How the History of Asian Shipping Can Lead Us to Future Profits

Goin' places that I've never been.
Seein' things that I may never see again
And I can't wait to get on the road again.

No, I'm not singing an old Willie Nelson song, but instead letting you know that I am off on another great Asian treasure hunt.

I love my research trips because I get to see new, fascinating parts of the world, meet interesting people, and most importantly, discover incredible investment opportunities that the Wall Street crowd has never heard of.

I've been on many trips. And EVERY one of them has yielded at least one investment home run, and this time is no different.

Historical Malacca —
Former Shipping Capital of the World

I just arrived in historic Malacca, which is located near the bottom of the Malaysian Peninsula and sits on the Strait of Malacca, a narrow, 500 mile stretch of water between the southern tip of the Malaysian peninsula and Indonesia.

The shipping route through the Strait of Malacca.

Because of its key location, Malacca was at one time one of the most prosperous cities in the world during its heyday.

From an economic and strategic perspective, the Strait of Malacca is one of the most important shipping lanes in the world because it is the main shipping channel between the Indian Ocean and the Pacific Ocean, linking economies such as India, China, Japan, South Korea, and the oil rich Middle East.

Because of its strategic location, Malacca attracted traders from around the world and became the most influential port in Asia. During its golden age as a commercial trading center in the 15th and 16th centuries, hundreds of ships from a dozen countries would stop here to trade.

Malacca was too prosperous for its own good and many European rulers were envious of its great wealth. In 1511, a Portuguese fleet led by Alfonso de Albuquerque sailed into Malacca's harbor, opened fire with cannons, and captured the city from the Malays. This marked the beginning of a colonial legacy that would last well into the 20th century.

The Dutch wrestled Malacca from the Portuguese, who ruled the area for 150 years, in 1641.

Malacca's economic and commercial influence slowly but steadily declined under the Portuguese and Dutch rule. Malacca's prosperity was fueled by its decision to remain a free trading port during Malaysian rule. However, both the Portuguese and Dutch levied taxes on all the commerce conducted through its port.

Soon thereafter, ships started to bypass Malacca and stop at Penang and Singapore instead. As a side note, our elected officials would be wise to note the economic damage they could do to our country if they start a trade/tariff war with China.

Malacca was ceded to the British under the Anglo-Dutch Treaty of 1824. The treaty ceded all the territories north of the Strait of Malacca — mainly Singapore, Malaysia, and India — to British colonization while the southern lands, mainly Indonesia, were ceded to Dutch rule.

The British resumed the free trade policy in Malacca, but Penang and Singapore were already established as the prime trading cities, while Malacca never regained its prosperity.

Today, over 60,000 ships a year pass through the Strait of Malacca each year worth approximately $4 trillion. That equals about 160 ships every day and those ships carry about one-quarter of the world's traded goods including oil and all the goods manufactured in China.

Malacca is a UNESCO World Heritage city and one of the most interesting places I have ever visited. Its economy now, however, relies mainly on tourists who provide 75% of Malacca's GDP.

Today, Malacca is a modern seaside vacation destination with mega-sized shopping malls, five-star hotels, fantastic seafood restaurants, museums, and dozens of amazing historical sites.

If you ever find yourself in Kuala Lumpur or Singapore, I HIGHLY recommend that you make the short 2-3 hour detour to Malacca.

Shipping Companies to
Keep an Eye On

The point of this Southeast Asian history lesson is to show you how important shipping and the maritime industry are to the economies on the Strait of Malacca. In fact, there is even an index of maritime stocks — the FTSE ST Maritime Index — which is comprised of 12 Singaporean companies that have at least 55% of their revenue derived from maritime-related activities including the manufacturing, ownership, operation and repairing of commercial and/or cargo vessels.

The 12 companies are:

  • ASL Marine Holdings
  • COSCO Corp
  • Courage Marine Group
  • First Ship Lease Trust
  • Jaya Holdings
  • JES International Holdings
  • Mercator Lines
  • Neptune Orient Lines
  • Rickmers Maritime
  • STX Pan Ocean
  • Swissco International
  • Yangzijiang Shipbuilding Holdings

Additionally, the two largest offshore oil rig builders, Keppel Corporation and Sembcorp Marine, are based in Singapore.

If it floats and passes through the Strait of Malacca, there are ways for you to invest in it.

And yes, most of those above stocks are available on one of the U.S. stock exchanges. That's right. You can buy most of those stocks just as easily as you can buy General Electric or Microsoft.

As I said at the top of this column, this is a research trip. And shortly after the end of my trip, I will reveal to my Asia Stock Alert subscribers my top investment pick(s) from this trip. If you'd like to join my family and learn about the newest Asian investment home runs I've found, make sure you sign up right away.

Just click here to learn how to join. Or you can call 1-800-285-7264. I believe you will find my service to be one of the best investments you'll ever make.

Best wishes,

Tony


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Posted 10-21-2011 11:44 AM by Tony Sagami