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3 Rising China Plays for the End of the Age of America

IMF predicts China will overtake the U.S. in 5 years

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China Rising Play #2 – Luxury Goods

Sales of luxury goods are growing the fastest in Asia and are not expected to slow anytime soon. Luxury goods are a status symbol and the fastest economic growth of any major economy in the world is in China, which creates the largest number of new consumers.

Wealthy Chinese prefer designer fashion goods with large logos. I like to call this the “bling factor.” These wealthy Chinese are shopping for status items that they can show off to their friends and relatives.

No surprise that Louis Vuitton Moet Hennessey (OTC: LVMUY) is still the most popular brand among wealthy Chinese. The company just reported that quarterly revenue rose 17% to 5.25 billion euros. Excluding acquisitions and currency shifts, sales climbed 14%. Japan accounts for about 8% of the luxury goods maker’s total sales, and sales there fell 9% in the quarter, but sales in the rest of Asia were exceptionally strong. With the Japanese economy likely to rebound later in the year, LVMUY shares are headed higher.

Other popular fashion labels for high-net-worth Chinese include Hermes, Zegna, Armani and Chanel. And Italian fashion house Prada plans to have an IPO this summer in Hong Kong to raise its awareness among Chinese consumers.

China Rising Play #3 – Oil

One of my favorite oil companies is China National Offshore Oil Corporation (NYSE: CEO), which reported stellar numbers for the first quarter in 2011. The shares are trading near all-time highs even though oil is not quite there yet, as the company is expanding rapidly.

For the first quarter, revenue jumped 59% — to 48.5 billion yuan from 30.5 billion yuan — a year earlier because of an increase in production and higher international crude oil prices. Total net production in the first quarter rose 27% to 85.2 million barrels of oil equivalent.

The company, which has no major refining operations, relies mainly on oil production for its profits. This is important, as in China, fuel prices are regulated, which squeezes margins for oil refiners. Last year, CNOOC reported that its net profit rose 85%, while this year, estimates call for a 36% gain in earnings. I remain bullish for CNOOC shares as oil continues to move higher through the summer. (Get four more oil plays to profit from rising prices here.)

China Is Beating Us At Our Own Game
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