Thursday, 26 February 2015 00:00

After a rough Wednesday, will stocks snap back? Maybe...

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After a tough day yesterday, when China stocks traded in the US lost about -1.7%, we may see some positive sentiment following announcements that policymakers in China are planning on introducing some limited stimulus measures. We’ve already had some news flow suggesting that there may be help on the way for the beleaguered housing sector, and the latest news that tax breaks may be coming for SMEs could be cause for limited optimism.   Shares in Hong Kong had a decent day, rising almost +1% before slipping in the afternoon session to end the day with gains of only +0.5%.…
Wednesday, 25 February 2015 00:00

Mainland markets back on line, shrug off PMI data

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The year of the sheep didn’t start off too well here in China for local investors, as the Shanghai and Shenzhen markets both closed lower after registering gains earlier in the day. The Shanghai index shed -0.6% and Shenzhen finished the day down -1.5%. Shares in Shanghai pushed higher before lunch after following the positive surprise in the form of flash manufacturing PMI data (our note here), but didn’t hold on to the gains through the afternoon; Shenzhen was underwater all day. Mainland markets had been reacting positively to the recent spate of soft economic data, a sign that stimulus…
500.com (WBAI, profile) announced that some provincial sports lottery administration centers were planning to temporarily suspend online sales for lottery products (click here for the source). The company noted that the aforementioned provincial sports lottery administration centers would suspend online sales starting from February 25, 2015, and that sales of four (4) high frequency lottery products the company sells would be impacted. Furthermore, sales of those four high frequency lottery products were about 10% of FY2013-2014 revenues. Although this announcement may seem ominous, it’s worth noting that sales of the company’s sports match lottery products don’t seem to be affected…
Wednesday, 25 February 2015 00:00

Eco data - February Flash PMI improves to 50.1

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The HSBC/Markit China flash manufacturing PMI for February 2015 was 50.1, up vs. 49.7 in January and beating the 49.5 estimate (source, English). February’s data included an improvement in key indexes vs. last month; both new orders and output rose at a faster pace, and backlogs also improved. The employment, export, and price indexes were all weaker, but the pace of price declines for both input and output prices moderated vs. January. Exports have been in the spotlight recently, with official customs data showing that volumes in January fell nearly 20% YoY. If this month’s flash reading is any indication,…
Tuesday, 24 February 2015 00:00

Analyzing GAAP and Non-GAAP financial results

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In a previous note, we took a look at how GAAP financial results can differ, sometimes significantly, from non-GAAP results, with the latter typically painting a more flattering or positive picture of the company. The crux of the difference between the two is that whereas the accounting rules for GAAP reporting are relatively clear-cut and uniform, companies and analysts can pick and choose non-GAAP calculations. So when looking at a company’s financial results, what is the “right” number to use? This answer isn’t very satisfying, because unfortunately “it depends.” Financial media typically focus on non-GAAP (also called ‘pro forma’) figures,…
Monday, 23 February 2015 00:00

500.com (WBAI) plunges lower Monday morning

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500.com (WBAI, profile) plunged lower Monday morning by as much as -20% following a whirlwind of rumors surrounding the company, including that it would have licenses revoked by the central government, ostensibly forcing it to shut down. Adding kerosene to the fire were also rumors that the company’s CEO had been detained, setting off alarm bells due to such a move typically being a precursor to a further investigation by authorities. The prospects for online lottery sales have been subject to a significant degree of uncertainty since late last year following a surprise audit of the industry and preliminary findings…
Monday, 23 February 2015 00:00

Choppy trading ahead as Lunar New Year holiday rolls on

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Although Hong Kong’s stock market was open for trading on Monday, mainland markets remained closed (trading will resume on Wednesday), giving investors little to go on for Chinese companies traded in the US. Hong Kong spent the morning session in loss-making territory, but recovered near lunch to stay at breakeven for the rest of the day. Volume in Hong Kong was relatively light, no doubt due to the ongoing holiday-mode as the Lunar New Year winds down to a close (total turnover on the HKEX was under 50 billion HKD vs. about 80 billion HKD daily average over the last…
Monday, 23 February 2015 00:00

Alibaba (BABA) class action lawsuit - a distraction

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News Friday that a class action lawsuit has been filed against Alibaba doesn't really come as much of a surprise. Given the alarming allegations broached in the SAIC white paper conveniently published before the company reported quarterly results late last month, it was a foregone conclusion. Irrespective of the merits of what exactly the suit alleges, Alibaba presents too much of a tasty target for lawyers working on contingency to pass up. We reiterate our earlier opinion of the whole affair – it doesn't matter. Our guess is that the end result will bear a remarkable resemblance to another IPO…
Saturday, 21 February 2015 00:00

Week in review – Feb 20, 2015

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China stocks traded in the US had a somewhat boring performance this week, adding +0.7% in the holiday-shortened trading session. There were a few interesting moves, but the limited news flow coming out of China had things mostly on pause. As we thought earlier, global macro did play a more prevalent role, with China stocks popping higher on Tuesday when it looked like the ongoing Greek debt crisis would reach a favorable outcome. Although stocks did drift lower through Friday, closing beneath highs reached earlier in the week, the overall uptrend which began at the start of the year remained…
Wednesday, 18 February 2015 00:00

Stocks pop on Tuesday, what's next?

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China stocks listed in the US had a strong day in trading yesterday, with the PowerShares Golden China ETF rising +1.7%, finally recovering all of the ground lost in the December sell-off. Gains came after news that the Eurozone's dance with destiny may last a little longer (yes, Greece again) hit the tapes, but there was also some earnings-related action after Vipshop (VIPS, profile) beat on Q4, sending related names higher. We were looking for that trade yesterday, hope you saw that note.   Other notable movers yesterday were Kandi Technologies (KNDI), which announced that the SEC closed its investigation…
China stocks listed in the US could see some pressure today due to negative sentiment from the ongoing macroeconomic headwinds in the form of a shaky Eurozone (yes, Greece). Developments in Europe will likely dampen any catch-up to local markets which have edged higher over the past two sessions, and may also bias the interpretation of home price data from the NBS (focusing on the YoY drop vs. developing MoM improvements). There could be some positive sentiment in e-commerce, however. Vipshop (VIPS, profile) posted some stellar Q4 results which blew away consensus and also provided strong guidance, which may draw…
Scary headlines sell newspapers and attract clicks; perhaps this is why media outlets are focusing on the wrong number from January’s official home price data. Specifically, the year over year comparison for new home prices, which widened to -5.1% YoY in January vs. -4.3% in December, not a great sign for an economy facing a ton of growth challenges. Seeing a widening gap in new home prices must mean the unmistakable demise of the housing sector, compounding China’s other problems until the economy collapses under its weight, right? Well, not exactly. The reason that it appears that things are getting…
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