Wednesday, 28 January 2015 00:00

Sideways trading while small names head lower

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China stocks traded in the US turned in a down day on Tuesday (January 27, 2015), with the PowerShares Golden Dragon China ETF (PGJ), which tracks US-listed China names, closing the day barely in the red. Of the ETF’s top 10 holdings, eight finished the day lower; only Vipshop (VIPS) and WuXi Pharmatech (WX) finished the day with positive gains. However, despite the apparent near sideways move of the PGJ, many smaller US-listed China names closed the day a few percent lower, the majority of the 200 or so names that we track closed flat to negative. Seeing the microcaps…
Monday, 26 January 2015 00:00

Alibaba (BABA) reporting tomorrow...

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Alibaba (BABA) is set to release earnings tomorrow pre-market, and the company’s results and guidance could well the market for other e-commerce names like JD.com (JD), Dangdang (DANG), and Vipshop (VIPS). There has been some positive news around the company's performance last quarter (strong sales on the 11/11 Single's Day holiday, and another article saying returns were high). Consensus for revenue is 4.5 billion USD (27 estimates ranging from 3.9 to 4.9 billion USD), with earnings per share of 0.75 USD (26 estimates, 0.65 – 0.85 with a range). The consensus for next quarter is for revenue of 2.9 billion…
Sunday, 25 January 2015 00:00

Week in review - Jan 23, 2015

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China stocks traded in the US put on a solid rally this past week, trading higher for four straight sessions in the holiday-shortened week. The PowerShares Golden Dragon China ETF (PGJ) rose about +2.8% vs. the previous Friday close, extending last week's gain to rise to nearly +4% on the month. The week’s move higher coincides with a broader market rally in the US, with the S&P 500 adding +1.6% last week while the NASDAQ was good for a +2.7% gain. One reason behind the move in China names was undoubtedly the stronger than expected economic data out early in…
Saturday, 24 January 2015 00:00

Mindray Medical (MR) looking up

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Mindray Medical (MR) – finding new footing? Looking bullish Mindray Medical (MR) has been in a grind lower for a while, and seems to have taken the full brunt of the sell-off in December, but hasn’t snapped back with the rest of the US-listed China universe. The company isn’t as…
Saturday, 24 January 2015 00:00

PowerShares Golden China (PGJ) recovering, looking bullish

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PowerShares Golden Dragon improving outlook, further gains ahead There are a few things behind this PowerShares Golden Dragon China ETF (PGJ) bullish call, which closes out the previously bearish view which we published late September (which returned about 7% if you stuck with it). First are the fundamentals - China’s…
Friday, 23 January 2015 00:00

Eco data - December Flash PMI improves slightly to 49.8

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The HSBC/Markit Flash China Manufacturing PMI for January 2015 was 49.8, a slight improvement vs. last month’s 49.6 reading, but still signaling contracting conditions. By sub-index, the data was somewhat mixed. Overall output levels reversed course from a decrease to an increasing reading, driven by new orders increasing (also stronger than last month’s data showing a decrease). New export orders continued to show expansion, however the pace moderated vs. last month. Employment continued to struggle with another month of contracting labor conditions, and at a faster pace than December. Both input and prices hinted at further pressure, and possible deflation,…
Recent rally fading, looking bearish We’ve had a bullish outlook on China Nepstar (NPD, profile) since January 9, after it looked like investors were coming back to the name after the buyback announcement. There has since been further interest in the sector following recent developments that China regulators were in…
Wednesday, 21 January 2015 00:00

Momo (MOMO) - it is a no-go

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We published a short note on SeekingAlpha explaining why we think MoMo (MOMO, profile) is a no-go for investors, and encourage readers to take a look. The stock is trading well under its $13.50 per share IPO price, so although it may seem like beating a dead horse, the article highlights some risks that investors considering the stock should be aware of. Here is an excerpt of the article, and a link follows: Momo was the last China stock to IPO in the US in 2014, and was initially greeted by great expectations, based on the potential of its location-based…
Tuesday, 20 January 2015 00:00

New Oriental Education (EDU) Q2 FY2015 Results

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New Oriental Education (EDU, profile) released Q2 FY2015 earnings results that included top-line growth of +13% YoY, but lower -40% QoQ somewhat due to seasonality. Second quarter revenue was at the low end of management’s earlier guidance, but beat consensus estimates. Non-GAAP earnings were approximately 0.5 USD per ADS, missing the consensus expectation of 0.07 USD. The earnings miss was due to the combination of cost pressures at the classroom level (higher pay for teachers), as well as increased general and administrative expenses, which resulted in an operating loss. Operating metrics showed signs of some improvement, with student enrollments increasing…
Tuesday, 20 January 2015 00:00

2014 Retail Sales Trends in China – A closer look

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According to the NBS, retail sales in December 2014 grew +11.9% YoY, beating expectations for a +11.7 gain. Further analysis shows that for Q4, retail sales were up +11.7% YoY, a slight slowdown from Q3’s +11.9% pace. Despite the apparent slowdown vs. Q3, there seemed to be some sales categories that actually showed signs of improvement toward the end of the year. Of the 15 different categories of retail sales provided by the NBS, a majority closed out Q4 2014 with stronger YoY growth rates than the first two months of the quarter. Specifically, retail sales for restaurants, home appliances,…
China’s National Bureau of Statistics released the December monthly reading of industrial production, fixed asset investment, retail sales, and investments in real estate development, which included a few positive surprises. On balance, the data reading suggested that some of the intense negativity surrounding the near-term outlook for China’s economy might be overdone.   China Eco Data Update Jan-Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: National Bureau of Statistics 2014                     Industrial Production (YoY) 8.6% 8.8% 8.7% 8.8% 9.2% 9.0% 6.9% 8.0% 7.7% 7.2% 7.9% Investment in…
Tuesday, 20 January 2015 00:00

Eco data - Q4 2014 GDP

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China’s National Bureau of Statistics released Q4 2014 GDP, which showed total economic output for the country grew at a +7.3% YoY pace for the quarter. For the full year, GDP growth was 7.4%, which was softer than the full year target of +7.5%. The quarter’s data was higher than the consensus estimate of +7.2%, but was the slowest Q4 since 2008, when the global economy was nearly frozen by the subprime financial crisis. This year’s data marks the first time that China has missed its full year growth target since 1989, a full 25 years ago. Seeing a relatively…
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