Friday, 15 May 2009 Hedge on These Three Chinese Companies

Posted By:CNBC.com

Topics:Asia

Despite a recent bout of profit-taking, Asian markets have rallied over the past few weeks as investors grow increasingly confident that the global economy is on the mend. The MSCI index of Asia-Pacific shares gained more than 32 percent from its year’s low hit in early March.

Daphne Roth, Head Equity Research of Asia at ABN AMRO Private Banking, tells CNBC Asia’s Protect Your Wealth, that she believes Asian markets have been overbought and a sell-off can be expected soon.

"What we advise investors to do is to position themselves for a 10 percent pullback. I don't think this time the pullback will be as violent as in the November '08 or the March '09 situation, because conditions have certainly improved, credit availability is better, and also the state of decline is not as extreme as the other time," she says.

However, Roth sees buying opportunities in the mainland Chinese market. She says that China will be a good hedge in the event that global growth continues to slow. Her top picks include Sinopec Shanghai Petrochemical, China Communication Construction and China Life Insurance.

"If I compare Sinopec to the other two oil companies, it’s still very cheap. It's trading below 10 times P.E., so it will be a very good, cheap and defensive play," she explains.

"If the global recovery does not come as quick as excepted, China will continue to stimulate the economy … and also to continue with its infrastructure spending, and I believe that China Communication Construction should benefit from that."

"We also like China Life. It's more defensive, and it's a good proxy to the China market," Roth adds.

Neither Roth nor ABN Amro owns shares in these three Chinese firms.

Catch "Protect Your Wealth" on CNBC's Asia Pacific network every Tuesday on "CNBC's Cash Flow," Wednesday on "Asia Squawk Box" and Thursday on "Capital Connection."

====================================

http://www.chinadaily.com.cn/

Baxter draws up 1b yuan capex plan for China

By Zheng Lifei (China Daily)
Updated: 2009-05-16 09:58

US healthcare company Baxter International Inc said on Friday that it would spend 1 billion yuan ($146.50 million) in China this year to ramp up production capacity in the latest investment made by foreign drugmakers in the country.

The US drugmaker will use the funds to expand the intravenous solutions and peritoneal dialysis products output at its Guangzhou, Suzhou, Tianjin and Shanghai plants.

"The investment reinforces our commitment to China," said Paul Vibert, general manager, Baxter China. "It will also allow us to provide a significant number of jobs, which is in line with our corporate social responsibility," Vibert said.

Related readings:
Novartis plans more investment
Novartis China to launch six new drugs this year
Lilly focuses on R&D as rivals eye M&A
GSK sees opportunity in China

The investment is expected to create 2,500 jobs, of which 1,000 will be available this year, the manager said.

Baxter, the maker of intravenous drug pumps, renal and other products, realized sales revenue of $200 million from China last year.

The company, Vibert said, "is confident" that it can achieve double-digit sales growth this year despite the economic downturn.

Globally, Baxter expects a sales growth of 7 percent this year from last year's $12.3 billion, excluding the foreign currency exchange impact.

The foreign pharmaceutical industry is one of the few that still continues to increase investment in China this year even as most of the others are cutting spending as a result of the global financial crisis.

The global pharmaceutical market is expected to grow by a mere 2.5 percent to 3.5 percent in 2009, the lowest growth rate in at least 25 years, according to US healthcare market research firm IMS Health Inc.

But China is expected to see sales grow by 13 percent to 16 percent through 2013, IMS said, forecasting that China may become the third-largest market by 2011, up from its current sixth place ranking.

China announced this year that it would invest 850 billion yuan to overhaul its healthcare system over three years.

© 2009 CNBC, Inc. All Rights Reserved