This post is part of a 12 articles feature on the best bets for investing in China. To see all the other recommendations in this special report, click here.
"Amidst all the concern about the U.S. economy and stock market, investors may gain some solace, as well as profits, by looking east-to China, where there are signs the huge government stimulus is bearing fruit," explains Stephen Leeb.
In The Complete Investor, he adds, "For income investors, it makes good sense to own carefully selected dividend-generating Chinese securities such as PetroChina (NYSE: PTR) and China National Offshore Oil Corp. (NYSE: CEO).
Here, the growth and income advisor reviews the two Asian energy plays.
"Stepped-up growth in China will boost overall demand for energy and other natural resources, with Chinese energy companies among the strongest beneficiaries.
"PetroChina's reserve base makes the company perhaps the dominant energy company not just in China but worldwide.
"At year-end 2008, the company had 11.2 billion barrels of crude oil reserves and 61.2 trillion cubic feet of proven natural gas reserves.
"Its refining, transporting, and marketing business is China's biggest, and its exploration and production efforts are massive, extending to 11 foreign countries and regions.
"The recently reported annual results showed the company weathered the difficult environment relatively well: while expenses were up, so was the average realized crude price.
"The company also noted improved natural gas fundamentals and strong growth in demand for natural gas during 2008.
"Going forward, PetroChina predicts a small decline in 2009 oil production. While its consolidated replacement ratio of oil and gas reserves was 1.165, the figure for natural gas exceeded 300%, and it looks as if natural gas will be the growth driver in the near future.
"A big plus in today's environment is the company's relatively small exposure to petrochemical businesses: as oil prices recover further, the higher costs in this division won't be enough to drag overall profits down.
"Another strong positive is the balance sheet strength, which gives us confidence in the company's dividends (the payout ratio is a very sustainable 45 percent) while allowing for acquisitions of overseas assets and resources.
"More than 80% owned by China National Petroleum Corp., PetroChina is a company whose future is part and parcel of China's energy independence and economic strength.
"It has been reported, for example, that China National Petroleum is eying $5 billion of assets in Syria and Libya held by Petro-Canada, which is merging with Canada's Suncor. With a backer like that, PetroChina should have an assured future.
"A second attractive choice is China National Offshore Oil Corp., or CNOOC. It, too, is utterly dominant in its area: it's the largest offshore oil and gas producer in China and one authorized to cooperate with foreign partners in exploring China's offshore areas.
"In 2008 its total oil and gas output rose 14% vs. 2007, while profits surged 42% to a record 44.4 billion renminbi despite the steep declines in oil's price in the second half of the year.
"All four major segments-drilling services, well services, marine support and transportation services, and geophysical services-performed well with revenues reaching record highs. Its overseas businesses also enjoyed strong growth and expanded to cover 20 countries and regions.
"As with PetroChina, financial strength is perhaps CNOOC's biggest asset. Its strong balance sheet should allow CNOOC to finance growth both internally and through selective acquisition of attractive assets, while aintaining-if not increasing-its 4.6% dividend."
Steven Halpern's TheStockAdvisors.com offers a free daily overview of the favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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