For speculators in equities, there’s no hotter sector of the stock market than China stocks. We’ve been talking about this for quite some time now.
It isn’t so much that there aren’t attractive domestic stocks in which to speculate, only that the growth rates of many China stocks are higher. Further to this, in the mind of an equity speculator, China’s economic coming of age really does satisfy the psychology inherent in risk-capital investing. Speculators want to own the highest growth/return potential, regardless of where the opportunities exist.
Who wants to argue with one- billion consumers intent on working really hard to increase their standard of living? There are hundreds of millions of Chinese residents who want to work hard, find an apartment, buy a car, and reward themselves with luxury goods.
It’s still like the Wild West over there, with regulatory environments changing on a dime. This is why China stocks that are listing on American stock exchanges are so attractive to domestic investors. Who wouldn’t want to participate in the biggest developing market on earth? And you can do so in American dollars.
With this in mind, China Security & Surveillance Technology Inc. (OTCBB/CSCT) is already ticking higher in price since it was first featured in this column.
Domestic investors just love good China stocks. And the growth rates really are impressive. In CSCT’s case, revenues in the third quarter of 2006 grew 247%. Net income grew 205%. It doesn’t even matter if part of this growth is due to acquisitions. The fact that these large numbers are present is contributing to positive investor sentiment.
There is going to come a time when China stocks listed on American stock exchanges experience tough times. This is the nature of the economy and the stock market. It would be a big mistake in my mind, however, for an aggressive equity portfolio in the current environment to ignore the opportunities related to China stocks.