The number of Chinese with Internet access is increasing at an astronomical rate – after all right now, the region’s penetration rate is only 17% compared with 75% here in the U.S. And along with that growth, opportunities are emerging for a select few investors to get in on tech growth in the Far East.

Most of the time, backdoor plays offer the largest profits in growth industries like this one. Sometimes, however, a straightforward approach is your best chance at the quickest gains. This is one of those times.

Take China Mobile, for instance. This telecom behemoth is the most obvious play in the region. In the last three years, the company doubled the number of subscribers and grew its bottom line 107%. That’s a rare feat for a $230 billion company.

China Mobile’s growth is impressive, but it’s nothing compared with what a small-cap player can do in this field. And with the telecom industry in Asia predicted to almost double by 2013, there’s plenty of room for other players to grow too.

That’s why we’ve been looking for under-the-radar Internet providers in Asia. And we just we found the only place worth looking at…

The Forgotten Power in Asia: Investing in Hong Kong

Most people think of China, India and Japan when you bring up Asia. The place most often left out of the conversation is Hong Kong — a Chinese territory that in 1997 ended 156 years of British rule.

Other than the small island nation of Brunei, Hong Kong has the largest GDP per capita in the entire region. In fact, the small territory is No. 14 in the whole world, and it’s only four spots behind the U.S.

Most are writing Hong Kong off these days, however. With the recent global financial collapse, Hong Kong’s large financial services industry was slaughtered. Even so, the world can’t just forget about this tiny-but-affluent region.

The Hong Kong Stock Exchange, for instance, is host to companies worth a total $2.7 trillion. That’s 10 times larger than the American Stock Exchange!

Another surprising tidbit about Hong Kong is the resilience of its tourism industry. While nearly every country in the world saw a decline in number of tourists, as well as income from its tourism industry, Hong Kong actually saw its tourism grow. Last year, the number of visitors to Hong Kong grew 5%, and average spending per overnight visitor grew 6.2%.

Needless to say, this is an overlooked region, but it shouldn’t be. Hong Kong is very capable of producing winners.

Right now, there is a small handful of exciting Hong Kong telecom plays that are worth looking at, but unfortunately, at this stage, it’s a case of look but don’t touch. Many of them are too speculative to mention here right now.

Watch the region — we’ll let you know when that changes.

Sincerely,
Jim Nelson

August 14, 2009

Jim Nelson

Jim Nelson began his investing career during the tech boom at age 14 – with purchases of Starbucks and AOL. Early inspiration came from an old Tweedy Brown whitepaper: “What Works in the Market.” He graduated with a degree in Political Science from Pittsburgh University, Nelson focuses on income investing, including dividends, covered calls, and fixed-income. Additionally, he covers MLPs, ADRs, utilities, consumer staples and tobacco. Nelson is the managing editor of Lifetime Income Report.

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