Where the Stars of Asia Align

Standard & Poor's new screen looks for U.S.-based companies making the most of China's booming economy

By Numer de Guia, CFA

The Asian economies, led by China, appear ready to outpace the rest of the world. In particular, the Middle Kingdom is expected to put up some sizzling numbers: Economists surveyed by economic researchers Informa Global Markets expect that nation's GDP to grow by 7.8% in 2004 and 8.0% in 2005. What's a good way for U.S. investors to capitalize on this trend?

In our previous screen, we identified companies domiciled in China, Hong Kong, and Taiwan that carried top marks from S&P's Asia-based team of equity analysts. Buying shares of companies listed outside the U.S. can be difficult for individual investors, of course, but our idea was to uncover names that investors in China-oriented mutual funds might like to see in the funds' portfolios.

This time around, we're taking a more direct route. Our focus is on U.S.-based and listed companies that derive a sizable chunk of their sales from Asia -- at least 25%, based on data compiled by Standard & Poor's Compustat. With such a heavy geographic weighting, their sales -- and earnings -- may well get a boost from the strong growth in the region.


  Then we ran one final filter to make sure we uncovered stocks with promising prospects: We looked for those issues ranked 4 STARS (accumulate) or 5 STARS (buy) by analysts at Standard & Poor's Equity Research Group. Stocks with those designations are expected by S&P to outperform the overall market over the next six to 12 months.

Our screen turned up 10 names. Interestingly enough, they are all from the technology sector. This may reflect rising capital spending in the region as companies upgrade their tech equipment, both as a result and a cause of the improving business environment:

Looking East
Company/ticker S&P STARS Rank
Analog Devices (ADI ) 5
AVX Corp. (AVX ) 4
Intel (INTC ) 5
International Rectifier (IRF ) 4
Jabil Circuit (JBL ) 4
Microchip Technology (MCHP ) 5
Molex (MOLX ) 4
Photon Dynamics (PHTN ) 4
Qualcomm (QCOM ) 5
RF Micro Devices (RFMD ) 4

De Guia is an analyst for Standard & Poor's Portfolio Services

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