Global Roundtable Briefing Book

BRIEFING BOOK

Data Information Knowledge WISDOM

GLOBAL ROUNDTABLE

Location: Forbes, New York, New York

About The Panelists ........................................................................... 2

The Panelists in Forbes "Investing In China," 07/20/09......................................... 4 "Tim Ferguson On The Global Economy," 12/15/09............ 7 "China's Muni Mess" 03/18/10 ...................................... 8 "The Changing IPO Market," 06/18/09............................... 10

The Discussion .................................................................................. 12

ABOUT THE PANELISTS

Intelligent Investing with Steve Forbes

John Burge is managing director at Auerbach Grayson. Before joining Auerbach Grayson in 1995, Burge was a founder and president of Triangle Asset Consulting, a firm specializing in consulting to mediumsized pension funds. He was also previously head of funds management for Ecofin, Ltd., a company which he helped found in London, England. Prior to that, he was senior funds manager for BIL/GT Group in Frankfurt, Germany.

Tim Ferguson is editor of Forbes Asia, the English-language publication of Forbes magazine in the Asia/Pacific region. He joined Forbes as its west coast bureau manager in 1995 and was assistant managing editor from 1998 to 2001. He has twice been a media fellow at the Hoover Institution at Stanford University.

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Paul Maidment is the Editor of , overseeing all editorial content, and executive editor of Forbes magazine. He is an awarding-winning financial journalist who hosts a weekly video commentary: Notes On The News, where he brings his deep understanding of global affairs to an informed audience.

Dr. Stephen Wood is chief market strategist at Russell Investments. He conducts research on the economy, capital markets, portfolio strategies and investor behavior. Before joining Russell, Wood was senior portfolio strategist at Manning & Napier Advisors. He was also previously senior equity portfolio strategist at Alliance-Bernstein. Wood began his career as a senior research associate and economist for the Milken Institute.

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THE PANELISTS IN FORBES

Intelligent Investing with Steve Forbes

Intelligent Investing Panel

Investing In China

Morgan Brennan, 07.20.09, 12:00 PM EDT China's V-shaped recovery lures investors.

China's National Bureau of Statistics recently announced that its annual gross domestic product growth at the end of the second quarter was 7.9%, up from 6.1% in the first. This narrowly exceeded expectations and experts are now scrambling to revise second-half forecasts to reflect a growth rate that will likely exceed China's 8% targeted rate. China, whose local stock market is up more than 73% year-to-date, is rebounding from the collateral damage of the developed world's credit crunch, despite lackluster demand from importing nations.

Chalk it up to a strong and steady surge in domestic consumption. Thanks to the government's four trillion yuan stimulus package and amplified bank lending, Chinese consumers are purchasing more cars (sales were up 20% in the second quarter), more homes (property sales are rising) and more goods (many retailers reported higher-than-expected earnings for the second quarter). All of this makes China an alluring prospect for investors.

China actually boasts three separate markets: the A-Share class, which is yuan-denominated and dominated by local investors and retailers (foreigners need permission from the government to invest in these shares); the B-Share class, which is dollar-denominated but trades at significantly high premiums to corporate book value; and the H-Share class, which constitutes Chinese companies listed in Hong Kong. Of the three, H-Shares prove the easiest and most popular way in since they provide direct access without the regulatory approval. Individuals looking to buy can also find New York Stock Exchange-listed American Depositary Receipts and Exchange Traded Funds.

January Yen, head of Institutional Sales of Greater China Equities at Auerbach Grayson, a brokerage firm operating in 128 countries that provides trade execution and research to U.S. institutional investors, is positive on the market in the medium to long term, emphasizing investment potential in the properties sector (up almost 40% ytd in H-Share market) and the banking sector (up about 24% ytd). For H-Share investment, she likes Bank of China and ICBC China for banking and Soho China (HKG:0410) for properties. In addition, since the stimulus package focuses heavily on infrastructure and mass transit, she also suggests construction companies like China Railway Construction (HKG: 1186) and steel companies like Angang Steel (HKG:0347).

Jerome Booth, head of research and a member of the Investment Committee at Ashmore Investment Management, an asset investor in emerging markets, agrees that investments in China will deliver

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positive results within the coming years. However, he warns, the areas currently yielding the most profit are not as-of-now actually in the public sector. Additionally, "public equities are also clearly going to offer a huge amount of value potentially but you do have a problem competing with so many local investors in an environment which doesn't have everything that an occidental investor would ideally want."

Even so, "the scope for further development is enormous," says Booth. "And if you are U.S. investor investing in China, pretty much whatever you invest in over the medium and longer terms is almost certain to see a currency appreciation in your favor as the dollar is managed down gradually against China and other key emerging currencies." Bill Singer, shareholder in the firm of Stark & Stark, invests in the ADR PowerShares Golden Dragon Halter USX China Portfolio (PGJ) and in the ETF iShares FTSE/Xinhua China 25 Index (FXI). He encourages American retail investors to pursue exchange-traded options, explaining that they trade completely liquid minute by minute, are directly accessible by a single computer click and trade in New York time rather than East Asian time (which is about a half-day ahead). In addition, he notes that given the Chinese government's reputation for journalistic suppression, there is always the risk that pertinent local information in China may not reach investors trading halfway across the world.

Advisers and analysts suggest spreading international investments over more than one or two countries. Lynn Phillips-Gaines, founder and head of a Raymond James financial services firm, explains that of the 15-20% of assets her firm invests in international markets, "we are more positioned in emerging markets than the straight international, with China around 5-8% of the international index."

In addition to China, there are about 60 economies currently "emerging," and as Booth explains, "On the whole emerging markets are offering much better risk adjusted return in whatever asset class you look at when compared to their equivalents in the developing world."

According to John Burge, executive vice president and director of sales for Auerbach Grayson, some countries to consider when diversifying your portfolio's international investments are: Brazil, where growth continues with car sales up, lower income housing doing well and the government executing some of infrastructure policies as China's; Africa, where many countries' growth outlooks are positive; and Southeast Asia, where India nabs all of the world's attention but Pakistan, Bangladesh and even newly peaceful Sri Lanka show promise.

"A lot of these markets are in the nascent stage," explains Burge, "We think that that in itself, with the growing population and the demographics and improving GDP per capita, will mean that these emerging markets as a whole will prove to be more interesting than the developed world in years to come."

As the global economic playing field continues to shift and level out, investors should think internationally and consider the potential developing countries show. China could be a good place to start.

Investing in China

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