn out, a new economic order – engineered by China – will shape the next century of investment. Innovation will be controlled… economic growth will look different… and there will be a challenging force to U.S. military dominance – all for Asia’s benefit. But there’s plenty of room for profit. Before there was Galileo or […]

Since China’s stock market debut in the early 1990s, hundreds of billions of foreign dollars have flown into Chinese companies. While some observers cite the vast amount as a sign that China’s capital markets are “modernizing”, in reality, it’s merely the Party’s ploy to fund China’s cash-strapped state-owned economy. In the 1980s China had a big problem. The government had magnificent plans to build 22 major industrial projects, but couldn’t pay for them. Neither the national budget nor China’s banking system had enough capital to fund all of the projects. […]

The Great Investment Frontier report (TGIF) looks at global issues shaping the world of international finance and investment. Over a series of 10 articles (1 every Friday), we go behind the scenes to uncover the secret trends and shadowy figures behind enormous global capital flows. And show you how to profit. We just finished our first TGIF series on the South China Sea, one of the most combustible and war-torn regions on earth. Sandwiched between Hong Kong to the north, the Philippines to the east and Vietnam to the west, the […]

Japan, one of the world’s most influential and developed nations, is carrying a colossal debt burden on its shoulders. With a debt figure estimated to be around 233% of GDP, it is the most indebted country in the world. The next highest country is Greece with 177% – it almost looks small in comparison. With these eye-watering levels of debt, you’d expect that Japan would be an investment ‘leper,’ with foreign direct investment (FDI) avoiding this fragile and debt-infected economy at all costs. We’ve observed debt levels climbing consistently since […]

Capital markets are like soy sauce, both need the right ingredients and time to “ferment”. But Asia’s capital markets are young and missing an ingredient or two. That means bank loans – not the stock or bond markets – are primary capital-raising sources. This is very different from older markets in places like Europe and the U.S. And it affects how you invest. As the salty legend goes… about 750 years ago a Japanese priest arrived in the small coastal town of Yuasa, Japan after a trip to China, bringing […]

Investment is pouring into a young island republic in Asia. But the country is going bankrupt spending on state of the art development projects, seemingly as these ‘hot sectors’ are not paying off. In this article we’ll tell you why as well as mention opportunities in a region plagued by big government. Right now, we are seeing a lot of public and private investment flow into several sectors in a small emerging market just off the coast of Australia; a country called Timor-Leste. But is the potential of profit real? […]

Asia’s banking system has been integral to the region’s “economic miracle”.  Since banks play such a huge role in the each country’s economy, they have become uniquely safe investments in emerging markets. And nowhere, has this been more apparent than in China. Banks are an arm of the government As we’ve written before, China’s government directs state-owned banks to lend to companies in strategic sectors of the economy. This is system is called Asia Capital Development (ACD) and can be viewed as a “blueprint” for economic growth. Due to banks […]

In the race to become Asia’s most important financial center, Hong Kong and Singapore are neck and neck. But one is pulling ahead. The growth engine behind each economy will determine which stock exchange will win. Asia is a battleground. When the Warring States Period ended in Japan, the country unified under the samurai lord Hideyoshi. His first goal was to conquer Ming China via Korea in 1592. Each army was roughly equal, except in naval power. Japan’s army depended on the navy for supplies, which the Koreans quickly exploited […]

In the ultra-competitive world of global finance, big banks hold the balance of power across many countries. The biggest influencers of all, however, are the central and global banks, such as the International Monetary Fund (IMF) and the World Bank. In future publications we’ll be explaining in detail how these organizations, through the rules of the ‘Washington Consensus’ (effectively Western Civilization’s guide to economic development) attempt to exert influence on developing Asian nations. Also, please look out for our special report on the series of publications under the title of […]

Previously, we talked about how (at first) the state, not the free market, is the backbone of successful economic growth. Like learning to ride a bike: first, a kid needs to practice with training wheels before he can ride on his own. And even when he’s confident on two wheels, it’s going to be some time before he can compete with older children. In this article, we’ll show how Japan, South Korea and Taiwan succeeded on the global stage while their neighbors struggled. What was the secret to their success? […]

For better or worse, central banks drive economies. Understanding who controls them, what they wish to accomplish and how they work are the first steps you should take to become a better investor. But central banks aren’t all created equal. Asian governments tend to have a tighter grip on them than we are used to in the West. The awkward couple Central banks dictate how economies work. But governments do, too. Sometimes, they have opposite goals – making them uncomfortable bedfellows. The main role of central banks is to try […]

We hope that you enjoyed our series on debt and credit. Now that you understand how money and debt creation are the fuel for economic growth and prosperity, you can change your investment strategy to capitalize on this insider knowledge. We’ve described to you how money is created through debt, a concept that many individuals working in high finance fail to fully grasp. Knowing that paper money is merely a token of exchange that relies solely on the faith of the user to ensure it maintains value is the ‘holy […]

Welcome to the latest edition of The Great Investment Frontier (TGIF) report. So far in this series we’ve talked about rising tensions in the South China Sea and how this has led to an escalating arms race in the region. But while an outbreak of armed conflict is possible… it’s not preferable. No one wants more bloodshed. Not least because militaries don’t come cheap. And China has a far more effective weapon at its disposal in shifting the balance of power – capital and debt. China is Rising China’s economic […]

China’s US$9 trillion bond market recently opened to foreign investors, but many people make the mistake of thinking China’s debt market is developed and prices are based on supply and demand. It’s not. In fact, bond markets across the region are designed for and by governments.   If you own a business in a developed economy like the U.S. and need to raise capital, you can take out a loan from a bank, issue a bond or list your company on the stock exchange. But if you’re a business owner […]

Stocks, bonds, and bank loans usually fall under a mixture of public and private control in Western countries. In Asia, the government controls all capital-raising routes. Last time we discussed how a capital market – that includes the bond and stock market as well as bank lending – needs the right “ingredients” and amount of time to fully develop. We also talked about how government intervention has made stock and bond markets in Asia unusually small sources of capital and the amount of bank loans in the system extraordinarily large. […]

Investors around the world have their eyes on China’s bond market, which is the third largest in the world. But it’s undeveloped and operates like no bond market you’ve ever seen before. To safely expose your portfolio to the world’s most exciting marketplace, you need to know who controls the bonds and what they want. When the sponsors of Yizheng Chemical Fiber project approached the Chinese government for funding in 1980, they didn’t realize they were kick-starting the country’s bond market. The ambitious development project desperately needed capital. At that […]

Welcome to the latest edition of The Great Investment Frontier (TGIF) report. This week, we look at how rising tension in the South China Sea has led to a spending spree on arms across the region… and bumper profits for defense companies at home and abroad. China’s growing assertiveness in the South China Sea is giving its neighbours sleepless nights. Vietnam, Japan and the other countries claiming parts of the region are spending more and more to upgrade their armed forces. And U.S. defense companies are cashing in. U.S. defense […]

China’s banking sector is the largest in the world. But it’s undeveloped and slow to “open”. That makes investing in this sector extraordinarily difficult, especially if you aren’t from China. After a lot of digging, we’ve uncovered a few banking gems – both domestic and foreign – that you can add to your portfolio. Hemmed in by Chinese government regulation, foreign banks are heeding the ancient advice of military tactician Sun Tzu, strategically aligning their (weaker) forces to take on China’s big boys in banking. Here’s who’s winning so far […]

Usually when stock markets boom, everyone is excited. Feverish enthusiasm accompanied soaring stock prices in Asia Pacific as the emerging tiger economies took off in the 1990s. Today, despite assets in Asia Pacific and around the world being in the midst of another bull run, you’d be hard pressed to find the same fervor. You can see in the graphs below that both stock and housing prices across Asia Pacific are up.   Chinese housing prices are the only exception. The country’s property bubble burst in 2007 and has been […]

Following government orders, central banks and commercial banks worked together to make the “Asian Miracle” happen. Over the past few decades, Asian economies have all seen double-digit GDP growth and relatively stable political regimes. But in the process, they’ve bailed out the bad guys, muzzled entrepreneurs and forced taxpayers to pick up the tab. How central banks work The majority of commercial banks in Asia are technically “independent” except for some cases in China and Vietnam. At times, they can rise above the government and partner with non-democratically elected entities […]

The economic miracle that took place in Asia has been widely documented. Living standards increased dramatically, with the number of people living on less than $2 USD per day falling by a half. Average incomes in Asia rose rapidly, in some areas by a factor of 100% and in others as much as 400%. The catalyst for this was China joining the World Trade Organization in 2002. Asia’s contribution to global GDP grew from 11% to 21% – but, as we shall see, debt distorts all these numbers tremendously. What […]

On their surface, stock markets in Asia look “normal”. Some of the largest companies in the world are traded in this region. Their capital-raising abilities are legendary. But unlike stock exchanges in New York or London, emerging Asian stock markets were created to funnel foreign cash into state-owned enterprises, which are usually inefficient. That means emerging market indexes (and the funds that track them) are overexposed to unprofitable companies. However, that doesn’t mean emerging economies aren’t on fire. There are plenty of hidden gems to be unearthed in the Wild […]

Economic development is a lot like learning math. To be able to solve calculus equations, people first learn to count, then basic arithmetic, and so on. Likewise, roads and ports (infrastructure), central banks (institutions) and education (human capital) are all important inputs into economic growth and are developed over time, sequentially. Economies are composed of sectors and typically grow in the three stages we have outlined in previous articles, agriculture – manufacturing – service. We have also written about how the policies of Northeast Asian governments encouraged their economies to […]

Free markets can be dangerous at times. When free market ideas are implemented into or onto state-directed markets they usually go haywire, sometimes crashing the system. Over the past decade, China – a state-directed economy – has increasingly “freed” its market by loosening capital controls. Will we see another 1997 Asian financial crises as a result? In our last daily we wrote about how China has a habit of using capital controls and wide interest rate margins to “erase” government debt. But both policy tools are becoming less effective and […]

Banks in Asia are big. The five largest banks in the world are all located in Asia; four of which are Chinese. Asian banks are seeing their highest ever returns right now – attracting investors from around the world. But you need to know that the growth of the banking industry is government driven, and ahead, we’ll show you how credit distribution is manipulated and what that means for your portfolio. What really drove the so-called “Asian Miracle”? Was it innovative entrepreneurs toiling night and day that built the region’s […]

Our last article described how most people think of capital as something tangible, like cash in the bank or shares traded on the stock market. But it’s much more than that. Capital is something that generates future income, growth & profits. So in that sense people are capital too. This is known as human capital, and it is the economic value of a person’s knowledge, skills and labor. Natural resources are important, but they are inherently limited. Human capital on the other hand is what defines a country in the […]

The service sector is the gold standard of the world; it is first class on an airplane and the VIP seat at a fancy Gala.   Services are where all countries want to be and it is absolutely where you want to ultimately invest.  In this series we’ve talked a lot about how countries economically develop and have noted that most Asian countries – to varying degrees – have followed Asian Capital Development policies.  Manufacturing, as we wrote yesterday is a huge strength in Asia, but who leads the charge in […]

Welcome to the third edition of The Great Investment Frontier (TGIF) report. (If you missed last week’s edition, you can catch up right here). This week, we continue our special series on the South China Sea… and uncover what brought the region to the brink of war. On October 10th 2017, a U.S. Navy destroyer (the USS Chafee) sailed within 12 miles of the disputed Paracel islands in the South China Sea… the fourth “freedom of operation” mission since President Trump came into office. At the same time, the U.S. […]

The secret to the fastest growing economies in the world isn’t free markets. It’s a banking system that doles out huge amounts of credit to grow strategic sectors. In our following article, we will delve into how Asian banks create and distribute money, and how the result is dangerous asset bubbles. In our previous set of publications on debt and credit we discussed what money is, and how it is created. Let’s recap in this article, viewing the process from the standpoint of a central bank. Paper money has no […]