Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Posts Tagged ‘China’s Growth’

Why China Is Hot for Travel Stocks

By for Profit Confidential

Chinese economyChina is rapidly become one of the top travel markets in the world for both domestic and international travelers. To deal with the increased travel, China has been steadily building its road, rail, and air infrastructure that will make travelling in this country much easier.

“China is the most attractive place in the world right now for hotels. That’s why investment capital is racing there and why the major international brands are racing there too,” said Patrick Ford, president of U.S.-based Lodging Econometrics, in an article on time.com.

China is the fourth top destination for tourism, but is expected to become the number one destination by 2020, according to the World Tourism Association.

The country is predicted to see major growth in its domestic travel from 2011 to 2013, according to a research report, China Tourism Industry Forecast to 2012, by traveldailynews.com.

China’s growth and travel industry are driven by a population of over 1.3 billion people and a steadily increasing middle class with money to spend on travel. As wages increase, so will the spending on non-essential items such as travel and recreation.

There is also a rising wave of foreign travelers that have made Asia and China premier travel destinations.

To handle the expected increase in travel, there is a push to build more hotels and motels across the vast country.

In the Chinese travel and hotel area, there are numerous operators that have excellent potential for the aggressive investor looking for growth areas.

Some of my favorite Chinese travel stocks include China Lodging Group, Limited (NASDAQ/HTHT), Home Inns & Hotels Management Inc. (NASDAQ/HMIN), and 7 Days … Read More

What Carmakers Are Doing in China Now

By for Profit Confidential

Chinese economyThe Chinese economy has accelerated at a high level for a number of years. While China’s growth might slow down in the short term, the long-term forecasts for the Chinese economy are extremely bullish. Many firms are hoping for an increase in corporate earnings by expanding sales and production within the Chinese economy. While most Americans still think of the Chinese economy as production only, meaning cheap labor, several corporations see more to the Chinese economy than that simple notion.

Ford Motor Company (NYSE/F) has just announced a $5.0-billion expansion in the Chinese economy. This includes a massive increase in production, as many would expect, but it is also expanding its dealerships throughout Asia. Ford, along with many corporations, sees the Chinese economy as the great frontier for corporate earnings growth over the next several decades. By completion of the fifth factory in 2015, Ford’s total capacity of production plants will be to build 1.2 million cars in China.

Ford isn’t the only carmaker looking to China for increased corporate earnings growth. General Motors Company (NYSE/GM) has been active in the Chinese economy and has a larger share of the market with its head start. GM is also looking to continue its expansion with additional joint venture partners and more production facilities to take advantage of the continued Chinese growth over the next two decades.

While GM is number one in overall car sales for non-Chinese automakers, Volkswagen Aktiengesellschaft (Pink Sheets/VLKAY) is also a large player in the Chinese economy, with additional production also set to take place over the next few years. As Ford stated in its release regarding … Read More

China’s Domestic Consumption Ambitions

By for Profit Confidential

China’s growthChina is set to announce its first-quarter gross domestic product (GDP) today and, trust me; there is global interest in the result. A weak result and speculation will swirl that the country will face a “hard landing,” which is not what the world wants to hear and could start a domino effect globally.

A month ago, Chinese Premier Wen suggested that GDP will come in as low as 7.5% this year in the worst-case scenario. The World Bank predicts growth of 8.2% this year—a 13-year low and down from an 8.4% estimate in January. For 2013, Chinese GDP growth is estimated at 8.6%.

Of course, the 7.5% estimate by the Chinese is on the conservative side and clearly is a move by the government to make sure the actual reading comes in well above to show the country is strong and can deliver. This is the kind of economic propaganda you find in China.

The stalling is also expected to spread to China’s neighbors. GDP in East Asia and the Pacific Rim is estimated to stall to 7.8% this year, versus 8.2% in 2011. The numbers continue to look strong relative to the other G8 countries, including the U.S. and Canada. Longer-term, China and India will be key players in Asia, which I discussed in Chindia: The Place to Be for Growth in the Future.

The important issue is whether the Chinese economy will have a “hard” or “soft” landing. The reality is that the country’s exports are declining, as the global economies continue to face growth issues. There is also a decline in domestic consumption, which is … Read More

More Signs of a Slowing Chinese Economy

By for Profit Confidential

Chinese economyWhen it comes to the world economy, everyone is expecting China to come to the rescue. While the financial authorities there have reduced China’s growth expectations down to 7.5% this year, this pace is still envied by the rest of the world. The problem is that such a slowdown from over eight percent is starting to be felt by Chinese citizens…and soon the rest of the world.

Chinese real estate is a huge portion of China’s growth over the past decade. The Chinese authorities have been adamant in trying to lower costs for the average citizen, saying that they are trying to rein in the Chinese real estate bubble. Recent evidence appears that even though new Chinese real estate developments are being sold at 20%-30% discounts, the reductions are still not enough.

A recent survey published by the Chinese authorities states that 68% of households think home prices are still too high and only 14% were thinking about buying. This sign of the Chinese real estate market slowing down is going to be felt in many industries, namely commodities that are used in construction.

With China’s growth being reduced, especially in the Chinese real estate market, we’re going to see less demand for commodities like copper and iron ore. This past week, BHP Billiton Ltd. (NYSE/BHP) warned of flat iron ore demand from China.

China is the world’s biggest consumer of many commodities; for example, it’s responsible for the purchase of more than a fifth of global steel and over a third of copper demand. With BHP sending out the warning that China’s growth is appreciably slowing, changing future projections … Read More

The Market’s Best Opportunity for Growth Investors

By for Profit Confidential

investment opportunityApple Inc. (NASDAQ/AAPL; Market Cap: $435.98 billion) surpassed oil giant Exxon Mobil Corporation (NYSE/XOM; Market Cap: $406.84 billion) to become the world’s biggest company on February 7. The upward move in Apple shares has been impressive and makes the company the most desirable technology play for investors, especially those who bought at cheaper prices. The maker of hip electronic devices made an astonishing $13.87 per diluted share in its fourth quarter, $3.71 or 36.50% above the consensus estimates.

Apple is an example of why I continue to feel that technology will be the best investment opportunity for growth investors going forward.

The NASDAQ has been the market leader so far in 2012, up nearly 12% and showing some strong technical strength. In late 2011, I said that technology would be a critical area for investment opportunity, as this sector has provided much of the leadership over the last several years. Yes, there are the banks, but you will not see the same returns with them as with technology.

I believe the area that will offer the best investment opportunity is that of mobility applications for tablets and smartphones, as users shift away from the more cumbersome PCs and laptops. Apple is the “best of breed” in my view. The major chip companies such as Intel Corporation (NASDAQ/INTC) will also be an excellent place to stash some capital. Take a look at some of the smaller semiconductor stocks that develop solutions for mobile applications.

 Going back to the glory days of technology investing, I see a good investment opportunity in Microsoft Corporation (NASDAQ/MSFT), which cracked $30.00 a share on Tuesday to … Read More

China’s Economic Landing: Hard or Soft?

By for Profit Confidential

The Chinese economy saw its gross domestic product (GDP) slow to 9.1% in the third quarter, down from 9.5% in the second quarter and over 10% in 2010. GDP is at its lowest growth rate since the Chinese economy expanded at 8.9% back in the third quarter in 2009. The Chinese economy may be slowing, but the growth is still staggering given the muted growth in the United States and Europe.

Right Now We Investors Know a Lot—Stock Market Has Stability & Hope

By for Profit Confidential

The stock market is showing real strength at this time. A lot of stocks that were hit hard during the market’s recent correction are fighting back and making good progress in their share prices. Consider Caterpillar Inc. (NYSE/CAT), which is an important benchmark stock to follow. The company’s second quarter came in slightly below expectations, then the market began to correct. The stock was around $112.00 and dropped like a stone to $82.00 per share. After experiencing a recovery to just over $90.00 a share, it dropped again to the $80.00-per-share mark. Now the stock has broken past the $93.00-per-share level and its near-term price momentum looks to be intact.

The China Surprise: Continued Growth

By for Profit Confidential

Many thought China was set to stall in 2011, but so far this has not been the case. The country’s gross domestic product (GDP) growth continues to be impressive coming in at 9.7% in the first quarter, above the estimate of 9.55%, according to the National Bureau of Statistics. The results also show the significant growth difference between China and the U.S. and Europe. China is continuing to roll along at high speed, but it must be controlled.

China’s Auto Sector: Slowing, But Still Attractive

By for Profit Confidential

The key in China will be the rapid growth of the country’s middle class. In a recent research finding, Credit Suisse predicted that the household wealth in China will double to $35.0 trillion by around 2015 based on achieving sustainable GDP growth at or near the current growth rate.

The economic analysis is simple. The extra Renminbi means more cash to spend on non-essential goods and services. This includes furniture, real estate, vehicles, and travel.

Chinese Stocks Creeping Higher

By for Profit Confidential

I’m not sure if you have noticed, but we have been seeing a ratcheting up of Chinese stocks since early February. It’s amazing what a week-long holiday break will do. Just take a look at China.

Growth Areas for Stocks: China Still on Top

By for Profit Confidential

There has been a rise in discussions on the concept of reverse mergers in the media relating to companies in China listing on domestic exchanges. The speculation is that some of the small Chinese stocks debuting on the domestic exchanges, which resulted from reverse mergers, are being investigated for pump and dump schemes, along with questionable reporting. Yes, there will be frauds and misinformation, but my investment advice is to remain patient and not simply go out and dump Chinese stocks. This is my best stock advice to you.

Why Interest Rates Need to Rise in China

By for Profit Confidential

As was widely expected, China’s central bank raised interest rates for the second time in a month and the third time since October in an effort to fight surging inflation and speculative real estate buying. The speculation is that the central bank will increase interest rates two additional times by the mid-year. While it may not be what you want to hear due to its potential impact on Chinese growth, the higher rates are necessary and make sense.

Big Industrial Companies Outperforming the Rest of the Market—and They Pay Dividends

By for Profit Confidential

As far as I’m concerned, the most impressive performance in equities over the last year has been in high-dividend-paying large-cap stocks. A lot of these blue-chip, widow and orphan type of shares generated rates of return that you’d think would come from the higher growth technology sector—and they are stable businesses that pay dividends!

Hot China Stocks:
The Mobile Sector’s on Fire

By for Profit Confidential

China is growing exponentially in many areas. An area that is growing at an incredible rate is the mobile phone sector, where growth is enormous and there are currently more than 842 million users. Think about it. There are more mobile users in China than the population of the United States, the European Union, and Canada combined!

Moneymaking Stocks—Why China’s
Still the Place to Find Them

By for Profit Confidential

I have always been a China bull, even in spite of the market relapse in 2010. Yes, the Shanghai Composite Index (SCI) in China had an off year in 2010, losing 14.31%. And, yes, the SCI is lagging the U.S. indices this year. However, its loss is down to 0.32% to start the key Lunar New Year holiday in China, when hundreds of millions of people travel back home for a break.
I have always been a China bull, even in spite of the market relapse in 2010. Yes, the Shanghai Composite Index (SCI) in China had an off year in 2010, losing 14.31%. And, yes, the SCI is lagging the U.S. indices this year. However, its loss is down to 0.32% to start the key Lunar New Year holiday in China, when hundreds of millions of people travel back home for a break.

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