tock markets in the U.S. are rallying since trading at lows not seen since 1995. Yet, in China, it has been a different story, as the benchmark Shangh...
tock markets in the U.S. are rallying since trading at lows not seen since 1995. Yet,
in China, it has been a different story, as the benchmark Shanghai Composite Index (SCI) has been strong in 2009 and is currently up nearly 26% in what has been an impressive run. Having been covering Chinese stocks for years, I'm not that surprised to see stocks in China rally, as the sell-off there in 2008 was overdone and not deserving of the valuation and future growth potential.
Many of you who read my columns know about my bullishness towards China along with Chinese stocks listed on U.S. exchanges, and this has not changed. China will continue to be the top growth engine going forward and, as I have always said, you need to have money there.
Many global multinationals also know this. On Tuesday, General Electric Company (NYSE/GE), which is looking for business, announced that its oil and gas unit had won a three-hundred-million-dollar contract to do work on a new natural gas pipeline in China that will run east to west. The money being spent on infrastructure in China will be in the trillions of dollars and U.S. companies like GE want a piece of it. Whether it is roads, rail, ports, plans, oil, industrial, or technology, you cannot ignore the 1.3-billion people market in China and what will continue to be a price area for growth.
The rise in the SCI demonstrates what I continue to believe is the top growth region in the world. Chinese stocks listed on U.S. exchanges have been struggling, but the valuations are attractive. The key is to have patience and to enter small positions so as to not risk too much capital.
China will see a decline in its GDP to between six percent and seven percent this year, but estimates call for GDP to rise to around eight percent by 2010. The country is also developing its trade with neighbor India, which could potentially open up a market of over one billion people. India is growing fast and, like China, will need goods and services, as the countries' people become wealthier. Between the two countries, you have over 2.4 billion people or over a third of the world's total population. Could you imagine the market as disposable incomes in both countries accelerate upwards? That is why you need to be in China. China and India are trying hard to expand trade, which was a mere $38.7 billion in 2007, but is expected to reach $60.0 billion by 2010 now that a bilateral pact has been signed.
The bottom line is that China is a key component of the global economic machine and will only grow. Goldman Sachs estimates that China will be the world's largest economy by about 2040.
I believe that there are good buying opportunities in Chinese stocks, specifically of the small-cap variety. I also believe that Chinese stocks listed in the U.S. will continue to represent an excellent area for growth investors. However, you also need to be careful and be diversified in your portfolio, as there could be more downside risk. The key is diversification.
Profit Confidential
---
http://www.profitconfidential.com/
LOMBARDI PUBLISHING CORPORATION
News, Analysis, and Information Services Since 1986.
One Million Customers in 141 Countries.
Lombardi Publishing Corporation
Financial Publications Division
350 Fifth Avenue, Suite 3304
New York, NY 10118-3304
---
Copyright 2008; Lombardi Publishing Corporation. All rights reserved. No part of this e-newsletter may be used or reproduced in any manner or means, including print, electronic, mechanical, or by any information storage and retrieval system whatsoever, without written permission from the copyright holder.
