So, the bottom line is that you want to be positioned in these stocks, but you just have to figure out good entry (and exit) timing. In terms of an "exit", I refer only to the tactics of portfolio risk management you'll need for when share prices get to be over-bought on a risk/reward basis.

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Sector 50: Telecom Service
ASIA Asiainfo: Profitable company that built China's Internet
CHA China Telecom: Exclusive integrated telecom service for northern China
CHL China Mobile: Major mobile telecom service that is very profitable
CHU China Unicom: Major mobile telecom service that is very profitable
CN China Netcom: Exclusive integrated telecom service for southern China

I have no favorites here. They are all good, but there are differences. And, as you'll see, some are superior to the others.

These charts indicate that Asiainfo (NDQ: ASIA) is really in a different class than the four other telecom service vendors, and that China Netcom (NYSE: CN) is a stock that was more recently formed as a corporation and then introduced to the NYSE.

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Asiainfo (NDQ: ASIA) is a unique company in that it is an infrastructure integrator. It built China's national Internet Protocol backbone for the four other telecom companies in my list. Then it started building provincial nodes, and local nodes.

In addition to building IP networks, Asiainfo has a software division that develops software applications like Chinese-language Text Messaging, plus software for CRM, Call Centre, Accounting, Transactions Management and Decision Support systems.

The directors and management team is young, aggressive and Western-trained. Co-founder and Chairman James Ding got his MSc (Info Tech) from UCLA. CEO Xingsheng Zhang was formerly head of marketing at Ericsson China. Sr. VP (Software) Steve Zhang worked for several Silicon Valley companies including Sun Micro. CFO Ying Han earned her stripes at Hewlett-Packard. Corp. Strategist Yungang Lu learned his investment banking at Morgan Stanley and Credit Suisse First Boston. They manage a staff of about 800, including mostly software engineers.

The only problem I can see here is that ASIA was part of the Internet bubble of 2000 when they did an IPO at $24 that launched into the stratosphere before coming down to earth after its telecom service vendor clients pulled in their horns in 2001, like all telecom companies.

But the company is doing (fairly) well as its financial summaries reflect, and it is well positioned for growth, in spite of the competition it now faces.

The stock could be put into the tech sector, but I put it into the telecom services sector because of its relationship with the four major telco operators in China.

At $4.66, the market cap is just $216.5 million, so this is not a stock that is closely followed by many institutions. Besides, the beta is 3.37, which is quite high, and the PE is 24.4, which indicates the stock is fairly priced, and at risk if the market suffers a severe pull back.

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China Mobile (NYSE: CHL) had a tough go of it when the Internet bubble burst because the stock had been trading then at 180 times earnings, and share traders were oblivious to capital market realities. Like China Unicom, it is mostly a mobile phone service operator, but the license rules in China have changed, opening competition to all four major phone companies, including the fixed-line operators China Telecom and China Netcom, and others, although the others are all relatively small players.

China Mobile is the number 1 mobile phone operator in China, providing service in 21 areas across the country. At $15.90, the market cap of CHL is $62.6 billion.

PE is a reasonable 13.1 and the dividend yield is presently 1.9 pct. Earnings exceed $1 billion per quarter and there is about $9 billion in cash, so the company is very strong financially. With 31 percent operating margins and 19 pct return on equity, CHL is worthy of consideration in any portfolio.

CHL, presently at $15.90, is going to run into market resistance in the $16.50-17 range, and the price cycle appears to be weakening here, so I would wait before entering the stock. My accumulation zone would be down near $14.50. If I could get $0.50 for writing the June 15 puts, I might be interested, but they are presently bid $0.35. Actually, I'd like to get more than $0.50, but I'd start there.

If CHL were to break down below $14.50, I'd be interested in buying calls if all else seemed normal.

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China Unicom (NYSE: CHU) is the number 2 mobile phone operator in China. The company is solid, and the stock has been on a roll this year. Still, I'm not interested in the stock at this point unless it pulls back to well below $8.00.

At $9.19, the market cap of CHU is $11.5 billion. PE is a high 22, which reflects the company's rapid 36 pct revenue growth rate, and the dividend yield is presently 1.3 pct.

The company is not nearly as strong financially as China Mobile. With lower operating margins and return on equity, CHU is number two China mobile company as well as number two (behind CHL) of China mobile phone operators in any portfolio.

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China Telecom (NYSE: CHA) is the integrated telco that covers southern China. The company is rock solid, with solvency and operations efficiency metrics that would be desirable by any telco operator in the world.

At a current price of $37.87, the PE is 9.8, and the market cap is $30.65 billion.

The PEG ratio at under 0.9 puts this stock on the radar screens of GARP traders.

I like the stock, and may start writing puts soon, but would outright buy it under $35.

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China Netcom (NYSE: CN) is the integrated telco that covers northern China. The company is, like China Telecom, an exclusive service provider. In fact it is a recent amalgamation of some local operations of China Telecom.

CN is not as rock solid financially or operationally as CHA, and the PEG ratio is a little high, at 1.9. I certainly would not chase this stock.

Trading at $28.75, CN has a PE of 11.6 and a market cap of 9.3 billion.

I'd look to be a buyer only under $25, and possibly lower.

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So, of the top five China telecom sector stocks, the ones I like are the biggest and financially/operationally strongest: China Mobile (NYSE: CHL) and China Telecom (NYSE: CHA). These would be two of my global 100.

In the next couple months, I'll try to monitor these China stocks for you. As equity markets ebb and flow, there will be trading opportunities.

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The charts used here are from Investertech, which is a service I use because it offers multiple charts to a page, and charts in multiple time frames. The info summaries come from Yahoo Finance, which deserves the "Very Best of the Web" accolade. Finally, the excellent financial data, and any quote monitors, I show come from ADVFN. Starting in March, I'm going to get involved in the ADVFN chat rooms because this service is starting to add online price data from all the major stock exchanges in the world, and I want to encourage that. As better services become available, I'll use them too. Please let me know your favorites.

BCara@BillCara.com