China has been growing exponentially in many areas, but while there is some stalling, an area that continues to expand at a staggering pace is the mobile phone sector. The growth in this market sector is enormous, with the number of subscribers surpassing one billion. Let me put it another way: there are more mobile phone users in China than the populations of the United States, the European Union, Mexico, and Canada combined!
These are exciting times for the Chinese mobile market, where three major carriers dominate the market.
The adoption of 3G and 4G networks will help to drive additional growth in the country’s mobile phone market, as manufacturers need to develop new phones to be used with these networks, based on my stock analysis. At the end of September, there were 203 million mobile 3G users in China, up from 167 million users at the end of May, according to the Ministry of Industry and Information Technology in China. The growth in 3G networks will continue to provide a catalyst for more opportunities.
Apple Inc. (NASDAQ/AAPL) is a major player in greater China with sales in the country accounting for about 15% of total sales in the fiscal fourth quarter, according to the company. Tim Cook, CEO of Apple, said “iPad” and “iPhone” sales in China surged 45% and 38%, respectively, in the fiscal fourth quarter. The potential is significant for Apple in the Chinese smartphone market. (Read why I don’t like Research In Motion in “Don’t Get Fooled by Research In Motion.”)
The income demographics in the country support the spending. In a recent research finding, Credit Suisse predicted that the household wealth in China could double to $35.0 trillion by around 2015, based on achieving sustainable gross domestic product (GDP) growth at or near the current levels; albeit, the current slowing will impact wealth but will still allow consumers to spend on more non-essential goods and services, such as mobile phones.
The top mobile phone company in the country is China Mobile Limited (NYSE/CHL). With a market-cap of around $224 billion, the company is massive. By comparison, AT&T Inc. (NYSE/T) is the largest mobile provider in the U.S. with a market-cap of $197 billion and Verizon Communications Inc. (NYSE/VZ) has a market-cap of $127 billion.
The price chart of China Mobile continues to look bullish, well above its 50- and 200-day moving averages (MAs), based on technical analysis.
Chart courtesy of www.StockCharts.com
China Mobile is one of the largest companies in China and can be considered a “widow” stock for long-term buy-and-hold investors. The company is ranked the top brand in BusinessWeek’s “20 Best China Brands.” The stock pays an annual dividend of $1.90 for a dividend yield of 3.4%, based on the stock price of $55.67.
The company had 698 million subscribers, or over 69% of all mobile phone users in China, at the end of September. (Source: “Operation Data: Customer Numbers,” China Mobile Limited, last accessed October 29, 2012.)
China Mobile is the world’s largest provider of cellular services, based on subscribers, and has set its sights on expansion outside of the Great Wall via its ownership of Luxembourg-based Millicom International Cellular S.A. (OTCBB/MICCF), a telecom operator with mobile operations in 13 countries and a potential market of about 270 million people. (Source: “Global Operations,” Millicom International Cellular S.A., last accessed October 29, 2012.)
Going forward, my stock analysis is that China Mobile should benefit from the massive mobile market and growth in the 3G and 4G telecommunications areas in China.
The bottom line is that the Chinese mobile market is massive and worth a look.
The Chinese Sector That’s a Hotbed for Growth was last modified: October 30th, 2012 by George Leong, B.Comm.
George Leong is a senior editor at Lombardi Financial. He has been involved in analyzing the stock markets for two decades, employing both fundamental and technical analysis. His overall market timing and trading knowledge are extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi Financial’s popular financial newsletters, including Red-Hot Small-Caps, Lombardi’s Special Situations, Judgment Day Profit Letter, Pennies to Millions, and 100% Letter. He is also the editor-in-chief of a... Read Full Bio »
Forecasts Aug. 30, 2015
Immediate term outlook:
The bear market rally in stocks that started in March 2009, extended because of unprecedented central bank money printing, is coming to an end. Gold bullion is up $1,000 an ounce since we first recommended it in 2002 and we are still bullish on the physical metal.
Short-to-medium term outlook:
World economies are entering their slowest growth period since 2009. The Chinese economy grew last year at its slowest pace in 24 years. Japan is in recession. The eurozone is in depression. With almost half the S&P 500 companies deriving revenue outside the U.S., slower world economic growth will negatively impact revenue and earnings growth of American companies. Domestically, America’s gross domestic product grew by only a meager 2.3% in the second quarter, which will negatively impact an already overpriced equity market.
Estimates Aug. 30, 2015
Trailing 12-month EPS for Dow Jones companies (Most Recent Quarter)