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6 Chinese Stocks Favored by U.S. Investors

Baidu (BIDU) is the leading Chinese-language online search company. It is expected to benefit from advertisers' increased spending on paid searches as they seek to optimize their budgets via effective and measurable marketing results seen over the Internet.

It is also seeing rising adoption of paid searches among small and medium-sized businesses, the main target market.

A recent S&P analyst's report said Baidu is "one of China's digital bellwethers, with significant momentum and opportunity in varied areas, including search, advertising, video, applications and video."

But it cautions that "despite strong recent execution, we see risk associated with regulatory/legal issues related to issues including piracy and privacy."

Its shares rose 43% in the first quarter and 131% over the past year, to $137.80, giving it a market value of $46 billion.

Standard & Poor's analysts downgraded Baidu shares on March 31 to "hold" from "buy," noting its shares are "fairly valued." But it is keeping its 12-month price target of $160.

S&P projects revenue increases of 68% in 2011 and 45% in 2012, "reflecting growth in the Chinese Internet search segment, benefits of new technologies such as the Phoenix Nest advertising platform and expansion into new areas."

For fiscal 2011, analysts estimate that Baidu will earn $2.48 per share and that will grow by 47% in 2012 to $3.64 per share.

S&P says that it found nine "buy" ratings, 12 "buy/holds," two "holds," two "weak/holds" and one "sell" in its review of analysts' ratings.

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