Investors have been fretting over Beijing’s market intervention measures. The earnings of some Chinese companies also have let them down.
They should start looking beyond Hong Kong and mainland markets.
The earnings per share (EPS) of Apple Inc. is around US$8.1, while its share price hovers around US$132. That is equivalent to a profit ratio of 6.1 percent, far exceeding the company’s three-year lending rate of 0.45 percent and 30-year rate of 4.5 percent. The low lending cost has enabled the company to boost its EPS and value.
In the first quarter of this year, China has surpassed the US market in iPhone sales for the first time, mainly due to brisk sales of iPhone 6 on the mainland since the last quarter of 2014.
At the end of June, there were 480 million 3G/4G users on the mainland, with iPhone having a penetration rate of 34 percent. That gives further upside for Apple’s share price in the future.
A major rally in Google’s earnings pushed the Nasdaq index to a record high. Google soared by 16.3 percent within a single day, bolstered by strong revenue growth from mobile ads and YouTube business units.
The company is poised to keep a strong growth momentum given that the internet advertising market is slowly easing out the traditional advertising industry.
The two founders of the legendary company, which has been listed for 11 years, are both in their early 40s. Investors can bet on what comes up next after cloud computing and its self-driving car project.
Google has jumped 29 percent year-to-date, Apple by 17 percent, Amazon 50 percent and Facebook 24 percent. By comparison, the Nasdaq index has only rallied 9 percent during the period. Giant internet technology firms are getting even bigger.
Meanwhile, which economy is the most undervalued? Not China, but Germany. The bright side of the Greece debt saga has presented a perfect opportunity for investors to buy German stocks.
German cars are well-known for good quality. The strong US dollar may change the landscape of global automobile industry, and benefit car exporters in Germany and Japan, according to Evercore ISI.
The three German carmakers are expected to make an extra revenue of 12 billion euros (US$13.12 billion) due to the stronger greenback.
The US dollar may gain further strength as the US Federal Reserve is on track to hike interest rate in September.
On the other hand, the euro may weaken further as the European Central Bank has to pump more money into the market amid the massive debt pile.
A stronger US dollar will reduce the competitiveness of US carmakers, and encourage more imports from other regions. Germany could be one of the biggest beneficiaries.
This article appeared in the Hong Kong Economic Journal on July 22.
Translation by Julie Zhu
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