Saturday, 18 October 2014 14:57

Week in review - Oct 17, 2014

Written by
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

Written by
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

Written by
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?

Written by
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…
Thursday, 16 October 2014 13:43

Eco data - RMB loans, Money supply for September 2014

Written by
China’s central bank released September lending and money supply data today, which included stronger-than-expected loan growth and money supply growth edging up slightly MoM. New RMB loans were approximately 857 billion RMB (+9% YoY, +22% QoQ), exceeding estimates of about 750 billion RMB. Official data showed that money supply (M2) was up +12.9 YoY (vs. +12.8% last month, and 0.7% lower than a year ago). Other measures of money also showed growth, but at paces lower both YoY and QoQ. September M1 was +4.8% (vs. +5.7% last month and +8.9% last year), and M0 growth was +4.2% (vs. +5.6% last…
China Lodging Group (HTHT, profile) released preliminary operating data for Q3 FY2014, which included RevPAR growth vs. previous two quarters, driven by stronger occupancy and improvements in pricing power. Compared to Q3 last year, RevPAR was slightly lower due to weaker occupancy, although ADR improved marginally YoY. The company’s hotel network increased by nearly 40% YoY, so recent openings could be a factor in the lower RevPAR vs. last year. On a like-for-like basis, RevPAR was flat YoY at 183 RMB, but reported improvements in ADR which offset a drop in occupancy rates YoY.   China Lodging Group    …
Wednesday, 15 October 2014 09:44

Eco data - Inflation data for September 2014

Written by
China’s official inflation readings for September came in under expectations, with CPI at +1.6 YoY (missing the +1.7% YoY consensus) and PPI at -1.8% YoY (missing the -1.6% consensus). This month’s data extended recent trends of softening consumer prices and wholesale deflation, adding to the concerns that China’s economy is showing clear signs of slowing down. CPI has been on a clear softening trend in 2014, notably lower than the near +3% levels late last year. A negative PPI has been the trend since early 2012, and despite September’s reading, wholesale prices continue to improve from lower levels in early…
Monday, 13 October 2014 17:29

Eco data - Export and imports for September 2014

Written by
Trade data for September signaled rebounding conditions vs. last month’s soft readings, with imports rising +7.0% YoY and exports up a strong +15.3%. Both measures exceeded economists’ expectations for import growth of about +3% YoY and exports higher by about 12% YoY. This month’s data was reassuring overall, however the strength in the import figures perhaps more so due to recent sluggish data. China’s trade surplus was 31 billion USD for September, sharply lower than the nearly 50 billion USD recorded in August. This month’s data may seem like a strong vote of confidence in China’s domestic demand, however after…
Sunday, 12 October 2014 23:34

Week in review - Oct 10, 2014

Written by
Last week was Golden Week in China, meaning that there was little real news flow and no economic data for investors to chew on. As a result, US headlines drove investor sentiment. The mid-week release of Fed minutes showing that policymakers were content to sit on their hands instead of raising rates anytime soon sent US-listed China stocks sharply higher along with the broader market. And then reality set in. After a deeper read of the data, it became pretty clear that one reason the Fed was in no rush to hike rates was due to weak global growth prospects.…
Friday, 10 October 2014 15:41

51job's Advertising business

Written by
One of the ways that Chinese jobs listing website 51job Inc (JOBS, profile here) makes money is through advertising on its recruitment website. But according to discussions with the company, web advertising isn’t even a main focus of its business (job search services being the main goal), but is used as a tool to enhance job listings sales to prospective clients. The logic being that greater exposure could lead to a higher degree of brand building, which would lead to higher caliber applicants. However the length to which 51job will go to for this brand building would appear to those…
Thursday, 09 October 2014 17:37

The state of capitalism in China today

Written by
A recent news article discussing the uneven manner in which Sinopec’s retail arm was carved up between domestic and non-Chinese investors feels like it is worth commenting on due to the overall shocked/surprised tone. Anyone who has been following China for more than a short period of time has probably heard the familiar arguments that China is opening up, reforming, and generally developing in a fashion applauded by some Westerners. In fact the rise of current President Xi Jinping to power was hailed as the arrival of a new era of even more pro-market, pro-capitalist reforms. The argument goes that…
Page 1 of 35