CHINA REGION

Decide to invest any portion of your assets outside of the United States and you've got to be willing to take on a great deal of risk. Not just a smidgen, as some investment pros would like to have you believe.

Consider investing in China, for instance. The past performance of those regional funds show that reality ever-so effectively:

At year-end 1998, the average China Region fund's total return was down 17.51 percent for the year; off 23.88 percent for the previous three years; and down a minus 45.83 percent for the five preceding years, according to Lipper, Inc. Even at the end of the first quarter of this year, the average China Region fund was still underwater. But as we all know, past performance is no indication of future returns, either.

"The second quarter of this year was very strong for us, " says Rahim Kassim-Lakha, a member of the team that manages the U.S.Global Investors China Region Opportunity Fund, (800-873-8637). "At the end of it, the fund was up 50.8 percent."

Kassim-Lakha, recently back from a 10-day trip to China in which he visited some of the companies the fund invests in and also talked with local economists and stock analysists, is excited about the future for China. Why? Because of the changes happening in the region, and, those he sees China's government making.

For instance, Kassim-Lakha says that about 30 percent of the Chinese population work as civil servants and that the government has just announced a 40 percent increase in civil servant salaries. That extraordinary move, he hopes, will free-up some money and help turn at least some in that nation of savers into spenders.

Another change, a decrease in stamp duty on B-shares----that's a fee charged to foreign investors on the stock trades they make. This change ought to allow for more liquidity in the markets. Interest rates have also been lowered making it cheaper for companies to borrow money.

And finally, there's the good economic news surrounding the region.

"China exports about 53 percent of its goods to its Asian neighbors like Japan and Korea, " says Kassim-Lakha. " With those markets (Japan and Korea) showing strength, companies listed on the Chinese exchanges that export goods to those economies can benefit."

The fund holds about 90 stocks. Roughly 60 percent of them represent companies traded on the Hong Kong Stock Exchange. Most of the rest are stocks of smaller, newer and more growth oriented companies that trade on the Shanghai and Shenzen exchanges.

After Kassim-Lakha's visit, he's added to some of the positions already held by the fund, like those of China Telecom. That's a cellular telephone company that's experiencing explosive growth---new subscribers to its cellular services are running around 350 to 400,000 per month. "Even rickshaw drivers have pagers and beepers on their hips," he says. " They don't have telephones but they have cell phones."

Another position the fund also increased its holdings in is China International Marine Container, the largest manufacturer of 20 foot freight containers in the world.

If you like this China story, keep in mind the China story has always been a seductive one. Here's a country that's so rich in history and culture that its past is as alive as its future is promising, albeit uncertain. Expect investing in China Regional funds to be a little bit like the ride one might get when grabbing onto the wagging tail of mighty dragon.