On the Silk Road: Favorites from China expert

"China has been my top market recommendation since late in 2008, and it remains so today," says global investing expert Yiannis Mostrous.

In The Silk Road Investor he explains, If the country’s stimulus package works (especially on the infrastructure front) expect the Chinese economy to have a V-shaped recovery this year." Here's a looks at two of the advisor's favorites -- China Life Insurance (NYSE: LFC) and Chunghwa Telecom (NYSE: CHT).

"The sustainability of such a recovery will depend on the status of the global economy, though. If the global economy and the credit/banking crisis don’t improve by this time next year, the Chinese economy will have more serious problems to deal with.

"For now, though, China seems to be headed for GDP growth of around 8% this year, which is nothing to fret about in the current economic environment.

"China Life Insurance reported a 45% decline in net profit, but earnings still beat estimates. The company performed much better than its peers; in the context of a disastrous 2008 the results look even better.

"The company reported return on equity of 11%. Net earned premium and policy fees grew by 21% year-over-year. The biggest contributor to the drop was a 61% decline in investment returns.

"Now, however, its investment asset mix has become more conservative, with equity investment only 8 percent of total assets compared to 23% the year before.

"The company is the largest life insurance company in China, accounting for 40% of industry premiums. China Life has the largest and most extensive distribution in the Chinese life insurance sector, with a presence in most regions.

"Its distribution network includes exclusive agents, direct sales representatives, and dedicated and non-dedicated agencies. The company still has one of the strongest balance sheets in the business, a big positive going forward.

"Taiwan-based Chunghwa Telecom reported fourth quarter 2008 revenue of USD1.5 billion, a marginal year-over-year decline from the same period of 2007. Earnings were down 6%, while revenue for the year rose 2%.

"One interesting development: Apple’s iPhone debuted on 13 December in Taiwan. Though there are no quarterly numbers available, of new subscriptions 40% are from customers switching from competitors and 60% are new mobile users. (Note that Chunghwa doesn’t have an exclusive contract for the iPhone in Taiwan.)

"The company also announced an increase in its stake in Senao from 30% to 40.8%. Senao is the largest mobile phone distributor in Taiwan, with 2008 sales of $620 million and net income of $30 million.

"Chunghwa has a 36% wireless market share, while its fixed-line market dominance is near total, at 97.3%. Not surprisingly, it’s been stable at this level for the past three years. Its broadband market share is around 85%.

"Chunghwa Telecom remains one of the most defensive high-yield plays in Asia. It has a debt-free balance sheet, with net cash exceeding by 10% its market capitalization, and stable cash flows."