As an investor in Chinese stocks, I’m constantly bombarded by musings of the country’s coming economic bust. Anti-China pundits like to cite the froth in China’s housing market, the high vacancy rate in some of the country’s newest cities and the recent moves by China’s central bank to increase reserve requirements as evidence that the country is on the brink of big economic trouble. Lately, the recent pullback in several high-profile Chinese stocks, as well as a pullback in the iShares FTSE/Xinhua China 25 Index (FXI) — the major Hong Kong market index — has been cited as more evidence for the country’s pending economic hardship.
While it is true that some China stocks have sold off lately after big runs higher in 2009, FXI is only down 3.8% over the past three months. That’s hardly a huge giveback. What I think the anti-China crowd fails to realize is that while there has been some profit taking in China stocks, there’s also been a whole lot of buying in others. Let’s take a quick look at five China stocks that prove that the China boom is alive and well.
1) China Automotive Systems (CAAS). The Auto supply company just reported 1,000% surge in net income for the fourth quarter, due primarily to booming sales and a new partnership with Chrysler Group LLC. The stock is up more than 12% over the past three months, and over the past year the shares have surged nearly 500%.
2) Ctrip.com International (CTRP). This company dominates China’s burgeoning online travel services industry. The company is similar to Expedia (EXPE), but it’s more vertically integrated, having also acquired brick and mortar assets such as hotels. Ctrip continues to grow its revenue and earnings at over 30% a year. CTRP shares are up more than 7% in the past three months, and up 173% over the past year.
3) NIVS IntelliMedia Technology Group (NIV). Shares of the audio and video products maker surged nearly 28% just in Thursday’s trade, after the company posted a fourth-quarter profit of 28 cents a share vs. a profit of just 4 cents a share one year ago. After the big surge in the stock on Thursday, NIV’s three month total return is now over 53%.
4) Puda Coal (PUDA). This company supplies metallurgical coal used to make steel. Though Puda’s latest quarterly numbers were marred by a non-cash charge related to a loss in the value of warrants, the stock still is booming. PUDA shares are up 31.7% over the past three months, and 487% in the past year. Puda’s revenue and earnings potential will likely continue climbing, as the Chinese government is forcing smaller coal mines with spotty safety records to sell their operations to Puda at a very low cost.
5) SkyPeople Fruit Juice (SPU). The Chinese people have a penchant for fruit juice, and when they reach for a fruit beverage, increasingly it’s one made by SkyPeople Fruit Juice. The company is a leading maker of both concentrated and ready-to-drink fruit juices, which means they have a prominent piece of nearly all of the Chinese fruit juice market. Investors have been drinking up SPU shares since their debut last year on the American Stock Exchange, as the stock is up 49.7% in just the last three months.
When you invest in any emerging market, there will be periods where that market will see big moves to the upside and sharp moves lower. But don’t confuse the normal ebb and flow and price volatility that’s taking place in China with an end to the boom. These five stocks illustrate quite clearly that the China boom is alive and well — and ripe for smart investors with the vision to see through the cloud of conventional wisdom.
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