COMMENT
Cashing In On The Chinese Bubble

By David Kuo (TMFDragon)
November 28, 2005

"China is a big country, inhabited by many Chinese." ~ Charles de Gaulle

China is not only a big country but it's also one of the world's fastest growing economies. In a recent online poll on Yahoo 42% of respondents reckoned that China had the brightest economic future with India and the US tied in second place on 29%. Whilst the online poll may not be entirely scientific, it nevertheless suggests that many investors perceive China as a place with tremendous growth potential.

Many UK companies now have a vested interested in the Chinese market. For instance, Vodafone (LSE: VOD) has a small stake in China Mobile, which is the country's biggest cellphone outfit, and HSBC (LSE: HSBA) has a huge branch network in China. Therefore, you are already exposed to China if you own shares in either of these companies. What's more, if you invest in these companies via a FTSE tracker then you are also indirectly exposed to China, albeit it in a small way.

A more direct way to invest in China may be through low-cost Exchange Traded Funds such as iShare FTSE/Xinhua China 25. It is also possible to buy specialist funds in which fund managers will use their expert knowledge of the China market to make judicious share purchases. But for a more hands on approach, there are now a number of Chinese companies listed on the London stock market. These include Air China (LSE: AIRC), China Petroleum & Chemical (LSE: SNP) and Jiangxi Copper (LSE: JCC).

Apart from the large setups there are a number of smaller outfits that have recently listed on the Alternative Investment Market too. Central China Goldfields (LSE: CGG), which is exploring for gold in Western Qinling, is one such company. Not surprisingly, the gold prospector is yet-to-be profitable and is therefore quite speculative. South China Resources (LSE: SRC) is another recently floated miner, though its forte is iron, copper and molybdenum. The company has commenced a first phase drilling programme in Shaanxi.

Sweet China (LSE: SWC) is into prospecting, though of a different sort. Earlier this year the company listed on AIM to help finance the making of acquisitions. It has raised £0.7m to tap into the Chinese confectionery market. Sticking with sweets, China Wonder (LSE: CWO) manufactures and sells wrapping machines for the confectionery market. It also makes packaging equipment for the fast-growing Chinese domestic pharmaceutical industry.

EBT Mobile China (LSE: EBT) may be an interesting play on the Chinese mobile phone market. It is one of China's leading retail chains selling mobile phones and airtime. Since 2003, it has doubled its number of outlet to 93, and increased its geographic presence from 2 cities to 13. It recently opened four stores in Wuhan marking its first move outside its East China base.

Finally, Asian Citrus Holdings (LSE: ACHL) is the largest orange plantation owner in China. It has over one million productive orange trees at its Hepu plantation in Guangxi plus another 400,000 trees at it Xinfeng plantation in Jiangxi province.

So Charles de Gaulle was right when he said China was a big country. But at the time de Gaulle was probably unaware that it would one day become one of the world's fastest growing economies. After all in 1970 China was still under communist rule with chairman Mao at the helm. But China's rapid move to a market-led economy has meant huge opportunities for canny investors, though investing in China is still considered to be quite risky.

As a parting thought, "stir frying" is Chinese slang for speculating in shares. But as anyone who cooks Chinese food will attest stir frying is a great way to produce a dish of crunchy vegetables and tender slices of meat with incredible flavours. But stir frying can easily go wrong too, if you don't prepare in advance and keep your eye on what's going on in your wok.

> Three Reasons To Invest In China | A New Way To Invest In China