China exposure is a must! Part I

I am one of China bulls. China is a must in my portfolio. That was one of the reasons I put Parkson in the portfolio. Some of us will have very sour taste for buying Chinese stocks too early in the last two years. It is like a cat got burnt sitting on a hot stove, it will never forget that experience and avoiding hot stove at all cost. But not me, I am maximum bullish China because:-

1. China is one of the best managed economy in the world. They are one of the better prepared for this downturn. They have been growing and growing at the level of 8-9% for the last 30 years.

2. Their top leadership committed to continue to reform. They are improving social safety net that will create security for its citizen to spend. They also try to narrow rural and urban income gap.

3. China is a high saver almost 50% vs American almost zero or negative. Their currencies will rise in the long term.

4. They valued education - you know what I mean. They are pushing and pushing for higher level of literacy. I believe it has reached almost 90%. Educatied society will demand progress.

5. Entrepreneurship is rising. They have dismantled the old State Owned Enterprise. Productivity is going remain high for years to come.

6. China consumption potential is not a fad. China has more than 170 cities with more than 1 million people. 400 million Chinese subscribe to mobile phones. Chinese is now account for almost 12% of world's luxury goods. Only 23 millions private cars in China, you can imagine the room for growth.

7. Their GDP per capita is still very low, only US $ 6,000(PPP).

8. Populations are young - median 33.6.

9. The valuation of the companies have reached to a very reasonable level. H Shares are selling around PE of 10-11X.

10. Both invisible(capitalism) and visible(Communism) hands are moving. They can implement things a lot faster. For example:-

Feb. 5 (Bloomberg) -- Industrial & Commercial Bank of China Ltd., the nation’s largest, said it offered 252.1 billion yuan ($36.9 billion) of new loans in January in response to the government’s stimulus plan to avert an economic slowdown.

The bank lent 69.3 billion yuan to power grid, railway, roads, and hydroelectric power projects, and 135 billion yuan in discounted bills to small and medium-sized companies, the Beijing-based firm said in an e-mailed statement, without giving comparisons. New loans to individuals, including mortgages, amounted to 16 billion yuan.

China dropped lending quotas and unveiled a 4 trillion yuan stimulus package in November to maintain economic growth and counter the global financial crisis. Banks have responded by raising lending targets and focusing on railways, roads, power grids and other infrastructure projects with stable returns.

Domestic banks offered a record 1.2 trillion yuan of new loans last month, representing almost a 50 percent gain from a year earlier, the China Securities Journal said yesterday.

ICBC aims to advance 530 billion yuan of new loans in 2009, about the same as last year, the 21st Century Business Herald reported today. The bank plans to complete 45 percent of the loan target in the first quarter.

ICBC attracted 271.2 billion yuan of deposits in January, equivalent to a quarter of the total increase in 2008, according to today’s statement.

See how fast things are moving when the removed the loan quota? I can tell you earning for Chinese banks will not slow down anytime soon.

12. People are still skeptical about China and market recovery. Now is one of the better time to invest slowly with dollar averaging strategy.

13. Honestly, Malaysia has disappointed me for a long time. Our politicians just can't get their acts right. I have been underweight Malaysia for a while.

I can go on and on and on .........