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Chinese Stock #4 --
China Life Insurance (LFC)

The battle between India and China for profits may very well extend to financial sector as well as capital always flows to the highest returns. China Life Insurance (LFC) looks to be moving in on the Indian life insurance market, entering into behind-the-scenes negotiations with India’s top insurance provider that could put it in the catbird seat to dominate the Asian continent with more than 2 billion potential customers. Should that happen, I could see this company easily repeat its 670% gains by 2015, doubling every year for the next five years.

Going forward, China Life's main growth will come from expansion in its fast-growing insurance sector, but changes in some recent regulations should add to the company's bottom line. In addition to insurance premiums, China Life also grows its profits the same way we do -- by investing. At the moment, fixed income securities and bank deposits are still the company's main investments. But in 2006, the Chinese government allowed insurance companies to invest more of their assets in the stock market. And at that time, the local Chinese stock market was on fire, so that was a positive for China Life. Now, recently the Chinese government allowed insurers to double the share of assets directly invested in domestic equities to 10%, and to invest as much as 15% of their total assets overseas -- up from the 5% previously permitted. I expect these policy changes to continue to drive China Life's investment returns.

Next -- Chinese Stock #5