I’ve been looking forward to my next trip to Asia for some time now. But unfortunately, due to a family problem, I had to postpone it. Life, like investing, is full of ups and downs. As soon as I reschedule, I’ll let you know.
In the meantime, I want to tell you about three especially promising investment areas in Asia. In my opinion, these three areas are the best places to look if you’re after Asian ten-baggers — stocks that can increase by as much as 1,000%!
The first area …
Capitalizing on China’s
Construction Craze
You’ve probably seen the pictures of the Three Gorges Dam project. That gigantic undertaking cost $25 billion, but it’s just a drop in the bucket when you consider the massive construction spending going on in China. Total construction expenditures on bridges, roads, airports, power plants, water systems, ports, and railroads in China totaled $406 billion in 2005. And they’re expected to hit $733 billion in 2010!
- Think Boston’s $15 billion Big Dig is a big deal? The Chinese government has pledged to spend as much as $250 billion to upgrade its passenger rail system by 2015.
- Every 10 days, one coal-fired power plant big enough to serve a city the size of Dallas or San Diego is opened somewhere in China.
- In the next five years, China is going to spend $17.4 billion on new airports. That’s on top of the $14.8 billion it has already spent since 1990.
- The Chinese government announced a gargantuan $175 billion environmental spending plan over the next five years.
- And don’t forget about the 2008 Olympics: China is going to spend $1.6 billion just to host the games, $2.4 billion toward construction of Olympic venues, and another $35 billion to $40 billion for urban renewal.
Bottom line: Some companies are making a mountain of money building all these projects. And many of them are publicly traded companies available to U.S. investors.
Another powerful investment area …
Companies Catering to
Cargo and Containers
China has become the manufacturing center of the world. It doesn’t matter if you’re talking about toys, shirts, shoes, or iPods.
Of course, since we don’t live in a Star Trek world where things can be transported through thin air, each of these items has to be shipped to its final destination. The three shipping channels with the most promising investment implications:
Highways: As 18-wheelers transport goods throughout China, they encounter many toll roads. Each of these extremely profitable highways collects a big, fat fee from every big rig that goes through its gates.
One company I have in my sights is the largest operator of toll roads in China. You can’t even imagine the amount of traffic that flows through its tollbooths!
Railroads: The railroads are as important to China’s development today as they were to the U.S. at the turn of the 20th century. Moreover, China’s comprehensive network of tracks makes it possible to go straight from the factory floor of an interior city warehouse to a bustling shipping port.
I’ve looked at the books of one Chinese railroad company, and it’s raking in money hand over fist.
Ports: China is manufacturing such vast quantities of clothes, shoes, and electronics that its ports are absolutely clogged! That’s bad news if you’re a ship captain, but it’s great news if you’re investing in any of the country’s publicly-traded port companies.
By the way, the large fleets of container ships leaving China have created an acute shortage of containers. And it just so happens that the largest container manufacturer is based in China!
My point: When it comes to China today, there are many profitable ways to invest in the cargo transportation industry.
Now, I want to tell you about the third Asian investment area you should look into. It’s not so much an industry, but rather, a trend. I call it …
The Rise of the Chuppies!
Whenever I travel to Asia, I’m amazed at the lines snaking out of Starbucks … the throngs of young ladies carrying Louis Vuitton handbags … and the sheer number of cell phones in use.
This activity isn’t from tourists, mind you. Rather, it’s from Chinese yuppies, or “Chuppies,†a new generation of upwardly mobile, urban, middle-class Chinese consumers. There are roughly 100 million of them right now, and their numbers should double by 2010.
These big spenders are educated young people who often live with their parents. That keeps their expenses low and gives them large disposable incomes.
They grew up watching Beverly Hills 90210 and Lifestyles of the Rich & Famous. They liked what they saw, and now they have the means to go out and get a taste of the good life for themselves.
They’re hungry for electronic gadgets, appliances, personal care products, clothing, travel, and designer products.
Consider this: At the turn of the century, only 1% of luxury handbags were sold to Chinese consumers. Today, that number has grown to 12%.
As an investor, here’s how you play it: Figure out what the Chuppies are buying, then buy the stocks behind those companies. This is why I spend time at shopping malls and busy retail streets like Nathan Road in Hong Kong or Nanjing Road in Shanghai.
Let me tell you, rather than talking to a Wall Street broker, you can learn a lot more about retail shopping trends by standing near a cash register or chatting with a sales clerk about hot-selling items.
For example, here’s some information on restaurant stocks:
In Asia, you can walk right up to a McDonald’s (NYSE: MCD) or a Burger King (NYSE: BKC) and immediately place your order without waiting. As an investor, wouldn’t you be a little concerned by the lack of lines?
However, it’s different at an Asian Pizza Hut (NYSE: YUM) — there’s often a long wait to get in. Sounds like a recipe for success, doesn’t it?
One other interesting side note: Hungry Chuppies aren’t waiting to get a pizza topped with pepperoni or Canadian bacon. What they want is a pizza topped with saltwater eel or raw fish!
You Can’t Learn These
Things in Manhattan
If I sat behind a desk in Manhattan or simply sipped drinks at Cloud 9 — the popular 87th floor cocktail lounge of the Jin Mao Tower in Shanghai — I’d never uncover the real sleeping giants.
I find Asian opportunities by dodging forklifts at bustling ports, taking bumpy two-hour bus rides to out-of-the-way factories, and talking to the regular people living, working, and spending money.
If you want to find out what companies I’ve been uncovering, check out my Asia Stock Alert service.
Or, if you want broad exposure to Asian stocks, here are a few of my favorite mutual funds: Fidelity Pacific Basin (FPBFX), Excelsior Asia Pacific (USPAX), U.S. Global China Opportunity (USCOX), and T. Rowe Price New Asia (PRASX).
Best wishes,
Tony
About MONEY AND MARKETS
MONEY AND MARKETS (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Sean Brodrick, Larry Edelson, Michael Larson, Nilus Mattive, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Regular contributors and staff include John Burke, Amber Dakar, Monica Lewman-Garcia, Wendy Montes de Oca, Kristen Adams, Jennifer Moran, Red Morgan, and Julie Trudeau.
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