Analyst recommends Chinese natural resources stocks

While China is a major source of finished commodities including steel and aluminum, it is lacking in natural resources. Water, oil, copper, lumber and iron ore are scarce in China. UBS analyst Joe Zhang believes there are ways for investors to profit from this scarcity:

Zhang recommends certain natural resources stocks because not only are natural resources lacking, but:

• Natural resources companies require less management expertise than industrial and service companies. (Management expertise is scarce in China.)

Zhang's recommendations:

• Yanzhou Coal (ticker: YZC) - the world's largest pure coal mining company.
• Jiangxi Copper (Pink Sheets).
• Aluminum Corporation of China (ticker: ACH) - China's only aluminum refinery catering to many bauxite mining companies.
• Anhui Conch Cement (Pink Sheets) - a cement manufacturer that controls many of the country's contracts for low-grade limestone, which is in diminishing supply in China.

UBS also likes petrochemical companies:

• UBS expects petrochemicals to outperform metals for the rest of 2005.
• Household goods use textiles and plastics that require petrochemicals.
• Recommendations: Shanghai Petrochemical (ticker: SHI), Zhenhai Refining, PetroChina (ticker: PTR) and Sinopec (ticker: SNP).

UBS also recommends monopolies:

• China monopolies have suffered from overbuilding and underutilization.
• Now efficiency is improving.
• Recommendations: China-controlled natural monopoly and infrastructure stocks including toll road companies, Zhejiang Expressway (Pink Sheets), Guangshen Railway (ticker: GSH), GZI Transport (Pink Sheets), Shanghai Port and Shenzhen Chiwan.

UBS fixed-line telecom recommendations:

• China Telecom (ticker: CHA).
• China Netcom (ticker: CN).