Big Players in a Torrid Economy

Here are four Chinese stocks that offer potential for the long-term investor.


Pumping gas at a PetroChina station in Shanghai.

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Here are four Chinese stocks that offer potential for the long-term investor:

PetroChina. Even though Warren Buffett recently sold off some of his shares, the largest oil producer in Asia is still a good buy, says Blaze Fabry, president of Chinavestor, a research firm. It's relatively cheap, with a price-to-earnings ratio of around 12 based on expected profits, and it has potential for growth as the demand for oil in China rises. The stock is up 74 percent for the past year. Chinavestor estimates PetroChina's net income for this year will be $22.6 billion.

China Mobile . As with PetroChina, the number of Chinese consumers makes this cellphone company's growth potential immense. "It's a very solid company that has very good quality management," says Richard Gao, portfolio manager at Matthews International Capital Management. "It's one of the companies that get benefit from living standard improvement and consumption growth in China." While the current p/e ratio hovers around 36, it is expected to drop to 16 as earnings rise in the coming year. Since the start of the year, the stock is up 85 percent. In 2006, net income was $ 8.52 billion.

Sina. The largest Internet portal in China is also growing as the Chinese depend more and more on the Internet. Gao points out that Internet users in China will surpass the number in the United States in the next year or two. The stock is relatively expensive, with a P/E ratio of just over 70, but that number is expected to fall as the company grows. Earnings for 2007 are estimated to reach almost $37 million. According to the company's quarterly report in August, net revenues increased 11 percent a year to $59.8 million, with advertising revenues up 40 percent. The share price has more than doubled over the past year.

China Southern Airlines. "The whole airline sector right now is super hot," Fabry says. As the Chinese become wealthier, they fly more. China Southern's operating revenue for the first six months of the year grew 19.2 percent over the same period a year earlier, the company said, while the number of passengers carried rose 16.6 percent to 26.4 million. Shares have quadrupled over the past year, although they've dipped a bit recently, making them a cheaper buy. In August, the company attributed its growth to a strong Chinese economy, good management, and cost controls. It added, though, that oil prices are likely to stay high, increasing operating costs.