China's Unbelievable New "Free Money" Opportunity
By Dr. Steve Sjuggerud
September 04, 2007

The Chinese government recently created an unbelievable buying opportunity for investors like you and me...

You see, two weeks ago the Chinese government announced that Chinese citizens could buy stocks in Hong Kong. This is absolutely huge... before this announcement, Chinese people were stuck investing in their home country. Opportunities were limited, and prices of every investable asset had soared, simply because there weren't enough alternatives...

But now things have changed... the Chinese are now allowed to put their money in one other place... the Hong Kong stock exchange.

The exact same companies trade in both China and Hong Kong. But shares in China currently trade at more than twice the value of shares in Hong Kong. It's ridiculous!

China Valuations Go Crazy... Creating Opportunity in
Chinese Companies Trading in Hong Kong

As you can imagine, as soon as the news came out that Chinese people could buy Hong Kong stocks, shares of Chinese companies trading in Hong Kong soared... The Hong Kong stock market is up by an astounding 3,500 points in just over two weeks – that's a record rise in that short a time. 

And there are more profits to come...

There's also an easy way play it, as a few of the Chinese companies that trade in Hong Kong also trade in the U.S.

Shares of insurance company China Life, for example, trade at 46 times earnings in China. But they trade at 29 times earnings in Hong Kong and in the U.S. It is the exact same stock.

My friend (and legendary Hong Kong investor) Peter Churchouse recently explained why Chinese stocks in particular have gotten so expensive. He said: 

"The money is captive in China. It can't go anywhere else. There's only one set of assets you can buy in China, and that's stocks. There's not a developed pension market, insurance market, or debt (bond) market... [So] the arbitrage opportunities between China stocks... and the same companies in Hong Kong... are huge."

I'm certain that Peter was well positioned for this move. When I visited him over the summer in Hong Kong, he was talking about this type of thing. He believes that the stock exchanges in Hong Kong and Shanghai could merge in the next five to 10 years.

Peter has likely doubled his investors' money in the last two years, once you add this recent run-up in Hong Kong to his track record. (If you're an accredited investor and you're looking for a great fund manager focusing on Asia, you ought to contact Peter and his company LIM Advisors at LIM@limadvisors.com.)

Fortunately, subscribers of my newsletters were able to capture these easy profits as well... Hong Kong's benchmark stock index, the Hang Seng Index, is up about 15% since August 16th, and shares of PetroChina (recommended in True Wealth) and Cheung Kong (recommended in Sjuggerud Confidential) are up about the same 15% in that time.

While our paid subscribers captured the big portion of the gains, there are still profits to come...

Shares of Chinese oil giant Sinopec trade at 26 times earnings in China, yet they only trade at 14 times earnings in Hong Kong and the U.S.

I could go on. While big gains have happened, there are more to come in Hong Kong.

Actually, we have a lot of "free money" opportunities out there right now. The new issue of Sjuggerud Confidential will be out on Wednesday evening, chock full of what I consider to be the best "free money" opportunities.

If you are not yet a subscriber, come on board now to get the next issue...

Good investing,

Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.

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