Traders searching for ways to get exposure to China’s burgeoning consumer economy often settle for immediate gratification by picking a U.S. chain that’s opening stores in Shanghai and Beijing.
J.P. Morgan lists around 10 Chinese companies active in the retail trade sector and listed in some form in the United States.
In order of average daily turnover, DANG should be well known to Emerging Money readers as “the Chinese Amazon.” The company is arguably the easiest way to trade truly discretionary areas of middle-class Chinese spending: books, gadgets, cosmetics, toys and other non-essential staples of modern life.
Sky-mobi (MOBI, quote) cuts out the household products to focus exclusively on electronic media: software, games, e-books. If DANG is the Amazon (AMZN, quote) of Asia, then MOBI is arguably the Kindle side of AMZN. As such, it’s still a start-up with a market cap of only $93 million — barely 1/7 the size of its more established and broader-based rival.
Still, it has a following among U.S. traders and reliably moves on Wall Street.
From the high-tech stratosphere to the highway, car lot operator Lentuo (LAS, quote) is often overlooked as a direct play on Chinese auto markets. The next time you see a report on China car sales, look for this ticker to get some action — and if not, find out why. Right now, the P/E is barely 4, so if you can find shares, it’s arguably a bit of a steal.
On the other side of the valuation curve, China Nepstar (NPD, quote) has built a market cap of $242 million running drug stores at ultra-thin margins. The company is profitable, but speculation and a relatively thin float have combined to push these shares to a scary 44 times current earnings.
Mecox Lane (MCOX, quote) sells clothes. They’re deeply unprofitable at this point, but if you’re looking for a truly local challenger to stand up against GPS in a pair trade, they may be worth a look.
Sad to say, the rest of the group — including multi-level marketer Acorn (ATV, quote), department store chains Parker (PKSGY, quote) and Golden Eagle (GDNEF, quote), grocer Lianhua Supermarket (LHUAF, quote) and the amusingly named “Wumart Stores” (WUMSF, quote) — trade so rarely that they’re really only of theoretical interest at this point.
That’s a bit of a missed opportunity for Wall Street because these five “zombie” tickers collectively account for 90% of the aggregate market cap in the group.
Evidently, the Chinese names getting all the play are the niche, sexy e-commerce operations. But the real heft in the sector is going to be difficult to trade into — much less out of, if things get bad.
Maybe GPS isn’t such a bad proxy on China after all.