Most of the time, backdoor plays offer the largest profits in growth industries like this one. Sometimes, however, a straightforward approach is your best chance at the quickest gains. This is one of those times.

Take China Mobile (NYSE:CHL), for instance. This telecom behemoth is the most obvious play in the region. In the last three years, the company doubled the number of subscribers and grew its bottom line 107%. That’s a rare feat for a $230 billion company.

China Mobile’s growth is impressive, but it’s nothing compared with what a small-cap player can do in this field. And with the telecom industry in Asia predicted to almost double by 2013, there’s plenty of room for other players to grow too.

That’s why we’ve been looking for under-the-radar Internet providers in Asia. And we just we found the only place worth looking at…

The Forgotten Power in Asia: Investing in Hong Kong

Most people think of China, India and Japan when you bring up Asia. The place most often left out of the conversation is Hong Kong — a Chinese territory that in 1997 ended 156 years of British rule.

Other than the small island nation of Brunei, Hong Kong has the largest GDP per capita in the entire region. In fact, the small territory is No. 14 in the whole world, and it’s only four spots behind the U.S.

Most are writing Hong Kong off these days, however. With the recent global financial collapse, Hong Kong’s large financial services industry was slaughtered. Even so, the world can’t just forget about this tiny-but-affluent region.

The Hong Kong Stock Exchange, for instance, is host to companies worth a total $2.7 trillion. That’s 10 times larger than the American Stock Exchange!

Another surprising tidbit about Hong Kong is the resilience of its tourism industry. While nearly every country in the world saw a decline in number of tourists, as well as income from its tourism industry, Hong Kong actually saw its tourism grow. Last year, the number of visitors to Hong Kong grew 5%, and average spending per overnight visitor grew 6.2%.

Needless to say, this is an overlooked region, but it shouldn’t be. Hong Kong is very capable of producing winners.

Right now, there is a small handful of exciting Hong Kong telecom plays that are worth looking at, but unfortunately, at this stage, it’s a case of look but don’t touch. Many of them are too speculative to mention here right now.

Watch the region — we’ll let you know when that changes.

Sincerely,
Jim Nelson

Source: How to Profit from the Asian Internet Boom

Just last week – for the first time in 60 years – Taiwan opened its doors to investments from Mainland China. The impact was almost immediate. On Friday, Guangzhou-based China Southern Airlines Ltd. (NYSE ADR: ZNH) submitted the first bid under the new regulations and became the first mainland company to apply to invest in Taiwan.

By the day’s end, three more of China’s air carriers had joined the race and filed applications to invest in Taiwan: Air China Ltd. (OTC ADR: AIRYY), China Eastern Airlines Corp. Ltd. (NYSE ADR: CEA) and Hainan Airlines Co. Ltd. Clearly, these companies understand the stakes here, which is what’s behind the rush for these potentially lucrative new routes between Taiwan and China.

Speaking for China Southern, spokeswoman Zeng Qingning noted in theTaiwan News “we can begin selling tickets once our office is approved to become a branch.” My experience suggests that other companies are well advanced in their preparations too, which is why this probably isn’t the last we’ll hear on this topic.

One-Way Street

Just last Tuesday, Taiwan’s Ministry of Economic Affairs (MOEA) announced that China-based companies and investors would be permitted to invest in more than 100 different product-and-service categories, and that regulations governing applications by China-based companies seeking to open branches or subsidiaries in Taiwan also were ready.

These initiatives were an outgrowth of several new investment accords reached in May between the Association for Relations Across the Taiwan Straits (ARATS) and the Straits Exchange Foundation (SEF). When I reported on these at the time, I told Money Morning readers that they literally were watching history in the making just as I was from my perch in China as the news unfolded.

Prior to last week, “cross-strait” investments had been a one-way street – from an official standpoint, at least – with Taiwan companies having invested hundreds of billions of dollars in Mainland China,including about $77 billion since just the late 1990s alone, The Wall Street Journal Asia reported.

In return, China’s been allowed absolutely zilch and has been legally barred from making investments in Taiwan. The fear – at least what’s been stated publicly – is that China would use its rapidly expanding economic might to blunt Taiwan’s efforts to remain an independent nation.

(You may recall from your history books that China views Taiwan – formerly known as Formosa – as a “breakaway republic,” a position the island nation has held since 1949, when the two split during a civil war that led to the creation of the communist-controlled People’s Republic of China.)

China’s Newfound Role as an Economic Savior

Behind the scenes, however, the story is much different. Many Taiwanese business leaders I’ve spoken with confidentially welcome normalized relations and view the opening process as a development that’s long overdue. For them, it’s not about political aspirations; it’s about what China can do for their over-leveraged, underutilized assets. Many, including new Taiwan President Ma Ying-jeou, for example, are acutely aware of the fact that Taiwan missed out on many of the benefits of China’s rapid industrialization and global emergence over the past 10 years, thanks to poor political relations and antagonistic regulation.
And it’s cost Taiwan dearly. The desire for continued independence aside, once-proud Taiwan has become another in a long list of nations around the world that are eating big slices of humble pie and that now see China as a potential savior from the current global financial crisis.

Taiwan’s experience with the Taipei 101 Tower is a concrete example of the potential benefit of China’s emerging economic might. The tower was supposed to stand as a symbol of Taiwan’s newfound economic prowess and, at the time of its construction, was the world’s tallest building.

But it soon became a colossal white elephant. In fact, until very recently, it stood less than 50% occupied. That’s when several of China’s corporate powerhouses took up residence, including:

• Lenovo Group Ltd. (OTC ADR: LNVGY), the growing global PC giant.
• Sinosteel Corp., the major iron-ore importer.
• And Tiens Group Co., a China-based direct-selling conglomerate that is the world’s fifth-largest healthcare products firm.

According to The Wall Street Journal, the building is now more than 80% occupied and rents in the area have risen by 5% to 10% in anticipation of more highbrow Chinese clients. Of course, it doesn’t hurt to have such big-name players as Bank of America (NYSE: BAC), Google Inc. (Nasdaq: GOOG) and even Merrill Lynch (NYSE: SAR) as tenants, but the reality is that the Mainland China companies are the firms that are really being sought right now. That’s particularly true at a time when the mainland economy remains on track for annual growth of 8% or more this year, and appears to be the only one of the world’s top industrialized economies that’s not in a deep state of denial or contraction or both.

The fact that China’s bucking the trend is not lost on the Taiwanese business community. Nor is the fact that many of the best-positioned and fastest-growing Mainland China companies are state-owned enterprises.

“In contrast to the past, when this was seen as a threat, they’re more attractive now for their deep pockets,” said one local real estate professional I interviewed who wanted to remain anonymous.

Not surpassingly, the welcome mat is not out for military-backed enterprises. Nor does it include potential investments in high-tech or real-estate-development projects. I think that will change, particularly if Taiwan’s economy registers a couple more consecutive quarters of contraction, and if its companies continue to experience weakened global demand for its products.

The Art of the (Asian) Deal

Despite the very clear need, Taiwan is still trying to exercise some caution in deciding which deals to approve. According to Deputy Economic Minister John Deng, if the capital comes directly from China the economics ministry will review it. Capital coming from third party destinations “investing over 30% in, or effectively controlling local companies” falls under the same scrutiny. Likewise, Deng noted, if China invests in more than 10% of a company’s stock, it will be “seen as [a] direct investment.”

So far, the first couple of Mainland China delegations have already reached $68 billion worth of deals in various industries.  Some are undoubtedly smaller and involve a smattering of the 200 industries open for direct investment, but it’s the bigger transactions that have everybody excited because they are a harbinger of better times and more profitable relationships ahead.

In April, for example, China Mobile Ltd. (NYSE ADR: CHL) offered $527 million for a 12% stake in Taiwan-based FarEasTone Telecommunications Co. Ltd. Because it was made prior to the new rules and involved the politically sensitive telecom industry, the consensus is that the deal won’t pass scrutiny. But you never know and that’s part of the thrill of the hunt.

Portfolio manager Henrietta Luk of Melchior Asian Opportunities Fundnotes that “local retail investors have gone on a treasure-hunt frenzy guessing which is the next industry or company to link up with China, leaving foreign investors chasing any stocks that are not limit up to make up for their hugely underweight positions in Taiwan.”

And they will have to chase them – literally. According to the Taiwanese Tourism Board, more than 300,000 Mainland Chinese visited Taiwan through April of this year, versus 320,000 during all of 2008. The number of mainland airports serviced from Taiwan has increased from 21 to 27, while the number of direct flights has soared from 108 to 270 per week, an increase of 150%.

Given that jump, it’s no surprise that China Southern Airlines submitted the first bid under the new regulations – or that the three rivaling carriers joined the hunt that same day.

If you’re of the same opinion, and want to attempt to ride this wave yourself, consider getting started with an investment in an exchange-traded fund (ETF) – specifically, the iShares MSCI Taiwan Index Fund (NYSE: EWT). With top holdings in computer hardware (42.44%), industrial materials (21.93%) and financial services (16.42%), you’ll no doubt hit something on China’s wish list soon.

Watch for agreements either late this year or early in 2010 that will permit the two countries to trade one another’s shares for the first time in 60 years – and then watch for the huge jump in liquidity that goes with it. I’ve been hearing for several months now – very quietly, I might add – that regulators in both Taiwan and China are considering a dual-listing agreement that would at least partially remove restrictions that prohibit individual investors from directly investing in each other’s stocks.

There’s clearly a long way to go here with regard to the global financial crisis, but the flurry of cross-straits activity we’re seeing and the accelerating nature of the activities there provide important confirmation that we’re on the right track.

I have no doubt that Taiwan will turn out to be one of the region’s powerhouse investments over the next five years – albeit one that is more closely tied to Beijing’s fortunes than many people on this side of the Pacific are inclined to accept.

Source: By Opening its Doors to China for the First Time in 60 Years, Taiwan Paves a New Path for Investor Profits

Editor’s Note: Fourteen trades. All profitable. Since launching his Geiger Indextrading service late last year, Money Morning Investment Director Keith Fitz-Gerald is a perfect 14 for 14, meaning he’s closed every single one of his trades at a profit. And he did this during one of the most volatile periods for the U.S. stock market since the Great Depression. Fitz-Gerald says the ongoing financial crisis has changed the investing game forever, and has created a completely new set of rules that investors must understand to survive and profit in this new era. Check out our latest insights on these new rules, this new market environment, and this new service, Geiger Index. ]]> http://www.contrarianprofits.com/articles/by-opening-its-doors-to-china-for-the-first-time-in-60-years-taiwan-paves-a-new-path-for-investor-profits/18799/feed 0 http://www.contrarianprofits.com/articles/looking-for-the-next-global-profit-play-take-a-look-at-these-emerging-market-etfs/16888 http://www.contrarianprofits.com/articles/looking-for-the-next-global-profit-play-take-a-look-at-these-emerging-market-etfs/16888#comments Wed, 20 May 2009 14:40:05 +0000 Mike Caggeso http://www.contrarianprofits.com/?p=16888 Like most investors, Harvard University’s billion-dollar endowment fund took a beating during the global financial crisis. Many investors cashed out, opting for the safety of the sidelines. But Harvard called a new play. During the first quarter, Harvard engineered a dramatic shift in its endowment-fund investment strategy – boosting its stakes in some of the most prominent emerging market exchange traded funds (ETFs).

Indeed, its largest first-quarter investments included:

• $50.9 million in Vanguard Emerging Markets ETF (NYSE: VWO)
• $1.5 million more iShares MSCI Brazil Index ETF (NYSE: EWZ)
• $1.1 million more into in iShares FTSE/Xinhua China 25 Index ETF (NYSE: FXI)
• $877,700 into Van Eck’s Market Vector Russia ETF Trust (NYSE: RSX)
• $817,300 into iShares MSCI Mexico Index Index (NYSE: EWW)
• $390,400 more into iShares MSCI South…

Unfortunately, there’s one sobering conclusion many investors have so far failed to reach: With grossly over-stimulative monetary and fiscal policies at play, most countries will find it very difficult to recover.

Fortunately, a few well-run countries avoided the fallout from the U.S. housing debacle – as well as the fiscal-and-monetary-stimulus mess that followed. And although they have been badly stung by the slump in world trade, these countries are poised to recover with a satisfying bounce.

One such country is Taiwan, and global markets may be just starting to realize this.

A Backgrounder on a Potential Winner

Because its banks were not active in the United States, Taiwan didn’t suffer directly from the collapse in the U.S. housing market. Taiwan also has not suffered from the typical money-tightening consequence of the financial crisis in the world’s emerging markets; it has no need of foreign bank credit, since it consistently runs a payments surplus and has $300 billion in currency reserves.

However, like all the East Asian countries involved in the supply chain to U.S. consumers, Taiwan did suffer a huge decline in exports in the first three months of 2009; its exports dropped more than 35% in the first quarter – less severe than Japan’s drop, but more than those in Korea and China.

I wrote on this some weeks ago, guessing that the export problem was not fundamental, but simply due to United States de-stocking and the difficulties of obtaining trade finance.

The first-quarter U.S. gross domestic product (GDP) figures published April 29 show that this supposition was correct. U.S. inventories dropped a huge $109 billion; the drop in inventories was by itself responsible for 46% of the 6.1% annual rate of decline in U.S. GDP.

Taiwan’s trade figures for March were already improving somewhat, suggesting that this problem might be alleviating. Recent statements by the major Taiwanese semiconductor companies – firms that are intimately involved in the East Asia/U.S. supply chain – confirm that this transformation is, indeed, taking place. Thus, the Taiwanese economy is likely to at least experience a short-term bounce.

Taiwan’s prospects for sustained recovery are better than many Western countries, because its leadership didn’t panic and jump into the fiscal and monetary policies that are almost certain to cause long-term damage in the countries where leaders opted for such strategies.

In fact, the panel of forecasters from The Economist predicted that Taiwan’s fiscal deficit to be only 5% of GDP for the current fiscal year – less than half the deficit projected for the United States and Great Britain, for example. Its short-term interest rates are below 1%, but it currently has no inflation. And the Taiwanese dollar has declined by 10% against the U.S. dollar since September, making Taiwanese exports more competitive.

The Economist panel expects the Taiwanese economy to shrink by 6.5% in 2009, but that is certainly far too conservative, given the signs of export recovery.

Profiting from the “Other” China

Investors have always worried about Taiwan’s relations with The People’s Republic of China, which claims it as part of the mainland country. However, since the election of the Kuomintang president Ma Ying-jeou last year, relations between Taiwan and Mainland China have improved markedly.

Investors who are aware of Taiwan’s potential have long labeled it as “The Other China.”

On Thursday, China Mobile Ltd. (NYSE ADR: CHL) – China’s largest cellular telephone company – announced plans to invest in Taiwan’s Far EasTone Telecommunications Co. Ltd., a first for Chinese investment in Taiwan (Taiwan has huge investments in China), suggesting that trade relations are no longer cool – but are, in fact, warm.

Three possible avenues into Taiwan seem attractive:

• The Taiwanese exchange-traded fund (ETF).
• And the two largest producers of semiconductors, an industry central to Taiwan’s growth that should benefit from the recent weakness in the Taiwan dollar. In this context, it is notable that the SEMI book-to-bill ratio for the U.S. semiconductor increased sharply in March to 0.61, with the three-month average of orders up 9%. That’s still not a strong number, but it’s moving in the right direction, and matches recent optimism from Taiwan’s manufacturers.

Let’s look at these three Taiwan profit plays:

The iShares MSCI Taiwan Index ETF (NYSE: EWT) is clearly an efficient way to invest in Taiwan; it has risen recently, but is currently trading at a reasonable 13 times earnings.

Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE ADR: TSM) is Taiwan’s largest semiconductor manufacturer. It just reported a tiny first quarter profit on a 54% decrease in sales, but said that its order book was very strong and noted that it expected a sharp rebound in sales and earnings in the second half of 2009.

United Microelectronics Corp. (NYSE ADR: UMC) reported a loss for the first quarter, but just invested $285 million to acquire Chinese semiconductor manufacturer HeJian Technology (Suzhou) Co. Ltd., giving it a substantial foothold in that rapidly growing market. UMC expects a profit in the second quarter and rapid recovery thereafter; it has a strong balance sheet and its free cash flow was positive even in the loss-making first quarter.

Source: Three Ways to Profit As Taiwan Rebounds From the Financial Crisis

Three reasons why they will explode out of this worldwide slow down; they have no debt and a three trillion dollar surplus, six-percent growth is considered a recession, and most importantly, a government that puts China first.

One more thing, the Fed just bought up a huge amount of our debt to guarantee the three trillion dollars the Chinese hold will be worth enough to keep them from selling it.

Of course, our Fed said the purpose was to assist homebuyers by lowering interest rates. But what really happened was that we just paid a huge ransom to the Chinese to keep the price of our bonds propped up.

With this move, the Chinese just graduated from emerging economy status to key player in the world. When we have to prop up our bond prices to keep the Chinese from selling them, they have arrived.

Don’t let this news get you upset, get even. Let’s make some money on them!

First idea, China Life Insurance Company, symbol LFC.

It is essentially a monopoly that is fully backed by the totalitarian regime in China, and it is protected from competition by the government. It has a 50% market share and has only developed about 10% of its potential.

Earnings this year are around $1.39 and are expected to grow to about $2.14 in 2010. The stock price is around $50 now and has been as high as $69 in the last 12 months.

You have to love monopolies!

Next idea, China Mobile Limited, symbol CHL.

This company has more mobile phone subscribers than we have people in the U.S., 470 million. It grew its subscriber base by 6,000,000 just last month. It has no debt, is swimming in cash and is expected to add 7,000,000 new subscribers per year going forward.

The stock is around $43 now, down from $90 in the last 12 months, with a 3.7% dividend.

Mobile demand in China is insane. Mobile technology has allowed them to develop an entire communication system nationwide with virtually no infrastructure costs. The future is unlimited for this company.

Don’t feel like a stock play, try an ETF, FXI. It has a few non-performers in its portfolio, but it is currently selling for about $28 and has a 12-month high of almost $55. That’s a lot of upside potential for an ETF with a 3.1% dividend.

The key to a successful China strategy is the inevitability of the play. Patience will be rewarded, but don’t get antsy if it doesn’t fly off the charts in the next six months. Give this a three to five year time horizon and you won’t be disappointed.

Don’t tread water in the U.S. market for five years to see any appreciable growth. Hit the road and get in on this far eastern money monster.

Source: Buy China Now: Making Money There Will Be Too Easy

No Crash Here

Anyway, as far as AB&I was concerned, the markets weren’t crashing at all. In fact, Tuesday was a heck of a day for its subscribers.

So, I checked with Lynn to see what was up with her Rising Tide Letter portfolio. It was having a nice day, too. As was the case with AB&I, Rising Tide was a sea of green with gains that ranged as high as 12 percent.

That made me feel sad for the publishing legend.

If his portfolios were crashing, it meant he is likely still trading on the misbegotten notion that the new global marketplace reality is nothing but an investment fad.

He’s hoping that GM (NYSE:GM) and Ford (NYSE:F)will be resurrected, that the US airline industry can be revived. He’s hoping that US workers will decide that it’s patriotic to take 60-80 percent pay cuts so all those lost manufacturing jobs will come home… that companies that make pills, cathode-ray televisions and Windows operating system PCs will be healed. He’s hoping that another generation of politicians will get away with passing the infrastructure-crisis buck so his children end up with the whopping bill to fix roads, sewers and bridges.

And, he yearns for the days when Donna Reed and June Cleaver, clad in cute little dresses, trotted their 22-inch waists around the house dusting, vaccing and cooking, which is so unlike these tough, pushy modern broads who wear pants, boss men around, sit on boards and think they’re actually smart enough to replace men in Washington as congressmen, senators and even – arrgggg! – President… as in President of the effing free world.

Dear Mr. Fantasy

Now, I would never deny a man his fantasies, but I wouldn’t invest in them, either.

Global is not a fad.

Today, Japan makes about 2 million more vehicles per year than does the US. Even more telling, in 2007, China built about 1.8 million fewer vehicles than the US did. In a couple of years, it will build more.

The US will then be the world’s third largest automaker, though Germany will be closing in.

For a while longer, the US will still be the world’s largest consumer. But, those iPods, PC’s, laptops, HDTV’s, stereo speakers (I used the archaic term there), digital cameras, heck, even the iconic Brooks Brothers’ suit, will be made 7,000 miles away.

What I find most surprising about this global reality is that it didn’t happen overnight. It’s been growing for decades… so what’s surprising is how many normal, sane, rational people are in denial about it. Or, to invoke a cliché, think the genie can actually be put back in the bottle.

The Can Company

One of my favorite wine shops on the East Coast is located in Baltimore. The Chesapeake Wine Company resides in a redeveloped – repurposed, if you will – old factory. It is a factory that was a blight on Baltimore’s waterfront for a couple of decades after it was shuttered.

Today, it’s home to restaurants, retail shops and DAP’s world headquarters.

In its first heyday, the huge complex was owned and operated by American Can.

You remember American Can, don’t you? Back in 1928 – a short 80 years ago – it was one of the original Dow 30.

Other original Dow 30 companies included American Smelting, General Railway Signal, Nash Motors, Paramount Publix, Postum Incorporated, Radio Corporation (NYSE:RSH), Victor Talking Machine and Wright Aeronautical.

My guess is no one back in 1928 saw the future clearly. Nor did they in 1938, ‘48, ‘58 or ‘68.

No one saw the advent of McDonalds (NYSE:MCD) (fast food), Microsoft (NASDAQ:MSFT)(computer software), Citigroup (NYSE:C) (banking), Walt Disney (NYSE:DIS) (entertainment), Intel (NASDAQ:INTC) (computing hardware), Home Depot (NYSE:HD) (retail home improvement), Wal-Mart Store (NYSE:WMT) (discount retailer) or Procter & Gamble (NYSE:PG) (consumer goods conglomerate).

Yet, each of these companies is a Dow 30 member today.

And, that should lead you to wonder how long it will be before Lenovo replaces IBM (NYSE:IBM) in the 30 or China Mobile (NYSE:CHL) replaces Verizon (NYSE:VZ)?

Because, as a historical look at the Dow 30 reveals, the world is always changing… its reality is always in flux.

But, it’s only changing too fast – spinning out of control – for people who cling to the past.

The global wireless industry has been exploding — over 250 million subscribers in the U.S., over 500 million in China, there are more people on this planet that own a mobile phone than those that own a computer — bottom line, this is the place to be for the long haul.

But we can’t talk about wireless without addressing the hottest company in the sector right now: Apple (AAPL: NASDAQ) and its headline-making iPhone…and we can’t talk about the hottest company without discussing the hottest market: China!

So a TickerHound member asked:

Why isn’t the iPhone in China?

Good question! But I think the better question is, why isn’t the iPhone in China YET?

After months of failed negotiations between Apple and China Mobile (CHL: NYSE) — the largest mobile service provider in the world in terms of subscribers — the companies were unable to reach an agreement.

But after Apple’s announcement on Monday, I think it’s clear that while negotiations between the two companies may be at a standstill, they won’t stay that way for long…

The Chinese wireless market is by far, one of the most desired mobile markets on the planet. This is a country with roughly 1.4 billion citizens and not even half of them have a mobile phone…yet…

There’s a tremendous opportunity for growth in China and Apple knows it.

Although a deal hasn’t been reached to bring the (genuine) iPhone to China yet, Apple is definitely gearing up for it.

Apple just recently presented the world with the “iPhone 2.0”.

Aside from the widely covered feature additions like 3G wireless technology, GPS, reduced price point, etc., Apple unveiled a feature that I personally jumped out of my seat for…and it’s geared directly for the Chinese market.

Texting and E-mailing in China

Having lived in China for a period of time, I can attest to the difficulty in sending Chinese text messages and e-mails from a mobile phone. Typically you’ll have to type the message using a spelling system known as pin-yin.

Pin-yin is the transliteration of Chinese words into westernized spelling. So if I wanted to type “hello” in a text message, I’d have to type “ni hao” using a western keyboard and that would then be translated into the appropriate Chinese characters.

Obviously the use of a stylus would make things much easier. In fact, that’s exactly what Motorola (MOT: NYSE) had in mind when they launched the Motorola Ming in China two years ago.

That’s precisely what Apple had in mind when they launched their Chinese character recognition software on Monday.

With the latest version of the iPhone, you can use your finger to write out Chinese characters directly on the screen. This will make writing text messages and e-mails much faster and easier.

So the real question becomes, what would it mean for Apple’s business if it secured a significant share of the Chinese handset market?

Well, let’s look to the Motorola Ming for an indication of what may be in store for Apple…

The Ming and Market Share

Motorola Ming had roughly 1% of the entire Chinese handset market at the beginning of 2007. Given that China has a mobile subscriber base of 583.5 million people now, that would mean 5.8 million phones by today’s numbers.

It would be easy to make the argument that the iPhone has much more hype, demand, functionality, etc. built around it and therefore could reasonably capture more of the market than the Ming. But let’s be conservative here. Let’s assume Apple is able to sell 5.8 million iPhones in China…

If Apple sticks to their $200 price point for the 8 GB model — which is certainly realistic considering the Ming’s price point was in the upper $400’s — that would be roughly $1.16 billion in additional top-line revenue for Apple.

Also, if you consider the “halo” effect Apple’s products tend to have (sell one product, you sell more of the others), then it’s easy to see how substantial adoption of the iPhone could turn China into an increasingly important source of revenue for Apple overall.

Regards,
Wayne Mulligan

P.S.: As hot as China’s market is, there’s another market out there that’s a lot more profitable, a lot more secret, and a lot less risk. We’ll give you a sneak peak to find out how to make easy millions. To find out what his hot market it… Click here…

Source: A is for Apple, B is for Billions, C is for China

Unicom will also pay $24 billion to take over fixed-line operator China Netcom Group Corp. Ltd. (ADR: CN) by issuing more than 10 billion new shares, Reuters reported.

These asset swaps are the first since the government announced a little over a week ago that the country would undergo a high-profile industry overhaul that will meld China’s six main wireless providers into just three – China Telecom, China Netcom and China Mobile Ltd. (ADR: CHL).

The reason: China needs to catch up with the rest of the world in adopting third-generation, or 3G, wireless services that quicken increasingly popular Internet services such as music and video downloading.

A day before the deal’s announcement, China’s state-controlled Xinhua news agency reported that China Mobile – the world’s fourth-largest company and largest mobile phone company – said it would take over China Tietong Telecommunications Corp. for an undisclosed amount.

“The government is the owner of all the players and the umpire and determines the playing field,” Duncan Clark of Beijing-based consultant group BDA told Reuters. “This is the first step toward 3G, but does it mean 3G will come sooner? That remains to be seen.”

Industry analysts expect each of the giant telecom companies to employ different versions of 3G technologies, The Wall Street Journal reported. One of those will include China’s own 3G standard, called TD-SCDMA.

But other 3G providers such as Paris-based Alcatel-Lucent (ADR: ALU), China’s Huawei Technologies Co. and Ericsson Telefon AB LM are hoping for a shot at what could be windfall profits via contracts with China’s new telecom kings.

“This restructuring is key to a 3G rollout, and there will be lots of opportunities for domestic and foreign equipment providers,” Ian McGuinn, managing director for JL McGregor & Co., a China-focused consulting company, told The Wall Street Journal.

Source: Phase One of China’s Telecom Overhaul: China Unicom, China Telecom

Not surprisingly, all are state controlled.

But now that the first two have more assets, the up-to-now dominant China Mobile faces increased competition and a more-level playing field.

The government of China announced this major shakeup in the country’s burgeoning telecommunication industry over the weekend. It’s a massive restructuring that’ll fold the country’s top six telecom companies into three, and possibly open the way to windfall profits for wireless-equipment providers.

“Everyone has been waiting for it for over three years and now it is here,” Kelvin Ho, a Hong Kong-based analyst at Nomura International PLC, told Bloomberg News of the reorganization plan. “Creating three full-service phone companies offering both fixed and mobile services will help the fixed-line phone companies.”

Under the plan, fixed-line provider China Telecom will acquire one of China United Telecommunications Corp.’s two wireless networks and also China Satellite Communications Corp., The Wall Street Journal reported. China United is the parent company of China Unicom Ltd. (ADR: CHU).

Then, China United’s remaining wireless network will merge with China Network Communications Group, parent company of China Netcom Group Corp. Ltd. (ADR: CN).

Financial terms weren’t released.

A day before the plan’s announcement, China’s state-controlled Xinhua news agency reported that China Mobile Ltd. – the world’s fourth-largest company and largest mobile phone company – will take over China Tietong Telecommunications Corp. for an undisclosed amount.

Many investors hung up on China Mobile, which saw its shares take an 8.2% shellacking on Monday, the biggest decline in two months, following the announcement of the government plan.

Three Companies Providing “3G”

Though the arrangements of this entanglement are complicated – and without a timeline for completion – the impetus is simple: China needs to catch up with the rest of the world in adopting third-generation, or 3G, wireless services that quicken increasingly popular Internet uses such as music and video downloading.

The restructuring will also combine many phone and Internet services into one bill for many households.

“This restructuring is key to a 3G rollout, and there will be lots of opportunities for domestic and foreign equipment providers,” Ian McGuinn, managing director for JL McGregor & Co., a China-focused consulting company, told The Wall Street Journal.

And 3G providers such as Paris-based Alcatel-Lucent (ADR: ALU), China’s Huawei Technologies Co. and Ericsson Telefon AB LM are lining up for contracts.

In fact, the annual salary of Alcatel-Lucent’s Chief Executive Patricia Russo may be largely determined by how well the company capitalizes on this and other opportunities, Reuters reported. Alcatel-Lucent’s New York shares gained 4.1% yesterday (Tuesday), the first day of trading in the U.S. market since the weekend announcement in China.

Industry analysts expect each of the giant telecom companies to employ different versions of 3G technologies, The Wall Street Journal reported. One of those will include China’s own 3G standard, called TD-SCDMA.

Pressure of the Mobile Phone Industry

The bruising competition in the global telecom market only adds to the companies’ eagerness to expand China’s mobile-phone market, which at more than 465 million users is larger than the combined populations of the United States, Japan…and, for good measure, the 48-person population of the Pitcairn Islands.

In China, China Mobile controls about 68% of the domestic mobile-phone market, while China Unicom has most of the rest. China Mobile has nearly 400 million customers total, a figure that combines its Internet, mobile-phone and fixed-line services.

Before this deal, China Mobile was leading the worldwide shift away from fixed-line phone service and into mobile multimedia. It had been steadily stealing subscribers away from China’s fixed-line titan China Telecom. And its penetration into new and rural markets – with its mobile newspapers service in tow – is tapping new customers that neither telecom company previously had been able to reach.

Now, customers have half the number of companies to choose from, but the three left standing are leaner. The mobile-phone market is China Mobile’s bread and butter, and these measures could likely induce potential mobile-phone customers to feel satisfied with combined Internet and fixed-line services.

Source: In Major Shakeup, China’s Govt. Melds Six Largest Telecoms into Three