Investors looking to move beyond U.S. borders are often attracted to emerging markets for an increased potential for growth. It is rare that a discussion of emerging markets comes up without anyone mentioning China. And there is a good reason for this. Growth in China has often topped double digits and still greatly exceeds the growth in most developed markets. But with the potential for growth comes risk. China is still a country with an autocratic government where government interests frequently result in the supporting of Chinese owned companies over foreign companies. For those looking to get in on the emerging market other developing nations are often compared to, investing in China may deserve a closer look. Here we will take a look at a small selection of companies with Chinese market exposure.
Emerging market airlines
While there are numerous flights offered to and from China by airlines around the world, those looking to focus on air travel within China should take a look at Chinese based airlines. China Eastern Airlines Corp. Ltd. (ADR) (NYSE:CEA) and China Southern Airlines Co Ltd (ADR) (NYSE:ZNH) are two of the largest Chinese airlines traded on the NYSE.
Both China Eastern Airlines Corp. Ltd. (ADR) (NYSE:CEA) and China Southern Airlines Co Ltd (ADR) (NYSE:ZNH) have rallied alongside the market and other major airlines since the summer of 2012 gaining 48 percent and 32 percent respectively. Neither airline pays a dividend, but this is typical in the airline industry, not just among foreign airlines. What could make these airlines appealing though is that the P/E ratios of both carriers are in line with airlines in the American market. But unlike the American market, which is fairly saturated, the Chinese market could continue to see higher than average growth as more people move to cities and a stronger middle class increases leisure travel.
China’s Google
While Google Inc (NASDAQ:GOOG) has a strong presence in much of the world, China’s Baidu.com, Inc. (ADR) (NASDAQ:BIDU) is giving Google a run for its money in China. Like Google Inc (NASDAQ:GOOG), China’s Baidu.com, Inc. (ADR) (NASDAQ:BIDU) does more than just Internet searches. Among its portfolio of offerings, one of the company’s divisions involves itself in travel booking. China’s Baidu.com, Inc. (ADR) (NASDAQ:BIDU) owns the travel booking company Qunar which, despite just being one part of China’s Baidu.com, Inc. (ADR) (NASDAQ:BIDU), has passed Chinese travel booking site Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) in airline ticket sales.
Still well above its IPO price of $27 per share (shares first opened at $66), the current price of $87.85 at close on Apr. 23 is far shy of what shares were worth in early 2012. China’s Baidu.com, Inc. (ADR) (NASDAQ:BIDU) shares have fallen from around $150 per share to their current levels creating a chart that looks like a long term downtrend. At this point, China’s Baidu.com, Inc. (ADR) (NASDAQ:BIDU) shares trade at only 18.2 times earnings, a level below that of Google Inc (NASDAQ:GOOG). Investors looking to play Internet growth in China through one of the country’s largest online players may be interested in Baidu.
More to see
It would be impossible to cover all of China’s companies in one article or even in a series of articles. While airlines and Internet companies are two ways to play Chinese growth, there are many other plays in consumer goods, industrials, and numerous other industries. Additionally, investors interested in China, or even emerging markets as a whole, may find an exchange traded fund (ETF) more suitable as it offers greater diversification and can span multiple countries for reduced exposure to individual government policies. Overall, the global market we live in requires investors to look globally for the best returns whether it be in developed or emerging markets.
The article A Tour Of Countries: China originally appeared on Fool.com is written by Alexander MacLennan.
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