Sohu.com Inc. (SOHU) and Baidu Inc. (BIDU) could be two key beneficiaries of a Chinese economic turnaround, as strong growth rates stand to multiply the effects of a recovery.
From automobiles to real estate, China’s economic stimulus package appears to be improving many areas of its economy. While first quarter gross domestic product growth grew just 6.1%, the slowest in almost a decade, many analysts are decidedly bullish. In fact, the Shanghai stock market is up 35% so far this year, signaling a positive future outlook by investors.
One of the fastest growing industries in China, as in the Western world, is the internet sector. While China now has the world’s largest internet population, having taken over the U.S. for the title in early 2008, it still has a lot of ground to make up in terms of market maturity. Regardless, there is room for opportunity with online ad spending expected to reach $3.5 billion by 2012.
Sohu.com Inc. [[SOHU]], an online Chinese news and entertainment provider, has continued to succeed with first quarter net income more than doubling over the same period a year ago. The company was also able to effectively capitalize the value of its former subsidiary by spinning off ChangYou [[CYOU]] and retaining a 68.5% stake in its combined Class A and Class B shares.
Baidu Inc. [[BIDU]], the leading Chinese online search provider, has also seen strong growth with net income increasing by 23.5% from the corresponding period in 2008. Meanwhile, revenues jumped 41.1% and operating profit increased 34.7%. Many investors are confident that this performance will substantially increase upon any economic recovery in China.
In the end, these two Chinese internet companies continue to outperform and should be able to take advantage of the so-far-successful Chinese economic recovery.
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