China's Growth Engine Produces Billionaires

Salem, Massachusetts

By Elyse Andrews


China Gives Rise to Female Billionaires

Stock Market Analysis Video

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I recently came across Forbes’ list of female billionaires and was particularly interested in the feature on the world’s richest self-made women. Forbes reported that worldwide, 14 women have amassed personal wealth of $1 billion or more, accounting for 2% of all self-made billionaires.

The thing that interested me the most about this was that out of the 14 women, seven have made their fortunes in China. According to Forbes, women in China today contribute half of the household income, up from 20% in the 1950s.

China’s booming economy has created lots of economic opportunities, and when combined with an enormous (and growing) consumer population and a surplus of cheap labor, it has helped facilitate these women’s rise to the top.

Topping the list of the world’s richest self-made women is Wu Yajun, who is worth $3.9 billion. Yajun made her fortune in China’s real estate boom at Longfor Properties, which was taken public on the Hong Kong exchange in 2009.

There are three others on the list who made their fortunes in Chinese real estate:

Xiu Li Hawken, the biggest shareholder in Renhe Commercial Holdings, which listed on the Hong Kong stock exchange in 2008 and runs shopping centers in locations that were once underground military shelters.

Zhang Xin founded and runs Beijing property developer Soho China with her husband, which last year made the biggest land purchase in Beijing by a non-state-owned company.

Chan Laiwa, made the list through her development of properties on Jinbao Street, Beijing’s luxury district.

There are three other Chinese women, not in real estate, who also made the list:

Chu Lam Yiu chairs Haubao International, which produces tobacco flavorings for China’s top cigarette makers. Yiu founded the company 10 years ago and took it public through a reverse takeover.

Yan Cheung got her start importing waste paper in Hong Kong 25 years ago, but has seen her fortune grow considerably with the rising Chinese stock market.

Lei Jufang runs Tibet Cheezheng Tibetan Medicine, which produces ointments, plasters and powders that relieve respiratory problems and pain. Shares of the company, which were first offered last August, trade at 46 times trailing earnings.

You’ve likely never heard of most (and perhaps any) of these women, but there’s no doubt that they are using China’s booming economy to amass great fortunes in growing areas. Since the companies they are associated with are listed on Chinese stock exchanges, you can’t buy the shares directly. But if you are interested in Chinese stocks, I’ve got one for you today. It isn’t in the burgeoning Chinese real estate sector, but it is benefiting from a booming trend in the country: travel.

It’s Home Inns & Hotels Management (HMIN), which was profiled by Paul Goodwin in Cabot China & Emerging Markets Report on May 27. Here’s what Paul wrote then:

“For decades, travel within the People’s Republic was hard, with trains supplying most of the carrying capacity. The advent of modern highways, robust airline service and disposable income has made travel more affordable and put many more Chinese on the tourism road.

“Traditionally, Chinese travelers tended to just roll into whichever town they were visiting and then look around for a place to stay. No reservations, no guarantees, no nothing. It’s probably fair to say that the quality of accommodations varied widely.

“But Home Inns has changed the picture, expanding from a string of 10 hotels in four cities in 2003 to nearly 640 hotels in 121 cities across China. And every hotel has all the comforts of home (and often more), with air conditioning and water coolers in every room, modern baths, a complementary bath kit and fresh towels, not to mention comfortable beds and pillows. The company’s motto: “Wherever you go, you’re always at home,” sets the standard. This, of course, says nothing about the dramatic increase in business-related travel as China’s economy expands.

“The U.S. model that comes to mind in this picture is Holiday Inn, the pioneering hotel chain that started with four hotels in Memphis, Tennessee, in 1953 and now has more than 1,800 locations worldwide. Even before McDonald’s ran with the idea, Holiday Inn pioneered the idea of duplicating a successful model in different locations. Home Inns & Hotels Management is on exactly the same path, but in an even bigger country.

“We also like that Home Inns is in an industry complementary to The travel industry’s fortunes are closely aligned with those of the accommodation industry, and has been holding up well during the recent market uproar. (Ctrip actually owns a chuck of HMIN, to boot.)”

If you’re reading this newsletter, you’re likely aware that the market hasn’t been kind to investors in the month since this report was first published. However, HMIN has managed to climb and then hold its higher ground, despite the market’s poor performance. And with no end in sight to China’s growth, there’s little doubt that Home Inns will continue to grow well into the future.

If you want more advice on HMIN and other top stocks in the emerging markets, you should try Cabot China & Emerging Markets Report, which is ranked the #1 investment newsletter for the last five years, according to Hulbert Financial Digest. The Report combines Cabot’s 40-year-old growth stock picking and market timing strategies and applies them to these fast-growing economies. Try it today! Click below!


In today’s Cabot Stock Market Analysis Video:

After the volatile action of the market the past month, Editor Mike Cintolo focuses on discussing market timing and trend following, and why he considers it the best way to time the market. Stocks discussed include Apple (AAPL), Aruba Networks (ARUN), Acme Packet (APKT), Rovi (ROVI), and Green Mountain Coffee (GMCR).

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In case you didn't get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, I have links below to each issue.

Cabot Wealth Advisory 6/28/10 – Investing Basics and Beyond

On Monday, J. Royden Ward gave some tips for getting started on a path to successful investing. Roy also discussed some criteria for determining good long-term investments and two stocks that would make good core holdings in your portfolio. Featured stocks: McDonald’s (MCD) and TJX Companies (TJX).


Cabot Wealth Advisory 6/29/10 – How to Profit from the Organic Trend

On Tuesday, Chloe Lutts wrote about the rise of “superweeds” from the widespread planting of genetically modified (GM) crops. Chloe then recommended an investment that would benefit from the trend away from GM crops and toward organic farming and foods. Featured stock: Hain Celestial Group (HAIN).


Cabot Wealth Advisory 7/1/10 – Go Where the Growth Is

On Thursday, Brendan Coffey discussed his concerns surrounding the Gulf Oil spill, such as economic hardship and the environmental impact. Brendan also discussed new findings that show the first five months of this year have brought the highest average temperaures on record and some of the companies with technologies that will help us reduce our dependence on oil. Many of these companies are in sectors that are growing quickly and are likely to continue to do so far into the future.


Until next time,

Elyse Andrews
Editor of Cabot Wealth Advisory

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