Should You Buy Chinese Telecom Stocks?

The growth story that is China has been a strong investment theme for most of the past decade. In recent years, however, the slowdown in the rate of China’s GDP growth has caused a lot of investor assets to bailout of the sector. The China exodus can be seen in stocks that makeup China’s benchmark index ETF, the iShares China Large-Cap (FXI), which is down about 10% over the past 12 months. So far in 2014, FXI has fallen more than 6%. The decline in the overall China equity market is amplified when we look at stocks in the once high-flying Chinese telecom segment.

For example, China Mobile (CHL), which also happens to be the biggest wireless service provider on the planet, has seen its shares sink more than 13% during the past 12 months. That drop includes an 8.3% year-to-date plunge in CHL stock. The CHL stock plunge is particularly disconcerting for sector bulls, especially considering the company just reported that its subscriber count vaulted to roughly 772 million at the end of January. That means China Mobile has more than double the number of subscribers than the total U.S. population. The CHL stock drop also comes despite the much ballyhooed deal with Apple (AAPL) that makes the company’s iPhone 5 models available on China Mobile’s wireless network, and for purchase through China Mobile’s massive retail distribution network.

Source: InvestorPlace

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