Olympics Shine Light on Chinese Investment Opportunities

By Ian Wyatt, Big Idea Investor | LFC | May 20, 2008 | comment

 May 21, 2008  Volume 4, Issue 21

 
Fellow Investor,

The Summer Olympics in Beijing are now just 79 days away. I, for one, can't wait for the opening ceremonies for a couple reasons ' one's personal, one's business.

I remember the opening ceremonies from Seoul, South Korea. They were the best I had seen. Absolutely phenomenal. But I think China's going to go one better.

This is China's coming out party. Sure, Chinese athletes have performed very well over the last decade. And we all know about the Chinese economic miracle. But now, China has invited the world to a party at its house. And judging from the preparations so far, the Chinese will spare no expense to make sure we're all duly impressed and entertained.

If you haven't seen the National Stadium, you should. It's an architectural wonder. It took nearly 5 years to build the stadium, which seats 91,000 people and covers 258,000 square meters.

The National Aquatics Center, or Water Cube, is an environmentally-friendly wonder. The glowing blue-skinned building collects rain water and can save something like 140,000 tons of recycled water every year.

The National Indoor Stadium is heated and cooled by 1,124 solar panels on the roof and 5 water source heat pumps. Even the hot water at the Olympic village, which will house 16,800 athletes, will be solar powered.

You may be starting to understand why I'm so excited. I'm an investor, sometimes to a fault. There aren't many situations where I don't ask "What's the investment angle here?"

I don't mind telling you, I think the Summer Olympics in Beijing will shine a light on a huge investment opportunity in China.

All the Progress in China

Now, China's been a tremendous investment story for the last 5 years at its modernized its capital markets and exchange regulations. My readers have made good money on stocks like China Life (NYSE:LFC), Petrochina (NYSE:PTR), Sohu.com (NASDAQ:SOHU) and C-Trip (NASDAQ:CTRP).

But this time around, investors stand to make even more.

China's made more progress over the last 30 years than perhaps any other country in history. Poverty rates have dropped from 53% in 1981 to just 8% in 2001. In 2001, infant mortality rates were 33 per 1,000 births. Today, it's about 22 per 1,000 births. And if you look only at a city like Beijing, the rate is below 5 per 1,000 births, in line with "advanced" cities the world over.

Even in the social realm, China's strong-arm tactics, honed by decades of authoritarian rule, have started to loosen.

But still, all the progress China has made has come at a steep cost. Put simply, China's environment is a disaster. Coal-fired plants belch sulfur monoxide into the air. It's so bad that an estimated 750,000 Chinese die every year from air pollution, either directly or indirectly.

Clean drinking water is hard to find. Only 15% of China's 1.3 billion citizens have access to clean tap water. China already has a distinct imbalance between farmable land and a growing population.

Olympic Sized Opportunity

The official theme of the 2008 Olympics is "One World, One Dream." But I think it's clear from the effort China's architects and engineers made to include renewable energy in their buildings that there's a second, underlying theme for the Games. The 2008 Olympics may be known as the "Green" Olympics.

From a personal standpoint, I'm glad that China will showcase the green technologies that will help it address its environmental problems. But from an investment standpoint, I'm licking my chops. There's going to be a lot of attention paid to China's "green" initiatives. And it will start with the Opening Ceremonies on August 8.

Don't worry, I'm ready. The June issue of my small-cap advisory service Rising Star Stocks will be an expanded coverage issue, focusing on China's alternative energy opportunities. And I've got a Special Report coming on the subject next week.

Now, the details of the Special Bonus Coverage issue of Rising Star Stocks and the Special Report are reserved for Rising Star Stocks members. So I'm writing you today with a special invitation to join Rising Star Stocks at no charge and to get on the list to receive your copy of my new report.

If you act today, I've got a special FREE 30-day trial to Rising Star Stocks waiting just for you. All you have to do is sign up and you'll get the Special Bonus Coverage issue of Rising Star Stocks plus the Special Report on China's alternative energy opportunities.

Plus, you'll get all the other members-only services Rising Star Stocks offers at no charge, for 30 days.

This is a terrific opportunity for you get positioned ahead of the 2008 Summer Olympic Opening Ceremonies'ahead of all the other investors who will be jumping in on these companies and paying you a premium for your shares. Here's a secure link with all the information you'll need to get your free trial membership to Rising Star Stocks.
 

Start Here
 

Warm regards,

Ian Wyatt
Chief Investment Strategist
Rising Star Stocks

PS ' Special Bonus Coverage issues will be a regular feature of Rising Star Stocks. Every three months, we'll take you in depth into the hottest small cap profit opportunities available to investors today. You won't want to miss it. Sign up today!

Click here to our secure sign up page and reserve your copy of the Special Bonus Coverage edition.

Interview with Marc Siegel, president of China Direct

"Last year, the majority of our earnings came from consulting. However, we think 2008 will be the critical turning point for China Direct.

"We believe that the majority of our revenues and earnings will come from our magnesium segment. We bought our first magnesium company in December of 2006. We showed no results for that company because we only owned it for nine days of 2006. We expect magnesium will be at least 50% of our earnings in 2008. [We'll] probably do $240 million of the $320 million in revenue [from magnesium].

"At China Direct, we are opportunistic. We were fortunate to buy our first magnesium company in 2006, when magnesium prices were roughly $1,850 per metric ton. Today the price is roughly $4,200. So we had a big wind at our back and were able to step out and consolidate that business.

"We met with a bunch of different companies in China in February and March and completed another acquisition in magnesium in Inner Mongolia. [The acquisition] makes us the lowest-cost producer of magnesium in the world. I'm not sure that we would go into any other segments. With the money we have in the bank today, we will probably beef up our chemical or our basic industry subsidiary -- which has the chemicals as well as the zinc business and our trading business -- and we'll probably also beef up our recycling business (our clean technology play); therefore, we'll have four sectors going into 2008. If we happen to raise some money for an accretive acquisition, we'll look into our fifth vertical. Right now if you look at China Direct, you have magnesium, the basic industry, the clean technology and the consulting segment. If we were to get additional capital to buy something that would be accretive to our revenues and our earnings, then we would probably look to another segment in the natural resources space.

"We would like to start going after larger consulting clients. Right now we have five public companies that are clients of China Direct that we help in all aspects of their business. We do full translation, help with the legal and accounting, and file their quarterly filings and their annual reports, but we'd like to get into some bigger companies. We think that a lot of the Chinese companies that come public in the United States need a U.S. partner. Our strategy has been to be long term with these guys. Our goal is to help Chinese companies trading in the U.S. that are doing at least $50 million to $100 million in revenue.

"We do not believe that a slowdown in the Chinese economy will affect China Direct at all. As a matter of fact, if the Chinese economy is going to grow at 9% versus the 11% it grew last year -- I believe the U.S. economy is growing 2% or 3% -- we would much rather be in China than have our money in the United States."

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