Friday, 24 October 2014 16:39

New Oriental Education (EDU) Q1 FY2015 Results

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New Oriental Education (EDU) released Q1 FY2015 results which included revenue of 394 million USD (lower than management’s initial guidance of about 420 million USD) and net income of 112 million USD. Revenue growth during Q1 was a paltry 1% YoY, notably slower than the +20% YoY pace for FY2014. The quarterly results showed the continued impact of headwinds facing the company, which missed both consensus revenue and earnings estimates.   Although the quarter’s results were disappointing, management’s outlook going forward could be cause for optimism. The company’s forecast for Q2 FY2015 revenue was for +15% YoY growth to about…
Friday, 24 October 2014 15:35

Eco data - Residential home prices for September 2014

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China new home prices fell slightly, or in one case remained stagnant, in all major cities across the nation despite the lifting of purchasing restriction in all but four top tier cities. All but one of the 70 major cities surveyed showed prices falling month on month by an average of -1%. The sole exception was the city of Xi’an which showed no change for month on month price changes. Beijing, arguably the most important market and a major source of the government’s concern with rising housing costs, saw prices dip -0.7% MoM, but were still slightly higher than a…
Thursday, 23 October 2014 16:23

Taking a look at the (WUBA) mobile app

Written by (WUBA, profile) is China’s popular online marketplace that allows users to post listings of items or services they want to sell and for people to respond to them. As part of its business, has a fairly easy-to-use and comprehensive mobile application that allows users to buy and sell from almost any location. To help investors understand more about how this app is powering's business, we took the app for a test drive.   On the app’s homepage users are able to quickly identify what categories they want to search in. service categories are virtually limitless, everything…
Thursday, 23 October 2014 10:08

Eco data - October Flash PMI increases to 50.4

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The HSBC/Markit Flash China Manufacturing PMI increased vs. September’s final reading of 50.2 (release here). An improvement in the main sub-indexes (output, new orders, exports, and employment) helped push the index higher. Output, new orders, and exports were all pointing to an increase, however were cooler than readings in September. The employment index was still showing contraction, but the index increased sharply from last month’s reading showing a larger degree of contraction.  
Tuesday, 21 October 2014 21:43

Hollysys (HOLI) back to positive

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Hollysys – back to a buy, but is it another head fake? Will Hollysys (HOLI, profile) finally play along and form a trend that lasts longer than a stoplight? We can only hope so; the stock has consistently failed to enter a trend over the past three times when we…
The National Bureau of Statistics released the monthly data on industrial production, fixed asset investment, real estate development, and retail sales for September, which all showed continued weakening trends, except for industrial production which was higher than August. All of the indicators from this month's data were lower than earlier in the year, when the government announced some targeted stimulus measures aimed at propping up growth (the mini-stimulus). With the latest round of lower numbers, it seems that policymakers will have to continue efforts to support the economy in some fashion.  Of particular interest this month was the retail sales…
Tuesday, 21 October 2014 10:09

Eco data - GDP

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The official GDP reading for Q3 came in at 7.3% YoY, slightly beating the consensus estimate of 7.2%, and was the slowest pace of growth since the financial crisis. The reading confirms data points released during the quarter - that China’s economy is experiencing a clear slowing down, driven by a weak housing market and shaky external demand. The Q3 data point makes the full-year target effectively unobtainable. Unless policymakers in Beijing apply a large stimulus in Q4, the numbers just don’t add up. With the Q1-Q3 pace averaging 7.4%, China’s economy would need to grow at about 7.7% YoY…
Saturday, 18 October 2014 14:57

Week in review - Oct 17, 2014

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US-listed China stocks finally turned in a week of positive trading, after sliding lower over the previous five weeks. By the time the dust settled on Friday, the PowerShares Golden Dragon China ETF (PGJ) had clawed back some of its YTD losses, trading -4.2% lower than the start of the year, and the iShares China large-cap ETF (FXI) was showing a small loss on YTD terms. Investors had a lot to chew on, with trade data and a read on inflation early in the week, and both FDI and bank lending statistics toward the end of the week. China’s trade…
Saturday, 18 October 2014 10:43

Shanda Games (GAME) Going Private - Update

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Since we last wrote about Shanda Games (GAME, profile) the stock has recovered somewhat, but still has a risk premium suggesting that the market sees the deal as less than a sure-thing. Investors looking at the stock now may see the deal spread of nearly 7% as attractive, particularly on an annualized basis, but that analysis is obviously predicated on the deal going through. The quick rundown: after the proposal for going private was announced in January, the stock popped, but then went nowhere for a few months until some buyout consortium members dropped out in September, sending the stock…
KongZhong (KZ, profile) recently announced a special one-time dividend to common shareholders, and the initial market reaction was quite strong, with the stock gapping up about 8% after the announcement. Although finance theory tells us that shareholders should have no preference for dividend payouts (cash in their pocket is the same as their share of cash held on the balance sheet), the real world can deviate from theory. The price action in KongZhong’s stock is providing a demonstration of when practice doesn't fit theory. As we argued earlier, the company seems to be unrealistically cheap. The stock sank about 8%…
Friday, 17 October 2014 09:46

Tech analysis - progress report

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With the recent market moves pushing US-listed China stocks higher in a contrarian bounce to the main US markets, we thought it would be helpful to show how our calls based on technical analysis have been doing. In short, the indicators have done a good job in spotting the longer-term…
Thursday, 16 October 2014 14:56

Stocks popped up, reversing the recent trend, now what?

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US-listed China stocks put in a strong day of trading Wednesday, popping higher to buck the trend of recent selling. Eco data released overnight showed that both consumer and producer inflation was lower than expected, giving some investors confidence that policymakers will be forced to apply stimulus to support the economy. Ignoring the argument that bad data is somehow a market positive, it’s also important to note that many US-listed China stocks had just reached an oversold condition, so there may have been technical factors behind yesterday’s bounce also. For those keeping track, the PowerShares Golden China ETF (PGJ, focusing…
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