INVESTING: Long term, China and India offer opportunities aplenty

To put it mildly, the hype about China (and now, increasingly, about India) has been enough to choke a horse.

I know. I got right to the front of the bandwagon three years ago when I started writing about India. But when it comes to your cash, it’s only worth talking about stuff that is going to make you money. We are not in a classroom. And with your money firmly in the front of our mind, let’s find out if the hype is living up to reality.

Over the last few years, several dozen companies based in China have completed initial public offerings in the United States. You can go to the floor of the New York Stock Exchange and buy stock in Chinese companies involved in electricity, computers and steel production.

Investors interested in India can choose from far less inventory (there are about a dozen Indian-based companies trading on American exchanges) but access to many aspects of its economy is still possible. There are more than a few closed-end funds and exchange-traded funds that hold several stocks in these countries, giving investors a quick-and-easy way to buy the whole country. In other words, if you want in to these places, the door is now wide open.

And investors have been taking advantage of the access. IPOs from China typically enjoy a tremendous first-day opening pop, much of it coming from American demand.

For a while, it seemed like everyone was right about the potential to make money. The Chinese and Indian stocks were doing well until this past May. Then, the wheels came off the bus. The Indian stock market corrected more than 30 percent and has been sitting near those lows since.

Chinese stocks are off the lows of mid-June a little, but they have not performed as well as the Dow Jones or the S&P 500.

When it comes to trading stocks, I like to work in the intermediate time frame. I define that as a few weeks to six months. The action I am seeing on the charts for China and India is not motivating me to buy anything in the space.

But the main reasons I brought up India three years ago still hold true today. These countries are going to be the dominant force for growth for the next 10 years at least. I am confident the recent slide will not be the last time these stocks get roughed up over the next decade. But for longer-term ideas, I don’t know if it can get much better than this.

Between the two nations, I still prefer India over China because of democracy and rule-of-law advantages. I still own some of the India Fund, or IFN, which invests in the 50 largest stocks on the Indian exchange. The stock could show solid appreciation from now until 2020, and it pays a 12-percent dividend while you wait. As I said before, it doesn’t get much better than that.

As for China, if you insist on buying the hype, check out symbol FXI. This is an exchange-traded fund that owns 25 large and diversified Chinese stocks. The dividend is only 1.6 percent, and it is a higher-risk play, but it will get you in without a lot of work. Please keep in mind, though, that these are long-term ideas. It may be a few years before you realize a solid payoff.