Posts Tagged ‘chinese stocks’
For the first time in more than three years, Chinese stocks are beginning to show some promise for growth investors looking for opportunities outside of the United States.
The benchmark Shanghai Composite Index has moved to just above its close of 2013; hence, it’s more or less in line with the S&P 500 and Dow Jones Industrial Average.
Many of you are aware of my continued bullishness for China, as I have talked about this in recent commentaries.
We saw some encouraging estimates on Tuesday. The country’s industrial output is estimated to rise 9.5% this year, which could support gross domestic product (GDP) growth of 7.5%, according to Industry and Information Technology. (Source: “China targets factory output growth of around 9.5 percent in 2014,” Reuters, February 17, 2014.) What’s interesting is that the key areas of growth for this year include telecommunications, along with a big jump in business for software and information technology (IT).
You can play the growth in these areas via Chinese IT services firms, such as iSoftStone Holdings Limited (NYSE/ISS, $5.15, Market Cap: $297 million), a provider of IT services to clients and globally. Services include consulting and solutions, IT services, and business process outsourcing. The company is growing with its headcount increasing 27% to 17,702 in the third quarter compared to the same time in 2012. Broken done, 65.1% of the company’s global sales came from the Greater China area, 21.4% were from the U.S., Europe accounted for 7.3%, and Japan made up 5.8%.
Analysts expect iSoftStone to report revenue growth of 13.6% to $432.81 million in 2013, followed by 17.8% to $510.06 million … Read More
We all know about some of the insane valuations with social media and Internet services stocks, such as Twitter, Inc. (NYSE/TWTR), Facebook, Inc. (NASDAQ/FB), and Yelp, Inc. (NYSE/YELP), as I have discussed in these pages before. (Read “Two More Internet Stocks to Watch.”)
These valuations make it extremely risky to buy, as a change in the market perception and valuation could lead to a sell-off in the stock, as was the case for Twitter recently.
Now, if you are willing to assume the risk, there are some more attractive Chinese Internet and social media stocks that offer far better valuations than their American counterparts, but these China-based companies also come with much higher risk.
A look at the valuations of these Chinese stocks really doesn’t tell us much, but based purely on strict metrics and valuations, these Chinese stocks look pretty good—in fact, the prices of these Chinese stocks seem too good to believe. And therein lies the risk: due to the questionable reliability of the financial reporting, auditing, and statements in China, these Chinese stocks carry a lot of risk. Sometimes, it seems as though numbers have been made up to suck in investors and drive the share price higher.
The U.S. Securities and Exchange Commission (SEC), as I said in a previous commentary on China, has been trying to clean up the reporting requirements and offer some potential hope that the numbers being reported are valid. While it’s a good step forward, there’s still no guarantee that crooks will not escape the watch of the SEC.
I was reading how there may be 30 or so … Read More
The Securities and Exchange Commission (SEC) is currently shutting down numerous Chinese shell companies trading on U.S. exchanges, such as the over-the-counter market and the highly speculative Pink Sheets stock exchange.
This is good and is something the SEC needs to continue to pursue and enforce, so domestic investors can regain some lost confidence towards Chinese stocks.
The American appetite for Chinese stocks has been picking up; albeit, it’s nowhere near where it was a few years ago when Chinese stocks were all the rage.
Yet if you think there’s little interest in Chinese stocks, take a look at some of the sizzling debuts of the few Chinese initial public offerings (IPOs) that listed in the U.S. last year.
There are now worries China may be set for a downside slide. I have been hearing how the Chinese economy was set to burst, especially regarding the real estate and financial sectors in China. So far this has yet to happen, but we are continuing to hear continued bearish comments towards China.
It’s true the Chinese economy is stalling and may find it difficult to get back to its former double-digit growth, but with gross domestic product (GDP) growth at 7.7% in 2013 and estimated to rise 8.2% this year, according to the Organisation for Economic Co-operation and Development (OECD), these are not bad numbers. By comparison, the U.S. economy is predicted to grow 2.9% in 2014, according to the OECD. (Read “OECD Predicts China #1 Economy by 2016; Consumer Spending to Soar.”)
A recent showing of contraction in Chinese manufacturing in January was used by the Chinese bears … Read More
It’s no secret that China is the biggest market for numerous raw materials, such as cement, steel, coal, copper, and oil, along with end-products, such as vehicles and mobile phones.
The growth of the middle class and wages in the country is the vital attraction for companies to go and set up shop there. Credit Suisse estimates the household wealth in the country will double to $35.0 trillion by around 2015, based on achieving sustainable gross domestic product (GDP) growth at or near the current growth rate. Moreover, the government’s strategy to drive domestic consumption will also help to push up the demand for goods and services.
An area in the Chinese economy that I continue to believe has tremendous long-term potential is the auto sector, but the short-term will pose some hurdles due to some buying limits imposed by the government.
The Chinese motor vehicle market is the largest in the world, and it continues to distance itself from the United States. The upward demand for vehicles remains in spite of the government’s efforts to limit vehicle sales in many of China’s largest cities in an attempt to cut pollution.
As a potential market for vehicles, China remains tops. Auto sales surged 16% in November following a 24% jump in October, according to the China Association of Automobile Manufacturers. (Source: China Association of Automobile Manufacturers web site, last accessed December 11, 2013.) About 1.7 million vehicles were sold for an annualized growth of 20.4 million. By comparison, sales of autos increased nine percent in the United States in November to an annualized rate of 16.4 million vehicles, according to … Read More
While the focus is on the government shutdown and debt ceiling, I’m getting ready for the start of another earnings season, to see if America delivers. Of course, the somewhat muted gross domestic product (GDP) growth has me fully expecting to see a drag in revenues across the broad.
Alcoa Inc. (NYSE/AA) starts the third-quarter earnings season when it reports after the markets close tomorrow. The company is a pretty decent indicator for the global economy, as aluminum is used in a broad assortment of industrial and consumer applications around the world.
The company is forecasted to earn $0.06 per diluted share on revenues of $5.71 billion, down 2.1% year-over-year, according to Thomson Financial. For this reporting year, Alcoa is expected to see revenues contract 2.8%, followed by 2.8% growth in 2014. This essentially means zero growth over two years. In my books, that’s not good; this clearly indicates a global economy that’s in trouble.
I don’t even think traders are expecting some miraculous jump in revenues or earnings in the third-quarter earnings season. Wall Street has already downgraded expectations for the earnings season.
Earnings growth for the third-quarter earnings season is estimated at 3.2%, according to a FactSet report dated September 27. (Source: “Earnings Insight,” FactSet Research Systems Inc. web site, September 27, 2013; last accessed October 4, 2013.) The number is well down from the estimate of 6.5% as of June 30.
The financial sector is expected to report the top growth, while the healthcare sector is projected to report the lowest level of growth in the third-quarter earnings season. Of course, should the U.S. government shutdown … Read More
China is not dead for investments, folks! In my previous article, I talked about the travel sector and the staggering potential for growth in the emerging markets—but this isn’t the only investment opportunity that may be arising in the second-largest economic hub.
Yes, many analysts and mainstream media outlets have been suggesting China is no longer a viable region for investments. I even heard a hedge fund manager say the potential in U.S. stocks is greater than that of China. While I do favor U.S. companies, to overlook China makes absolutely no sense. (Read “Why Chinese Stocks Are Taking Off All of a Sudden.”)
Just take a look at the recent economic numbers. Assuming they are valid, these numbers prove that there are clearly reasons to get excited about shifting some capital to Chinese stocks or multinational companies that derive a major portion of their revenues from China.
The key exports metric has been rising for two straight months. The country reported a healthy 7.2% rise in its exports in August, up from 5.1% in July and -3.1% in June, according to the General Administration of Customs. (Source: Orlik, T. and Kazer, W., “Economy in China Benefits From Stronger U.S. Demand,” Wall Street Journal, September 8, 2013.) This is extremely positive and indicates that demand for the global economy is on the rise.
A strong Chinese economy makes for a stronger global economy.
With the economic renewal, we are seeing a demand for raw materials from China. China imported 526.7 million metric tons of iron ore for the 12 months to August, up 8.1% year-over-year. (Source: “Freight … Read More
The comparative advance in the Shanghai Composite Index may be subpar and well below the moves in the S&P 500 and Dow Jones Industrial Average, but that doesn’t mean you should ignore Chinese stocks. Recall a few weeks back when I discussed the upward moves in Chinese stocks. (Read “They’re Not Popular, But These Stocks May Offer Opportunity After All.”)
While there are the non-believers who feel that China and Chinese stocks are going down the toilet and that everything with the country was fabricated by the communist government, I simply say—good luck.
Just take a look at the price charts, and you’ll notice a somewhat resurgence in Chinese stocks, especially small-cap stocks, over the past weeks, with many advancing to new 52-week highs.
Now, I’m not saying you should welcome Chinese stocks into your portfolio with open arms, but there’s clearly an increased appetite for risk and bigger potential returns, versus the current flatness in U.S. stocks.
Take a look at China-based Qihoo 360 Technology Co. Ltd. (NYSE/QIHU), a developer of Internet and mobile security solutions to the Chinese market. You can think of Qihoo as the “Norton Antivirus” of China, and with 1.3 billion people, that’s a massive market opportunity. I recommended Qihoo in one of my past publications, and it has been a massive winner, up four-fold from its 52-week low of $20.01.
Based on my technical analysis, the chart of Qihoo below is a beautiful example of a stock in an uptrend. The stock also just recorded a bullish upside trading gap.
Chart courtesy of www.StockCharts.com
What I advise is not to just … Read More
We all know what happened with Sino-Forest Corporation or Deer Consumer Products, Inc (OTC/DEER) and how these companies tricked us. Sino-Forest apparently didn’t have much of the forest properties or the revenues it claimed. Hedge fund guru John Paulson lost nearly $500 million from investing in this fabricated company. Deer Consumer Products, on the other hand, really didn’t have much going on at its factories, according to someone who observed the company. (Apparently there were no trucks coming or going, and workers were nowhere to be seen.)
Of course, there were numerous other Chinese stocks, many of which debuted via the hotly contested reverse merger process, that fabricated their numbers. (Read “Chinese Stocks Hindered by Mistrust.”)
The problem is that China is known as the “Wild West” for creative accounting. This is the reason why you see many of the smaller Chinese companies sporting extremely low valuations, as the associated Chinese risk is high and speculative. The trust is simply not there. You are better off with the large Chinese companies, but then the upside potential is low versus small-caps.
Moreover, there’s also the trust we have in the economic numbers coming out of China. There are some who believe key economic data is also creatively managed.
For instance, China reported its Purchasing Managers’ Index (PMI) last Thursday, and it came in at a surprising 50.3 in July, according to the National Bureau of Statistics. Many on the Street … Read More
We all know how Chinese stocks have underperformed this year and last, but that doesn’t mean there’s no reason to invest in them—just remember that careful and selective picking is the name of the game here.
While I’m neutral in the near-term, my longer-term assessment continues to be bullish in spite of what others are saying about the eventual collapse of the “Great Wall” economy.
I have been to Asia, and I have seen the dynamic economies there. Yes, there are many manufacturing plants in China’s economic zones that sit idle as the global economy struggles on. And yes, we are seeing some manufacturing move to Mexico, where the close proximity to the U.S. is making Mexico a hotspot for manufacturing outside of the Chinese economy. But I would still be looking at some of the bigger Chinese companies—the ones that actually make money. Of course, we need to also trust the reports. The U.S. Securities and Exchange Commission (SEC) is working on this.
For some of you, a good alternative to buying stocks would be to consider buying exchange-traded funds (ETFs) with a focus on the Chinese economy. This includes the PowerShares Golden Dragon Halter USX China Portfolio (NASDAQ/PGJ) ETF, which is at a 52-week high. This ETF has a focus on strong small-cap stocks that are familiar to most investors, including Baidu, Inc. (NASDAQ/BIDU) and Qihoo 360 Technology Co. Ltd. (NASDA/QIHU), which has been sizzling on the chart. This is a good fund that allows you access to numerous Chinese growth stocks in the technology, healthcare, and industrial sectors.
On the large-cap side, if you are more … Read More
I know many of you probably don’t even look at Chinese stocks anymore. I wouldn’t be surprised given the years of fraudulent reporting by numerous China-based companies that decided to come here and steal your money through deception.
The reality is that the flow of new Chinese initial public offerings (IPOs) to America is dead. Whether that flow will be revived is anyone’s guess, but I’m not betting on it, at least not until Chinese companies are subject to a similar audit process faced by U.S. companies. That’s in the works with the U.S. Securities and Exchange Commission (SEC).
For now, China is struggling to hold onto its gross domestic product (GDP) growth, which came in at 7.5% in the second quarter. But I wonder if we can trust that number as accurate or if it’s some fabrication by the Chinese government. Based on what we have seen, you never know.
But I still consider China to be the top growth area in the world and a place where you should have some capital invested, albeit carefully. (Read “China: The New Breeding Grounds for Capitalism.”)
What’s interesting is that China is undergoing an economic transformation under the leadership of its new government, which took control earlier in the year. The strategy is to focus on driving up domestic consumption and relying less on exports and foreign investment.
So far the shift to the new paradigm appears to be working, as domestic consumption has been rising, helping to decrease the dependence on foreign demand.
In June, retail sales surged 13.3% year-over-year, according to the National Bureau of Statistics. … Read More
The Chinese are coming! Well, not really, but we did see the first Chinese initial public offering (IPO) of the year list on an U.S. exchange yesterday and only the third Chinese IPO since 2011. The pipeline has dried up from the 60 or so Chinese IPOs listing in the U.S. from 2008 to 2011. And whether the flow will start again is questionable, as I doubt it will happen.
China-based shopping center LightInTheBox Holding Co., Ltd. (NASDAQ/LITB), an online seller of apparel and other household goods to the world market, is the top Chinese online retailer as far as sales to customers outside of its country’s borders. The company, sometimes seen as the little “Amazon.com” of China, was started by Alan Guo, who was previously an executive at Google China. The company priced 8.3 million shares at $9.50 (the mid-point). The deal was hot due to the absence of IPOs coming from China. The stock surged 34% to an intraday high of $12.69 prior to settling at $11.61 for a market cap of about $470 million.
The strong buying in LightInTheBox indicates the demand for Chinese IPOs that are deemed to be trustworthy. The other two Chinese IPOs that debuted in 2012 have done well—online discount retailer Vipshop Holdings Limited (NYSE/VIPS) and social media company YY Inc. (NASDAQ/YY) are up a whopping 340% and 150%, respectively, from their IPO debuts.
At issue have been the numerous cases of fraudulent financial reporting by Chinese companies listing in the U.S., since these companies were not subject to U.S. reporting requirements with many listing on the bulletin board and pink … Read More
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