How To Invest If China’s Economy Falters

Fears about the health of the Chinese economy appear to be the current concern of the day.

On Monday, one newswire suggested that the U.S. stock market was falling as investors were spooked about China’s slowing economic growth. But here’s the thing: the China slowdown has been making the headlines since at least 2010.

That’s right, it has been five years (or more) since worries about China’s economy started appearing in news headlines.

If the common investor had been scared out of investing due to fears of a Chinese slowdown five years ago, he or she may have missed out on a number of winning stocks.

Rising companies

Take Vicom Limited (SGX: V01) for instance.

While fears on the health of China’s economic engine have simmered over the past five years, the testing and inspection company, with operations primarily in Singapore, has simply shrugged its shoulders and went about its daily business of testing cars and more in our sunny island.

Vicom's total dividends (ordinary + special) and free cash flow (FCF) per share

Source: S&P Capital IQ

Along the way, Vicom went about generating increasing levels of free cash flow, which has helped fund a growth in dividends. You can see these in the chart above.

The stock market works in a simple way. To borrow a quote from Warren Buffett, if the business does well, the stock eventually follows. This fits Vicom to a tee. With its growing free cash flow and rising dividends, its shares have climbed by more than 160% since the start of 2010.

Foolish summary

I’m not trying to make light of the potential negative impacts that may come with China’s slowdown in growth. There will likely be many companies and industries that will suffer some short-term bumps because of that.

But if we focus too much on the headline news, we may miss companies which may be less impacted by the health of the Chinese economy. So as always, focus on the business and less on the news.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong owns shares in Vicom Limited.