Golden Dragon

Posted By Darren Winters on Oct 21, 2021


Golden Dragon

The Nasdaq Golden Dragon China Index is giving investors a good ride for their money as bargain-hunters bought the August dip.

In a piece entitled, “Treasuries,” a few months ago, in August, it was written that the “NASDAQ Golden Dragon China Index looks interesting.” 

Fast forward a few months, and that was yet another bang on the money call as the Golden Dragon jumped 13.6% since slumping to the lowest in more than a year on August 19.

I believe the Nasdaq Golden Dragon China Index still represents a bargain and could continue providing investors with alpha returns going forward

So, the recent selloff in Chinese stocks could continue to be a buying opportunity at current prices.

The Nasdaq Golden Dragon China Index (HXC) provides investors with diversification in investing in an array of Chinese companies in the fastest growing global economy, China.

Here is why I continue to remain bullish on the Golden Dragon HXC

Golden Dragon

China’s massive transformation continues to take place. 

In the 80s, China was predominantly an agrarian society. It has developed into an industrial society like none other and is now racing to become a leader in technology. 

Global elites feast at the same table they play in the same playground, their kids go to the same elite universities. I believe countries will look to build a strategic alliance with China, seeing it as a growth market with the need to have a foothold. The war with China narrative is a good spin for the military-industrial complex, and I do not believe it is realistic. But keep an eye on China’s holdings of US treasuries. So, if you see a China holding below 1.5 T USD combined with a souring of China-US diplomacy as a negative sign. 

China and its Golden Dragon companies today represent the factory of the world

Remember when “Like a Virgin” by Madonna in 1985 was the top song, and the US imported just $243 million in a year and had a positive trade balance. Fast forward to today, imports from China so far totaled nearly $43 billion, which is a 146-fold increase in 36 years.

Despite talk of a trade war, that trend continues. Moreover, CEOs from Tesla’s Musk to Nike’s Donahoe today, in 2021, are both brown-nosing China.

Today there are more billionaires in USD terms in China than there are in the US. According to the Hurun Report, a Shanghai-based organization that tracks China’s wealthy population, 1,058 billionaires lived in China last year, compared to 696 in the U.S. 

Warren Buffett had some informative slides that he showed at Berkshire Hathaway’s in May.

Buffett showed slides of the world’s 20 largest companies 30 years ago. Today none of them are on the top list. 

“If you’re looking out 30 years, probably things will be changing. My guess is that China will have more companies on the list, but I don’t think they will top the U.S., but who knows? It’s amazing what has been accomplished,” said Warren Buffett.

But there are risks investing in Golden Dragon companies, they include a slowing economy, too much private debt, and government regulations. 

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