"Street Critique" -Hilary Kramer, Personal Finance Editor at AOL
Wednesday, June 06, 2007PAUL KANGAS: China's benchmark Shanghai Composite Index has been on a roller coaster ride, selling off sharply over the last week after rising almost 50 percent since the beginning of the year. My "Street Critique" guest tonight still sees plenty of value in Chinese stocks, but says you have to be selective. She's Hilary Kramer, market strategist and personal finance editor at AOL.
Hilary, welcome back to NBR.
HILARY KRAMER, PERSONAL FINANCE EDITOR, AOL: Thank you, Paul.
KANGAS: We kicked off the week with another big sell-off on the Shanghai Composite. It fell 8 percent. U.S. markets kind of shrugged off that decline, but does the volatility we are seeing in China scare you off?
KRAMER: No, there is so much potential there with a billion-plus people, all of whom have money now to spend.
KANGAS: OK. As an investor, what are you looking for in China? What kinds of businesses, those that focus on China's domestic market and its emerging consumer class, or firms that are strictly focused on exports?
KRAMER: It is the consumer class -- it is the growing consumer class that has money now. That is who is benefitting from all of the new companies that are growing.
KANGAS: OK. Now we spoke about opportunities in China on your February 28th visit. The Shanghai Composite had just marked its first big sell-off which caused a major drop in U.S. stocks. You had three stocks for our viewers at the time. Let's see how they have done since then.
First we see Focus Media (FMCN) up 9.6 percent, as was New Oriental Education and Technology (EDU). Are you still with those two gainers?
KRAMER: They are great companies, especially Focus Media, which makes the flat panel screens that are used to advertise everywhere from buses to elevators.
KANGAS: Then of course we see Homes, Inns and Hotels (HMIN) down over 26 percent. What went on there?
KRAMER: There was expectation that there would be additional IPOs and growth of these discount hotel chains all over China, and also they didn't grow as fast as was expected. They only have 80 hotels right now.
KANGAS: OK. You have some new picks. China TechFaith Wireless (CNTF) is first up. What does the firm do? Let's get a chart up there if we can have -- there it is. Go ahead.
KRAMER: OK. China TechFaith Wireless makes handsets. They are a designer of the handsets. So they supply them to the major mobile companies all over China. And the stock really sold off. And there is a nice opportunity right now.
KANGAS: OK. You think it is oversold, in other words?
KRAMER: Absolutely.
KANGAS: All Right. LDK Solar (LDK). That debuted on the New York Exchange last Friday at a price of 27, been struggling. Why do you like this one?
KRAMER: LDK was bought by the -- what we call the IPO flippers. There was a lot of stock, $400 million-plus, that was issued out there, a lot of buyers just flipped right out of it. But they are a big supplier to the major solar companies with solar wafers around the world.
KANGAS: OK. Then you like Harbin Electric (HRBN). And let's have a chart on that and give us the story on this one.
KRAMER: OK. Now Harbin Electric is a smaller cap stock. So it is a little less liquid, but it is a very, very well-situated company that does efficient motors for everything from microwave ovens to power tools to big industrial equipment in China. And there is legislation for more efficient motors. I like this for the very, very long term.
KANGAS: OK. An interesting selection, Hilary. Do you own any of the issues personally, or have any other disclosure to make?
KRAMER: Of all of these companies, LDK is the one that I do own.
KANGAS: OK. Fair enough. Hilary, great to see you again. We will see you again on June 20th.
KRAMER: Thank you, Paul. I look forward to it.
KANGAS: My guest, Hilary Kramer, personal finance editor at AOL.
