What are the advantages of investing in the stock of Chinese companies? What are the disadvantages?

THE GLOBAL VIEW (AACSB)

Where’s the Energy in the Chinese Stock Market?

Warren Buffett is the third-richest man in the world (behind Bill Gates). As CEO of Berkshire Hathaway, a holding company with large stakes in a broad portfolio of investments, Buffett spends a lot of his time looking for companies with promising futures. His time has been quite well spent: the market price of a share in Berkshire Hathaway now tops $115,000—up from $16 a share in 1964.

In 2002 and 2003, Berkshire Hathaway paid $488 million for two million shares in PetroChina, an energy firm 90 percent owned by the Chinese government. In 2007, he sold the stock for $4 billion, realizing an incredible more than 700 percent gain. To evaluate Buffett’s thinking in buying and then selling stock in PetroChina, you’ll need to do some research.

First, find out something about the company by going to://www.petrochina.com.cn/ptr and linking to the English version of the PetroChina Web site. Explore the sections “About PetroChina” and “Investor Relations.” Look for answers to the following questions:

1. What does the company do? What products and services does it provide? How does it distribute its products?

2. On which stock exchanges are its shares sold?

Next, to learn about the company’s financial performance, go to link to the Finance section of the Yahoo.com Web site. Enter the company’s stock symbol—PTR—and review the information provided on the site. To see what analysts think of the stock, for example, click on “Analyst Opinion.” To gain insight into why Buffett sold his stock and whether it was a good or a bad move, read these articles: “Should We Buy the PetroChina Stock Warren Buffett Sold?” petrochina-stock-warren.html) and “Buffett\"s PetroChina Sale: Fiscal or Social Move,” Now, answer the following questions:

1. What do analysts think of the stock?

2. Should Buffett have bought the stock in PetroChina? Was it a good decision at the time? Why or why not?

3. Should Buffett have sold his stock in the company? Why do you think he sold the stock? Was it a good decision at the time? Why or why not?

4. If you personally had $50,000 to invest, how likely is it that you’d buy stock in PetroChina? What factors would you consider in making your decision?

To learn more about the pros and cons of buying stock in Chinese companies, go to the MSNBC Web site and read the article “Nice Place to Visit.” Then answer these final questions:

1. What are the advantages of investing in the stock of Chinese companies? What are the disadvantages?

2. In your opinion, should the average investor put money in Chinese stock? Why, or why not?