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Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

In a Decade, the World's Biggest Stock Will Be Chinese

Companies / China Stocks Nov 08, 2010 - 08:01 AM GMT

By: DailyWealth

Companies

Dr. Steve Sjuggerud writes: Ten years from now, the world's biggest stock will almost certainly be... Chinese.

At least that's what my friend and expert Asia analyst Peter Churchouse found when he recently set out to answer that question.


Four of the six companies that came out on top in his "Largest Companies in the Coming Decade" study were Chinese. Only one was American. According to Peter...

A handful of companies in this list could lift market cap by more than three times. A "buy and hold" strategy for some of these giants could produce very solid returns over the decade.

Fortunately, there's an easy way for Americans to own the Chinese giants. I'll share it with you today...

Right now, four of the world's 10 largest stocks are Chinese. A decade ago, that was unthinkable. No Chinese names were even close.

Today, the world's top 10 list of large companies includes names you'd expect – like ExxonMobil (the world's largest), Microsoft, Berkshire Hathaway, and Wal-Mart. The list also includes a couple names you might not expect – like Apple and commodity-giant BHP Billiton.

Rounding out the top 10 are four Chinese companies you probably never heard of. Most of these Chinese companies are near the bottom of the top 10 list today. But if Peter is right (and he used some very basic assumptions), these four Chinese companies could be in the top six in a decade... And one of them could overtake ExxonMobil as the world's largest company.

The four Chinese names are: oil company PetroChina, cell-phone provider China Mobile, and two major banks: ICBC and China Construction Bank.

You can easily own these Chinese names through an exchange-traded fund: the iShares China 25 Index Fund (FXI).

FXI's top three holdings are three of these names. And four of them make up about one-third of this fund.

At first glance, FXI doesn't appear cheap... It's trading at a price-to-earnings ratio of 16.8 and a price-to-book ratio of 2.6. (It pays a 1.9% dividend.) But it doesn't seem expensive at all when you understand the slowest-growing company out of the four increased its sales 15% a year over the last decade.

Peter isn't guaranteeing these names will become the biggest in the world, of course. And we can't know the future. We have plenty of other possibilities to ponder... Peter writes:

Will there be a new Google out there, coming from way behind the curve? Will something out of biotech be the next Google, a product of the genome project? Will we see some emerging market giants come screaming out of the chutes? Will some of the old contenders such as U.S. banks get a new lease of life, and catch the next wave of growth and valuation over the coming decade?

Chances are good for all of those. We can't know what's coming... But based on some simple assumptions, Churchouse suggests the future for Chinese blue-chip stocks is very good over the next 10 years... Invest accordingly.

Good investing,

Steve
P.S. In addition to FXI, you can also trade these stocks with leverage, if you're bold... You can own a "double-long" fund on the same index. That's the ProShares Ultra China 25 Index Fund (XPP).

http://www.dailywealth.com

The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

Customer Service: 1-888-261-2693 – Copyright 2010 Stansberry & Associates Investment Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This e-letter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry & Associates Investment Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Daily Wealth Archive

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