Notwithstanding that the Chinese economy already contains inherent strengths and is highly competitive, it is gaining further traction from a $586 billion stimulus package announced by the government at the beginning of 2009. Of the $586 billion, $259 billion is allocated towards infrastructure, earthquake and housing with a further $219 billion allocated to transport and power infrastructure.

Delinquencies among U.S. subprime residential mortgage-backed securities (RMBS) transactions originally rated in 2006 and 2007 continued to increase as of the August 2008 distribution date, while delinquencies for the 2005 vintage started to decline. Total delinquencies were 38.05%, 42.89%, and 32.79% of the current aggregate pool balances for the 2005, 2006, and 2007 vintages, respectively. Compared with the July 2008 distribution date, these figures marked increases of approximately 3% for the 2006 vintage and 5% for 2007 and a 0.1% decline for the 2005 vintage.

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Having recently secured $15 million debenture financing, plus an additional $13 million equity warrants attached thereto, China North East Petroleum (CNEH.OB) has embarked on a path of demonstrably strong growth set to last a number of years.

Stable Business Model

The main financing details are:

For several reasons, CNEH stock may appear unsuitable for investors: it is a micro-cap traded only on the OB market and thus below the threshold of institutional and most private investors; the company doesn’t yet have a trusted record of delivering predictable earnings growth quarter on quarter; it has no broker coverage; and, not surprisingly, the company’s business model is understood by very few in the investment community. Further, the company’s web site has not been updated in over a year and doesn’t yet mention the total size of CNEH’s oil reserves and, finally, the stock price has recently been pressured by the overhang of company disclosures in late 2007 concerning funding efforts.

Long-Term Outlook

Traditionally the Chinese steel industry has been highly fragmented with over 1,100 separate players, most of which are still state owned enterprises [SOE]. Historically, many of these had low quality output and were uncompetitive compared to large global steel producers. The Chinese Government has declared that the country needs a strong indigenous steel industry capable of competing on a world stage. As such it has afforded Chinese steel companies certain advantages over foreign companies. The Government introduced plans to have the existing industry privatized and consolidated into a handful of efficient companies and also decided that antiquated plants must close. The closing of antiquated plants also ties into China’s plans to cut energy consumption and greenhouse gases by eliminating 55 million tons of inefficient steel making capacity by 2010. To further assist the local Chinese companies in their consolidation efforts the Government prohibited foreign companies from having controlling interests in steel SOEs. In essence, a highly attractive playing field has now been created for a select number of Chinese steel companies.