Best Financial Markets Analysis Article I was on my way to Akihabara, a district of Tokyo also known as Electric Town, on the JR Line of the Tokyo subway system. In Akihabara, you can find just about every electronic gadget imaginable: Computers, cell phones, video games, TVs, software, digital cameras … you name it.

The subway was standing room only and almost every person was fiddling with some electronic doodad. Some were typing out text messages, others were listening to music on an MP3 player, some were playing video games on a hand-held Nintendo DS player, and many were paying rapt attention to something on the screen of their smartphones.

Suddenly, I heard a cluster of giggles erupt all around the subway car. Did I miss a good joke? Did somebody pass some gas?

Nope. What happened is that the people paying rapt attention to their smartphones were watching a popular Japanese comedy show. One of the comedians must have said something funny because that is what caused the spontaneous laughter in the subway car I was riding in.

I suspect that laughter was played out in subways, restaurants, and the back seats of cars all over Japan because one of the most popular uses of the new generation of smartphones is to watch movies and popular television shows.

The new 3G or Third Generation of phones is transforming cell phones into full-blown entertainment centers. That by itself is amazing — but there’s more!

In Japan, you can use your cell phone to buy a Coke from a vending machine, play video games, open the door of a university dorm room, activate panic alarms connected to the police, purchase airline and railroad tickets, shop for groceries.

The Japanese and South Koreans are years ahead of the rest of the world for 3G applications, but that is about to change.

In the U.S., for example, NBC is offering much of its TV programming as streaming video for 3G-enabled smartphones. For free.

NBC Universal and FLO TV, a unit of Qualcomm, are spending big bucks to put streaming video content on smartphones. “Putting the concepts of mobility and watching video together is a natural, and we’re seeing it really grow right now,” said FLO TV’s president, Bill Stone.

It won’t be long until you will be able to use your smartphone just like the giggling Japanese on the Tokyo subway. You’ll be able to watch your favorite sitcom, The O’Reilly Factor, the local news, or a full-length Hollywood movie.

There is, of course, a truckload of investment opportunities behind this mobile entertainment movement, but the best ones will be found over in China.

Why? Because cell phones have a VERY different function in China than they do in the U.S. How so? Most Americans have both a personal computer and internet access for their homes, but millions of Chinese use their cell phone as a PC substitute.

The new generation of smartphones is accelerating that trend. Cell phones are game consoles, still cameras, email systems, text messengers, carriers of entertainment and business data, and used for e-commerce.

Millions of Asians use their cell phones as a PC substitute and source of entertainment and business data.

About 75% of China’s 195 million web users under the age of 25 surfed the Internet using a cell phone in 2009, according to the government-run Chinese Internet Network Information Center. That’s up from 50% from a year ago, but I expect that number to keep growing and growing.

How can you make money from this tidal wave of mobile entertainment?

China Mobile (NYSE:CHL) and China Unicom (NYSE:CHU) are the two largest wireless phone companies in China and they may be one of the biggest winners. I say that because the billing clock is ticking every minute that they are watching videos. The longer users watch … the more money China Mobile and China Unicom make.

Chinese television is controlled by the Chinese government and the shows that it produces are … well … crap. Much of the best and most popular content in China is produced by Chinese internet companies that will prosper from the hunger for mobile phone-delivered content. Sohu.com (Nasdaq:SOHU), Bidu.com (Nasdaq:BIDU), and Sina.com (Nasdaq:SINA) have tons of content that Chinese cell phone users can’t get enough of.

AsiaInfo Holdings (Nasdaq:ASIA) makes software that helps cell phones operate more efficiently and being based in China gives it great access to China Mobile and China Unicom.

LinkTone (Nasdaq:LTON) one of China’s largest data service and telecom content providers such as trivia, fortune-telling, games, lunar horoscopes, jokes, fan clubs, and entertainment news updates.

KongZhong (Nasdaq:KONG) is an interactive entertainment services that provides games, pictures, logos, karaoke, electronic books, and content, such as domestic and international news, entertainment, sports, fashion, lifestyle, interactive chat, message boards, and dating.

ZTE (ZTCOF.PK) is a Chinese maker of cell phones and wireless infrastructure.

Should you rush out and buy any or all of these stocks right now? First, you need to do your own homework and make sure you like what you see and, most importantly, carefully pick your entry point.

That’s what I’m doing. I have owned and/or recommended some of the above stocks to my Asia Stock Alert and Asia Stock Options subscribers in the past … but I don’t own any of them at this time. A couple of them, however, have dropped enough in price that I’m very close to jumping on board.

The wireless world is changing, maturing, and growing, but nowhere are the opportunities as exciting as in China. There is a fortune to be made across the Pacific Ocean and I hope that you put a healthy dose of Asian technology spice into your portfolio.

Best wishes,

Tony

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