The benchmark Shanghai Composite Index is currently trading at a price-to-earnings ratio of more than 18, which is significantly higher than the S&P 500's P/E of 15.2..

But small-cap Chinese stocks listed in the U.S. continue to remain undervalued as a result of limited interest from institutional investors and a lack of research coverage by U.S. brokers, say market experts. The scenario clearly presents ample opportunities for investors to ride on the growth story of companies in emerging markets.

One such opportunity to watch out for is in China's food sector. The country is home to the world's largest population with rising disposable income and as a result select small-sized companies are recording exponential sales growth.

These stocks include Zhongpin ( HOGS), AgFeed Industries ( FEED), American Lorain ( ALN) and China Marine Food Group ( CMFO).

All of these companies are trading at a P/E of less than 9, a 40% discount to the U.S. stock markets and a 50% discount to the domestic Chinese market.

In comparison, the largest food companies globally, Unilever ( UL), Kraft Foods ( KFT) and Cadbury ( CBY) trade at P/Es of 14.4, 14.6 and 22.3, respectively.

U.S. food majors General Mills ( GIS), Kellogg ( K), Archer Daniels Midland ( ADM) and H.J. Heinz ( HNZ) trade at a P/Es of 15.3, 14.8, 9.5 and 16, respectively.

Strong economic growth and rapid urbanization are leading to rising disposable incomes and a burgeoning industrial middle class population in China. This is resulting in changing dietary patterns which translate into strong and sustainable demand for food and other agricultural products.

Zhongpin

The company is a leading processor and distributor of meat and food products in China. Its product line includes 314 meat products including chilled pork, frozen pork, and prepared meats, and more than 20 vegetable and fruit products that are sold under the "Zhongpin" brand.

China's dietary patterns are changing in favor of higher protein consumption and therefore, meat products. China is the largest market for pork in the world, accounting for half the global production and consumption, and is projected to grow at an average annual rate of 15% until 2012.

Zhongpin, being a vertically integrated company with a strong franchise, expanding customer base, and a healthy balance sheet, is well-positioned to achieve and sustain a longstanding leadership status. Sales are likely to zoom from $726 million in 2009 to $948 million in 2010 and to $1.14 billion in 2011, according to analysts polled by Bloomberg. At about $12.70, the stock is trading at an attractive P/E of 8.

AgFeed

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