GAC of China (General Administration of Customs of China) released data over the weekend showing accelerated economic activity in June. Export and import exceeded US$254B, well above May numbers. This is a further proof that China may have succeeded in controlling its overheated economy, and perhaps the time has come to move to next phase of development, which was announced last week by the Communist Party, to develop its west provinces, much like what America did in California in the Gold Rush era.
This comes after six months of lag in the Shanghai stock market with the Shanghai index turning position with strong rally from its bottom last week, supported by various strong economic data. Developing the West will improve its employment and the economy should enter the next level of growth. Investing in China is tricky but pay attention to PE and PEG, which will give you better idea which one has the most upside, especially when stock price is beaten down so much. Shanghai stock market rally may signal a new growth in China and the government is signaling further heavy investment in the second half of the year through projects in the West provinces. The following is the list of ADRs that have shown good growth in the current environment:
|Company||PE||PEG||2010 Revenue Prediction($)||Market Cap($)|
*Data from E*Trade and Yahoo finance. Calculation based on July/09 closing price.
Comparing PEGs, they are extremely cheap (except for BIDU). RINO is trading at only PEG 0.31 which is definitely disconnected from fundamentals. If the Shanghai market put its bottom of the year behind, with the economy starting a second round of moving higher, all those well-run companies will go much higher over time. Be patient. It may be time to think about investment, not trade. American companies such as Genral Electric (GE), Microsoft (MSFT), Cisco (CSCO) and other names which have significant presence in China will also do well over time.
Disclosure: Long JASO GE