China — Why You Should Consider it in 2010
Friday, January 8th, 2010
By George Leong, B.Comm. for Profit Confidential
— “Calling the Trend” Column, by George Leong, B.Comm.
How do you follow on the heels of an 80% market gain in the Shanghai Composite Index (SCI) in 2009? China has been one of the hottest regions for growth opportunities over the past five years and I fully expect this to continue going forward. In my recent commentary on 2010, I presented my bullish view towards this enormous country. Yes, the country’s per-capita income pales in comparison to that of the United States and Western Europe, but the massive population helps to offset this. Make no mistake about it; China will continue to be a sought-after haven for foreign companies looking for added growth. Many of the largest U.S. companies have already set up shop here, and with great results.
Wal-Mart Store Inc. (NYSE/WMT) is rapidly expanding in China. The country is now the biggest revenue generator outside of the U.S. as far as revenues go. Based on revenue growth, China far outpaces the U.S. Wal-Mart has great plans and expectations for China. The majority of its goods originate there, so it makes sense to set up shop in the country.
General Motors Corp. is struggling in the U.S. and is currently restructuring under U.S. federal control, but, in China, GM continues to see immense growth. In 2009, automobile sales in China surged 67% to a record 1.83 million units, according to the “Wall Street
Journal”.
In 2010, GDP growth is predicted at eight percent, but the majority of economists are expecting nine-percent growth in 2010. The World Bank predicts GDP to rise to 8.7% in 2010, with sustainable growth needing to be driven by “more emphasis on consumption and services and less on investment and industry.” In other words, the Chinese must increase consumer spending and save less.
China is predicted to expand its industrial production by 11% in 2010, according to Li Yizhong, the minister of Industry and Information Technology in China. The HSBC purchasing manager index (PMI) for China came in at an expansionary 56.1 in December, representing the highest level since April 2004.
The reality is that the numbers don’t lie. The risk, of course, with all of this growth is price appreciation and inflation. The Chinese government is already trying to curb property speculation and price increases in its major cities to try to avoid a property bubble. Interest rates may also have to rise in order to curb inflationary pressures.
Whether it is technology, manufacturing, services, infrastructure, or the many other areas of pent-up demand, you need to have capital in China. I continue to believe there will still be good buying opportunities in Chinese stocks, specifically of the small-cap variety.
Chinese stocks listed in the U.S. will continue to represent an excellent area for growth investors; yet you also need to be careful and be diversified in your portfolio, as there could be more downside risk.
I look at market corrections in Chinese stocks as an opportunity to accumulate shares.
Next Post: Making a Case for the BearsPrevious Post: Making Money From the Stock Market — the Only Place to Be
Tags: chinese economy, investment advice, Stock Market Advice, Stock Market Analysis, Stock Market News, stock market tips
Tweet
Sign Up for PROFIT CONFIDENTIAL and
receive a FREE copy of our exclusive report:
"A GOLDEN OPPORTUNITY FOR STOCK MARKET INVESTORS"
We respect your privacy and
will never share your e-mail address.
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.
