China has some fantastic companies with low price-to-earnings ratios and high dividend yields. So why aren't CNinsure Inc ( CISG , quote ), Xinyuan Real Estate Co. ( XIN , quote ) and Tianyin Pharmaceutical Co. ( TPI , quote ) trading at the prices that shareholders deserve?
The problem is that there aren't enough opportunities to sell the company.
If these were American companies, they would be targets for a merger, an acquisition, or some form of buyout, by another company or by private equity. The demand of new capital looking for good investments would drive up the stock price and enhance shareholder value.
That's not happening in China, where it's still very difficult for companies to change hands. China is famous for the web of red tape potential business buyers have to cut through, especially if the buyers are foreign investors.
China needs to free up its markets and unleash the shareholders in these and other stocks. Until then, investors should take advantage of the attractive valuations and appealing dividend yields.