The Bears Take Control Again
as Economic Worries Continue

Despite the efforts of President Bush and Fed Chairman Bernanke, the market dropped sharply for the third time in the last five trading sessions.  Both of the aforementioned officials came out this morning touting an economic stimulus plan, but neither offered any details.  Without any substance to back it up and a few cautionary comments from the Fed, Wall Street decided not to bite at the bait.

The market didn’t get any help from the economic data that came out today either.  Housing starts and building permits for December were both well below their expected levels.  These reports were expected to drop significantly and yet they still managed to disappoint.

The other economic report that came out this morning was the Philly Fed Survey.  The regional manufacturing report came in at unbelievably low reading of -20.9.  Expectations were for a reading of -1.5.  This is the lowest reading since October 2001, right after the attacks of September 11.

MaryEllen Tribby
Publisher
Investor’s Daily Edge

	Andy Carpenter

2008’s Best China
Auto Sector Play

If you missed Michael Masterson’s provocative long-term trend piece in the January 14 Early To Rise, you need to check it out.  But do it when you’re done here.  There’s a fertile China investment idea for you below.

Actually, there are three.  One is contained within this missive.  The other two are in a free Special Report.  What you may find interesting is that one of the companies in the report is already up 9.9 percent for the year and you can’t say that about much today.

A New World of Profits

Anyway, latching onto trends early will be vital in the information-rich, rapid-data-transfer 21st century.  And I am not talking about whether Earnest Sewn jeans, Simply Vera (Wang), Bahn Mi, or Red Wattle sausages are must-haves in 2008.  Or even whether Paris or Lindsay get naked on YouTube.  That stuff is for time wasters, not fortune builders.

Currently, there is an investment trend that’s unfolding that could have a huge impact on your financial well being.  A grossly positive one, at that.  For while it’s still possible to make money on the U.S. stock markets, I suspect the majority of new fortunes will be built offshore.  And I’m not talking about some lame Caribbean tax-avoidance scheme.

Offshore in this case means the place where folks who’ve followed my advice cashed in a total return of more than 81 percent during the 25 months that ended December 31.  These stellar returns ranged from the gigantic (430 and 148 percent) to the paltry (23 and 7.8 percent) to some small negative numbers.

That’s not to imply that if you employ this strategy you’ll knock down 40 percent every year.  But there is no denying the potential investment power you can find in the ultimate offshore – Hong Kong.  More specifically, the Hong Kong Stock Exchange.

Even better, it’s already easy for most U.S. investors to trade on the HKEx.  Most just have to pick up a phone and make a broker-assisted trade.

But some investors, such as those who use Scottrade, pay the price for those cheap trades with lack of access to the rest of the world.  For them, there’s E*Trade, which has a new online global platform that would be perfect.  There’s also the Boom.com online brokerage from Hong Kong.

It’s important for you to be in Hong Kong because the HKEx is about to become the world’s most influential market.  More and more Chinese IPOs will take place there and not in New York.

In fact, if you weren’t in Hong Kong, you missed out on 2007’s best cherry-picking IPOs.  Alibaba.com (1688.HK) was an easy gotcha last November when it popped up 140 percent, as was Xingye Copper International Group (0505.HK), which is up 88 percent since it began life on the HKEx on December 27.

In all, there were 100 HKEx IPOs between February 2, 2007 and December 27, 2007.  Thirty-five of those newly public companies still show a decent return.

A steady source of IPOs is but one reason for you to be in Hong Kong.  That’s because the HKEx is where you gain immediate access to the majority of Chinese companies that do business in China.  In the past few years, U.S. investors have been hot to jump into Chinese automakers.  But the best were not available here.

Denway Motors (0203.HK) treated my readers well during the past 20 months.  It’s up 51.6 percent since I recommended it in April 2006.  But I don’t think Denway will be the Chinese auto sector’s big winner in 2008.

That honor should go to Great Wall Motor Company (2333.HK).  Great Wall currently sports a low valuation.  Sales of its SUV/pickup truck line are up 40 percent.  Exports, which now account for 37 percent of its business, are on the rise.  And Great Wall is set to start selling a line of sedans later this year.

Entry into the sedan market, with a line of five models, should allow Great Wall to graduate from a niche player and move into the mainstream.  The company says it will aim its sedans at younger buyers, which is Asia’s fastest growing car-buying segment.

Great Wall’s sedan-line rollout will happen at a leisurely pace.  It will release one new model a quarter starting late this year.  The first three will be the Florid (in 1.2-liter, 1.3-liter, and 1.5-liter versions), the i7 (1.3L and 1.5L), and the CoolBear (1.2L, 1.3L, and 1.5 L).

Once it gains a foothold, the company says it will release larger sedan models, including a mid-sized sedan (2.0L and 2.5L) as well as a larger sedan that will have something larger than a 2.5-liter engine.

There should be an upside to this for its truck and SUV line as well.  All its sedan R&D may translate to better pickup/SUV interiors … in other words, more compelling sales features.

Great Wall has a reputation for knowing how to launch SUV and pickup truck lines.  This experience should help smoothly launch sedans.

All this should help Great Wall expand revenues by at least 30 percent in 2008 and 35 percent in 2009.  And that should translate into money in your pocket.

Like most stocks across the globe, Great Wall opened the year by getting pounded.  That won’t last.  It trades under HK$10 (US.$1.28), but should end the year in the HK$14.40-$14.80 range.

But you can only line up for these potentially sweet returns if you embrace the Hong Kong Stock Exchange.

Do it now, and you’ll be an experienced trader there by the time the rest of the world rushes in.  And you’ll be lined up for them to float your boat.

Lock and Load,

Andy Carpenter

P.S.  To let me know what you thought of today's article, send an e-mail to: feedback@investorsdailyedge.com.