For those who see the glass as half full, the Chinese trade surplus is still positive, albeit shrinking. Latest figures show the BRIC leader exporting $12.9 billion more than it imported in September.
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The figures have been decreasing, since peaking at roughly $30 billion back in late 2007. Compared to the U.S., which has been running a trade deficit for the better part of three decades, the Chinese economy looks strong. And there's no question that demand for cheap Chinese manufactured goods is still strong. Whether the trend stays in place or reverses, there are a number of companies that stand to gain whether the surplus is in place or not. Below we evaluate a number of them.
China Nepstar Chain Drugstore (NYSE:NPD) is one of the few Chinese issues that also offers a great dividend yield. The company offers investors 5.30% annually and a five-year annualized sales growth rate of 34.5%.
Great Cash Flows
With a full service line of pharmaceutical and health and beauty aids, NPD's 2,700 retail outlets generate tremendous revenue. So much so, the company recently declared a special $1.50 dividend to be paid to shareholders before year end, pending board approval.
China Mobile Ltd. (NYSE:CHL) is that country's premier wireless operator, with a market cap in excess of $200 billion. The shares trade with a trailing P/E multiple of 12.3-times earnings and sport a dividend yield of 3.5%. They're up almost 50% since bottoming almost a year ago, and Zack's market research finds them among the top five telecoms globally to invest in.
In the last ten years, China Mobile has reported only one period in which profits declined vis-à-vis the previous quarter.
"Rapid" Overseas Expansion Planned
China Petroleum & Chemical Corp. (NYSE:SNP) or Sinopec as it's more commonly known, carries a market cap of $78 billion and has nearly doubled in price in the last six months. The shares trade with a dividend yield of 2.3% and a P/E ratio of 10.
After reporting record profits in late summer, Sinopec announced it would be expanding its overseas operations rapidly, predominantly through acquisitions in countries like Russia, Nigeria and Australia.
Two Chinese agriculture related issues are also worthy of investors' attention, China Green Agriculture Inc. (AMEX:CGA) and AgFeed Industries Inc. (Nasdaq:FEED). CGA is a fertilizer and fruit and vegetable dealer while FEED produces pork fodder. China is the world's largest pork producer and consumer, accounting for over 50% of global production.
Both stocks are up over 400% from this year's lows.
The Bottom Line
China's on the rise, and the above named issues should continue to do well regardless any shrinkage in the trade deficit. None of them are reliant on exports for continued growth. Rather, a growing middle class and its attendant needs should drive profits in these companies ever higher. (To learn more, read Investing In China.)
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