Tuesday, 16 December 2014 22:50

Eco data - Flash Manufacturing PMI drops to 49.5

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The HSBC/Markit Flash China Manufacturing PMI was a tepid 49.5 for December 2014, slipping beneath the breakeven line and signaling contraction and hitting a seven-month low. This month’s data points to a continuing slowdown in China’s manufacturing sector, to the chagrin of policymakers who have been taking steps in recent weeks to stimulate economic activity. Of the major sub-indexes, perhaps the most ominous sign was the new orders index switching from showing some growth last month to contraction in December. Exports were a relative bright spot, increasing at a faster rate MoM, but were overshadowed by a stubborn employment sub-index…
Saturday, 13 December 2014 11:59

Week in review - Dec 12, 2014

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China companies traded in the US had another tough week of selling, combined with volatility at nosebleed levels. The PowerShares Golden Dragon China ETF (PGJ), which tracks US-listed China stocks, ended the week lower in its fourth consecutive week of losses. As of Friday’s close, PGJ was sitting on YTD losses of nearly -8% in what has been a see-saw year for China stocks traded in the US. In a similar tone to earlier notes, the main reason for selling was a steady stream of data showing that China’s economy is definitely slowing. This week’s releases included trade data (both…
Saturday, 13 December 2014 10:28

Eco data - RMB loans, Money supply for November 2014

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The People’s Bank of China released updated information on new loans for November, which grew to nearly 853 billion RMB, up nearly +40% YoY, exceeding expectations. Money supply growth was +12.3% YoY, slightly under expectations. The loan data is a net positive for China’s economy. Access to credit has often been cited as a factor limiting growth this year, and the significant increase MoM (+56%) could provide an adrenaline shot to the economy. The “could” is an important consideration, however. If corporate borrowers are replenishing their cash coffers instead of putting the money to work, little results may follow. Additionally,…
Friday, 12 December 2014 18:35

Hey stranger...we take the Momo app for a test drive

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Following Momo’s (MOMO) IPO yesterday, the web has been flooded with comparisons to the popular meet-up app “Tinder”, but on further examination it’s obvious that the two apps really have little in common. To help investors better understand what Momo is trying to do with its app, we took it for a test drive. Momo (which translates to “stranger” in Chinese) actually has a lot more features and functionality than Tinder and is intended to be more comprehensive in its social networking abilities. Where Tinder is aimed at helping strangers meet, Momo goes a step further and tries to get…
Friday, 12 December 2014 13:46

Eco data - IP, Fixed Assets, Real Estate, Retail Sales

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The NBS’ monthly report on IP, fixed asset investment, retail sales, and real estate investment for November delivered a somewhat expected weak reading on the Chinese economy. All of the indexes were lower MoM, except retail sales, which were +11.7% higher than a year ago, up from the +11.5% pace recorded in October, and higher than the +11.5% expected. Retail sales grew due to increased purchases of non-food items, which grew +12% YoY vs. the +11.7% pace in October. Sales of necessities (food and clothing), offset slowing purchases of discretionary items like automobiles and jewelry. In light of concerns about…
Friday, 12 December 2014 10:49

Momo (MOMO) successfully IPOs

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Momo Inc. (MOMO) successfully IPOed yesterday, raising about 216 million USD (16 million ADS for $13.50 each). The IPO was backed by Morgan Stanley, Credit Suisse, JP Morgan, and China Renaissance. Additionally, upon the successful completion of the IPO, Alibaba (BABA) and 58.com (WUBA, profile) took stakes in the company; Alibaba bought 50 million USD worth of shares, 58.com bought 10 million USD. After the IPO, Alibaba and 58.com held stakes of about 6% and 1%, respectively (Alibaba was an active pre-IPO investor in the company). Based on pre-IPO materials, Momo will cooperate with Alibaba to display merchant ads in…
Thursday, 11 December 2014 18:15

KongZhong (KZ) - progress in mobile?

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We’ve written quite a bit about KongZhong (KZ, profile) in the past, and wanted to publish a quick follow up on the performance of some mobile titles launched in Q4. The mobile game space in China has been becoming an increasingly competitive market, and one of the reasons that investors have punished shares of most companies in the industry. Success with mobile games is a tough nut to crack; if a publisher doesn’t have the “hot game” at the right time, titles can flop. Additionally, if the balance between monetization and gameplay isn’t just right, it can also spell doom…
Thursday, 11 December 2014 16:14

Wednesday brings more selling, what's next?

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Wednesday’s trading in US-listed China stocks brought another bout of pain for investors, with most stocks spilling copious amounts of red ink for the second time this week. As we noted after Monday’s drop, there are plenty of reasons to be sellers of China-themed names. The economy is looking shaky, specifically with falling real estate prices, lackluster trade data, and the prospect of deflation apparently becoming more real. But US-listed China stocks move not just based on China factors. Domestic US stocks have also been trading lower over the past few days. The S&P 500 is about 3% lower from…
Wednesday, 10 December 2014 19:29

China Nepstar (NPD) - hammered lower, now what?

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China Nepstar (NPD, profile) has been crushed since releasing Q3, the stock is down over 20% after reporting decent revenue growth but a scary contraction in gross profit, which rippled through the P&L. A positive takeaway from Q3 was comp sales performance (+8%, which management wasn't satisfied with, it wanted more), and the cash on the balance sheet (0.41 per share). Yesterday’s drop of nearly 11% was the latest  tumble in the stock’s slide, and although the chart seems set in a downward trend, it violated the lower Bollinger band with such a huge move, so there may be a…
Wednesday, 10 December 2014 11:52

Eco data - Inflation data for November 2014

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The National Bureau of Statistics released November inflation data which showed continuing weakness in both consumer and producer price indexes (CPI source here, PPI source here). According to the NBS, China’s November CPI dropped to a +1.4% YoY pace, and PPI fell to -2.7% YoY, both missing expectations (CPI 1.4% vs 1.6% est., PPI -2.7% vs. -2.4% est.). This month’s data is likely to further increase pressure on policymakers to apply stimulus to support the economy. A closer look at both price index shows broad based weakness, with some key sub-indexes showing a quickening pace of decline vs. recent months.…
Tuesday, 09 December 2014 20:07

New Oriental (EDU) bearish bearish bearish

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Again with this stock, we got schooled, our call flips to bearish New Oriental Education (EDU) has given us whiplash recently, with a few head fakes on finding support giving us hope that our earlier bullish call had potential. Well, like a candidate that runs a 20 second 40, those…
Tuesday, 09 December 2014 20:04

KongZhong (KZ) - sinks to bearish after Q3

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Oversold, but squarely in bearish territory KongZhong (KZ, profile) has been a favorite of sellers recently, even after rewarding shareholders with a special one-time dividend payment. Why? Well, Q3 was pretty tough; the company missed its own guidance due to weak performance of key titles expected to be major contributors,…
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