Wealth in China to Drive Internet Services Demand
Wednesday, March 21st, 2007
By George Leong, B.Comm. for Profit Confidential
China is growing in leaps and bounds, and this is most evident in the rising wealth of its citizens.
The aftermath of this increased wealth will be fueled consumer demand and continued strong growth in areas such as the Internet- based services sector. In spite of the recent selling in Chinese stocks, longer-term, there is no better place to be for the growth- oriented investor.
Consider a report by Michael Tieu, a Brean Murray Carret & Co. analyst. According to Michael Tieu, the Internet-based services sector in China, which has been on a nice positive trend, is set for additional and sustainable long-term growth. China’s accelerated move towards a supermarket economy led by hundreds of millions of freshly minted consumers will be the driver.
The growth prospects are simply staggering in China. At present, there are about 540 million subscribers of wired and wireless services in China. Tieu predicts this number will accelerate at a superlative rate of about 50% per annum over the next several years.
This news should not be a surprise to you. We have all read and heard about the extraordinary economic growth in China. It will not only be limited to technology.
As Chinese citizens see their incomes rise, the demand for consumer goods and services will rise in turn. We are seeing this in cars, homes, big-ticket items, and discretionary spending.
In the country’s surging real estate market, it is common to see million-dollar subdivisions sell out in matter of days or weeks. For a country where the average GDP per capita was over $6,000 in 2006 (according to the CIA), the growth of millionaires has been impressive.
I expect the per capita income to continue to rise as the country’s economic engine chugs along. China is still a relatively infant market for many goods. That is why large U.S. and European markets look at China as a major area of growth going forward.
Every investor should have some capital allocated to Chinese investments either in U.S. companies with exposure in China, American Depository Receipt (ADR), mutual funds, or Exchange- Traded Funds (ETFs).
The reality is the country is growing in all facets, whether in technology, industry, or natural resources. The trend is positive, and you need to be there.
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Tags: china, chinese economy, chinese stocks, GDP
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George is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. His trading advice on stocks and options is also found on his daily trading site, Daily Profits. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services.
