Can China Stocks Get Any Hotter?
By
Rick Aristotle Munarriz
October 1, 2007
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Another week, another handful of Chinese stocks on the run.
I wrote about how the list of Wall Street's biggest gainers was dominated by fast-growing companies in China two weeks ago. This past trading week invited more of the same. New names. Identical market-thumping results.
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Last Week's Gain
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China
BAK Battery (Nasdaq: CBAK)
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78%
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China
Finance (Nasdaq: JRJC)
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39%
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Kongzhong (Nasdaq: KONG)
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32%
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China
Sunenergy (Nasdaq: CSUN)
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31%
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China
Telecomm (NYSE: CHA)
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28%
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In the previous article I emphasized the importance of a globally diversified portfolio. Many Chinese companies are growing substantially faster than their stateside counterparts. I explained how that was at the heart of the Global Gains newsletter, of course, and it's also the reason the Rule Breakers, Hidden Gems, and Stock Advisor newsletter services list Chinese stocks on their "Recommendations" scorecards.
No matter what sector interests you, odds are there's some spunky Chinese equivalent for you to consider. The new batch of market-clobbering equities certainly isn't marching to the same drummer. Wireless services, finance, solar energy, and lithium ion rechargeable batteries lit up the big gainers this past week.
One would think the market is simply reacting to a low supply of Chinese stocks to whet the voracious thematic appetite, but that's just not true. New issues continue to hit the market. China Architectural Engineering (AMEX: RCH) and consulting specialist China Direct (AMEX: CDS) just began trading on the American Stock Exchange last week.
Still, the biggest indicator that this isn't a matter of too many investors chasing too few stocks is that every single closed-end fund specializing in Chinese stocks is trading at a discount to its net asset value. The discounts may have narrowed since I recommended closed-end funds as plays on the hot Chinese economy back in March, but my argument is still valid until those funds are bid up for more than the market value of their underlying assets.
So can China get any hotter? Of course it can. Is the market risky? You better believe it. Will I be back next week to profile another batch of hot performing China stocks? I probably will.
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