While many emerging market stocks around the world continue to
struggle, a handful continue to outperform thanks to the secular
nature of their growth. One such example is the Chinese telecom
space in which
its largest operator
, China Mobile (
), continues to thrive.
[caption id="attachment_70677" align="alignright" width="300"
caption="More 3G users equals more yuan for China Mobile"]
As we have discussed previously, Chinese mobile phone companies
continue to outperform thanks to
the propensity of emerging market middle class
consumers to spend an ever increasing amount of disposable income
on mobile devices
. As sector observers have witnessed over the past decade, as
emerging market middle classes become increasingly wealthy,
consumers are far more inclined to spend money on cellular
As 3G technology has become ubiquitous in major Chinese cities,
this means more and more consumers switching to more advanced
devices, which means more consumption of data. This facet of mobile
telephony is particularly lucrative for telecom firms.
The increased profitability as a result of this trend for China
Mobile has manifested itself in the firm's equity price.
Although the Chinese economy (
) has been slowing, China Mobile has been on a tear, thanks to the
secular nature of the firm's profit machine. The company reached a
52-week high earlier this week.
China Mobile offers a unique mix of both growth and safety. The
company issues a solid dividend, with the stock currently yielding
3.67%. With a current P/E of 11.96, China Mobile still is
compellingly valued, considering that its growth is likely to
continue as the Chinese middle class spend more and more on mobile
phones and accessories.
Potentially even more importantly, if China Mobile were to sign
a deal with Apple (
) to sell iPhones, the company's stock could shoot even higher. In
particular, with the iPhone 5 and its enhanced Chinese
functionality to be released later this year,
a deal with Apple could be a game changer for China Mobile
Given China Mobile's current technical and fundamental strength,
investors should look for this name to move another leg higher.