Dear Fellow Investor,
The holiday season is a busy time of year here in America. Many of us are shopping for gifts, attending holiday gatherings, decorating our houses and preparing to say goodbye to this year and ring in the next.
It's not quite this active in China, but there is still plenty going on, and I thought you might be interested in knowing about it. So let's start this week's Dispatch with a look at the holiday season in China, and then we'll look ahead at what I expect to be a big opportunity in 2007 and how to profit from it.
Party Time in China
As you're probably aware, the biggest holiday of the year in China is the Chinese Lunar New Year, which will fall on February 18 in 2007. Christmas and New Year's don't compare with that, but they are gaining greater importance as China embraces globalization.
For example, workers and students alike throughout the entire China region get Christmas Day off. In Mainland China over the past 10 years, we've seen the young and increasingly affluent (Chuppies, as I call them) start to celebrate Christmas. Most Chinese are not Christians, so consumerism replaces the holiday's religious overtone. Christmas is a day for many Chinese to experience a "Western" lifestyle. Friends and couples exchange gifts, and parents in large cities like Shanghai often buy presents for their children as well.
The Chuppies absolutely love nightlife, and Christmas Eve and New Year's Eve are becoming two of the biggest party nights of the year. Restaurants that serve Western food, such as Pizza Hut, offer specials to attract extra business. It's working. Christmas Eve is now the busiest night for Pizza Hut, with patrons waiting an average of two hours to be seated at a table. (Our play on this in China Strategy is up 26% for us this year. Click here to get immediate access to it and all of my current recommendations.)
Outside of Mainland China, both Taiwan and Hong Kong have long traditions of celebrating Christmas. As a little boy growing up in Taipei, I always looked forward to finding new toys and gifts in my stocking under the Christmas tree. As in Mainland China, most Chinese in Taiwan and Hong Kong are not Christians, and Christmas is more of a party holiday than a religious holiday. Popular American restaurants in Taipei and Hong Kong, such as TGI Friday's and Ruth's Chris Steak House, all serve special Christmas dinners as well.
New Year's Eve is also becoming a major party night for Chuppies. It doesn't reach the level of Times Square, but giant citywide New Year's countdown parties are now an annual event in places like Taipei, Hong Kong, Shanghai and Beijing. Pop stars hold free concerts on large makeshift stages in front of crowds in excess of 100,000. After the countdown, there is usually a fireworks show to celebrate the New Year.
And speaking of celebrating the New Year, let's turn to what I expect to be a big opportunity in 2007 and how you can profit from it.
Next-Generation Profits in 2007
China is far and away the largest cellular market in the world, with 440 million cell phone users—more than the entire population of the U.S.! The industry continues to grow more than 20% a year and will hit an eye-popping 500 million users in 2007.
Chinese consumers are willing to spend money on the latest and greatest technology, and with wireless so hot there, they often devote a full month's wages to a cool new cell phone. Well, the phones are about to get even cooler, and one of China's leading manufacturers of mobile phone equipment technology is dialed in to benefit from this boom.
Based in Shenzhen, my latest recommendation designs technical components such as memory chips, circuit boards, LCD screens, keypads and camera phones—the very devices that make new cell phones smaller in size and yet have more capabilities. The 10-year-old company has grown with the biggest telecom manufacturers in China, making its Chinese connections difficult to match.
This company has a lot going for it, but the main reason I believe it is such a good investment right now is that it is in prime position to capitalize on China's imminent move to upgrade its wireless network to the next generation of wireless broadband, known as 3G.
The increasing number of cell phone users worldwide has created demand for faster technology that lets people use their cell phones for more and more of their daily activities. 3G, or third-generation technology, aims to meet that demand by providing networks with the ability to simultaneously accept both telephone and non-voice data, like receiving emails and text messages, video, pictures, etc.
As Asia modernizes and works to fully participate in the global marketplace, many countries have made developing their IT infrastructures a top priority. China is one of them. It will spend more than $24 billion to upgrade its wireless communications network to 3G. Chinese vendors are going to gain significant share when 3G rolls out, and I expect my newest recommendation will be among the biggest beneficiaries.
I look for the Chinese government to award 3G licenses by this coming spring, with the goal of having everything fully functional in time for the 2008 Summer Olympic Games in Beijing. You can see that this story will continue to play out for some time, and now is a great time to position yourself for profits before the hype builds. (You can get complete details on this stock, including my latest buying instructions, when you join China Strategy today. Click here for more information.)
Let me conclude by wishing you and your loved ones the happiest of holiday seasons. And here's to a fun and profitable 2007 for all of us!
Sincerely,
Robert Hsu
Editor, China Strategy
P.S. My full report on this 3G stock is in the current issue of China Strategy, which you can read right away by joining today. You'll also learn about all of my other recommended stocks, including another wireless play that's gained 68% this year! Click here to get in on the profits today.
