Tuesday, February 12, 2008

Investing Down Under

A 17-year bull run is expected to continue - thanks to Australia's natural resources and proximity to China & India. With the limelight strictly focused on emerging markets and the US economic slowdown - Australia may be getting a little neglected. But Australia's economy is booming and with ample energy supplies and raw material to fuel its neighbor's stellar economic growth - Australia may be a tempting investment opportunity.

A recent article in FT reports that

"The industrialisation of China, Australia’s biggest trading partner, has created the type of windfall that local economists say will occur “only once in several generations”. Huge demand has pushed up prices paid for Australia’s vast resource supplies and China has exerted downward pressure on the prices of manufactured goods that Australia imports...
... Signs of prosperity are manifold. More than 1m new cars were bought last year, in a population of barely 21m; cranes dot the skylines of Perth and Brisbane, capitals of the resource states of Western Australia and Queensland; and immigration is at a record as the government attempts to plug skills shortages."

Investment opportunities in Australia revolve around commodity companies - like iron ore and steel. BHP Billiton, the world's biggest miner is one such company. Rio Tinto, although expensive at $428/adr is another mining giant worth considering.

If you are an index investor - there are a variety of Australian ETFs and index funds to consider. Some common ones include - iShare MSCI Australia Index (EWA) and the Dow Jones Australian Index (^DJAU). EWA has consistently beaten the Dow and returned in excess of 200% over the last 5 years.

If you are global investor and seek active diversification - the land down under should be part of your portfolio.

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