Investing in Education a 'No Brainer' for Chinese

I was less than 2 years old when my parents divorced in 1957. My 20-year-old Japanese mother suddenly found herself living in a strange country with no family, friends, money, food or place to live.

Yet instead of returning to Japan where her family and friends were, she scratched, rummaged and scavenged enough to make a new life for us in America. Why?

My mother knew that a half-Japanese, half-American child had limited opportunities in Japan. It wasn’t like it is today; the wounds from World War II were too fresh. I would have never gone to a top university or landed a top job.

Even though my mother barely spoke English and seldom had more than two nickels to rub together, she fiercely held to the idea of the American dream. “In America, anybody can get rich if they work hard,” she told me.

And she was determined to have me prove her right.

Putting the ‘Earn’ in ‘Learn’

My mother ordered me to sit in the front row right in front of the teacher’s desk. She gave me almost-daily lectures on the importance of education, and punished me severely if I brought home anything less than an A. My mother was a big believer in corporal punishment and I got the spankings of my life for anything less than straight-As.

For someone who started off as a homeless immigrant, my mother saw all her children grow up to achieve great professional success. I am sad to say that my mother died seven years ago from cancer, but I preach the same lessons about education to my children to this day.

Those same lectures about education are given every day all over Asia, especially in China, because academic success is a top cultural priority even despite the effects of the global economic slowdown.

Spending on Schooling
Shouldn’t Slow Down

Consumer spending in China is still robust but there’s no question that it’s slowing down. The latest numbers for April showed that retail sales in China grew by 14.1% on a year-over-year basis.

While that may sound good compared to the sluggish U.S. retail sector, it is the lowest number in 14 months and far-below expectations.

Chinese consumers are becoming more-selective with their spending but, according to a new survey from A.C. Nielsen, education is one thing that they don’t skimp on.

3 Facts About China’s
Changing Spending Habits

You may think of Nielsen as a U.S. company, but they do business all over the world, including China. Nielsen, which provides data on consumers’ spending and viewing habits worldwide, surveyed 3,500 Chinese people from a range of backgrounds. Its newest survey of Chinese consumers disclosed some important facts:

  • Although Chinese consumer confidence rose in the first three months of 2012 to its highest level since 2005, making China the world’s fourth-most-optimistic nation, willingness to spend remained flat.
  • China’s consumers are cooling toward discretionary spending, even on important things like food, clothes, holiday gifts and entertainment. Spending on all those categories dropped from the previous quarter.
  • Consumers were willing to devote more money to only two areas: Savings and education.

That last piece of data tells you how important education is in China.

Most Chinese students don’t finish until 5 p.m. or 6 p.m., watch little television and play very few video games. They are prohibited from working before the age of 16, so they can concentrate on school. Plus, most students attend tutoring classes after school and on Saturdays.

“Very rarely do children in other countries receive academic training as intensive as our children do. So if the test is on math and science, there’s no doubt Chinese students will win the competition,” said Sun Baohong of the Shanghai Academy of Social Sciences.

Plain and simple, the education sector is an all-weather, recession-resistant, steady growth winner and there is a way to profit — HANDSOMELY — from the Asian obsession with education and academic success.

10 Chinese Education
Stocks for U.S. Investors

Did you know that there are 10 Chinese education stocks listed on the NYSE and Nasdaq? Yup ... and here they are.

  • ATA Inc. (ATAI) provides computer-based training courses to pass professional certification exams such as banking, insurance and accounting.
  • Ambow Education Holding (AMBO) has a unique combination of hands-on personal tutoring supplemented with online training.
  • ChinaEdu Corp. (CEDU) is the Chinese equivalent of the University of Phoenix, offering online college degrees.
  • China Distance Education Holdings (DL) offers online education and test-preparation courses in accounting, law, healthcare, construction, engineering and information technology.
  • China Education Alliance (CEAI.PK) sells “education resources” online, a fancy name for a huge database of informative practice exams.
  • ChinaCast Education Corp. (CAST) actually owns several Chinese universities and is expanding its enrollment with online degree options.
  • New Oriental Education & Tech. Group (EDU) is the largest English and college entrance exam preparation school in China.
  • TAL Education Group (XRS) is the largest private educational tutoring company in China.
  • Noah Education Holdings (NED) sells electronic education materials, and distributes its content primarily through handheld digital learning devices.
  • Xueda Education Group (XUE) is also a private tutoring company but differs from TAL Education in that it tutors university students as well as high school students.

As you can see, there are several ways to profit from the Chinese obsession with academic excellence.

I should disclose that my Asia Stock Alert subscribers currently own New Oriental Education and many are sitting on more than a 200% gain. That’s a big return, but I think there are more profits yet to come in these shares.

That doesn’t mean you should rush out and buy New Oriental Education or any of the other above-mentioned stocks tomorrow morning. The education sector has been hot, and most of these stocks have already had big gains.

I recommend that you wait until they go on sale or wait for my buy signal in Asia Stock Alert before committing any new money.

But make no mistake, educational services is a sector that should deliver big, big profits.

Best wishes,

Tony


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Posted 06-01-2012 12:16 PM by Tony Sagami
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