5 Agents of Change Investors Need to Know About Now

5 Agents of Change Investors Need to Know About Now




by Frank Holmes, CIO, CEO, U.S. Global Investors

The world is changing fast right now in ways that many investors might not easily recognize or want to admit. This could end up being a costly mistake. If you’re not paying attention, you could be letting opportunities pass you by without even realizing it.

With that in mind, I’ve put together a list of five agents of change that I think investors need to be aware of and possibly factor into their decision-making process.

1. Xi Jinping

At China’s 19th National Party Congress two weeks ago, Xi Jinping’s political thought was enshrined into the country’s constitution, an honor that, before now, had been reserved only for Mao Zedong, founder of the People’s Republic of China, and Deng Xiaoping. It was Deng, if you recall, who in 1980 established special economic zones (SEZs) that helped turn China into the economic powerhouse it is today.

But back to Xi. His elevation to Chairman Mao-status not only cements his place in the annals of Chinese history but also makes him peerless among other world leaders in terms of political and militaristic might, with the obvious exception of U.S. President Donald J. Trump.

But whereas Trump has been criticized by some for setting the U.S. on a more isolationist path—shrinking the size of the State Department, just to name one example—Xi sees China emerging as the de facto global leader by 2050. To get there, his country is spending billions on the “Belt and Road Initiative” and other massive infrastructure projects, opening its doors to foreign investors, reforming state-run enterprises, weeding out corruption, investing heavily in clean energy and public transportation and expanding its middle class. And let’s not forget that the Chinese yuan, also known as the renminbi, was included in the International Monetary Fund’s (IMF) basket of reserve currencies in 2015, placing it in the same league as the U.S. dollar, British pound, Japanese yen and euro.

During his three-hour speech before the congress, Xi made reference to the “Chinese dream,” adding that the “Chinese people will enjoy greater happiness and well-being, and the Chinese nation will stand taller and firmer in the world.”

Xi has his own detractors, of course, who see China’s rise as a threat to established world order. But if his vision is to be realized, it might be prudent to recognize and prepare for it now. China’s economy grew a healthy 6.8 percent in the third quarter year-over-year, helping it get closer to meeting economists’ target of 6.5 percent for 2017. And although manufacturing expansion slowed in October, falling from 52.4 in September to 51.6, it was still well above the 50 threshold.

China manufacturing power expanded at slightly lower pace in October
click to enlarge

Citing these indicators as well as strong medium and long-term bank lending to nonfinancial corporations, research firm BCA recommended that investors overweight Chinese stocks relative to the emerging market aggregate.

2. Poland

Besides China, another region I’m keeping my eye on is Poland. Already one of the fastest growing economies in Europe, the country was just upgraded from the “advanced emerging” category to “developed” by FTSE Russell, effective September 2018. This will place Poland in the same company as, among others, the U.S., U.K., Japan, Germany, Singapore and South Korea, the last country to have joined the club of top-ranking economies. Poland is the first Central and Eastern European (CEE) country to receive “developed” status.

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About the author

Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., and a Toronto, Canada native, which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure. The company’s funds have earned more than two dozen Lipper Fund Awards and certificates since 2000. The Global Resources Fund (PSPFX) was Lipper’s top-performing global natural resources fund in 2010. In 2009, the World Precious Minerals Fund (UNWPX) was Lipper’s top-performing gold fund, the second time in four years for that achievement. In addition, both funds received 2007 and 2008 Lipper Fund Awards as the best overall funds in their respective categories. Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a leading publication for the global resources industry, and he is co-author of “The Goldwatcher: Demystifying Gold Investing.” He is also an advisor to the International Crisis Group, which works to resolve global conflict, and the William J. Clinton Foundation on sustainable development in nations with resource-based economies. Mr. Holmes is a much-sought-after conference speaker and a regular commentator on financial television. He has been profiled by Fortune, Barron’s, The Financial Times and other publications.

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