Sunday, 02 February 2014 21:21

Week in review - Jan 31, 2014

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The initial shock wore off from the previous week’s double-whammy of softer than expected macro data and the SEC possibly banning auditors from practice, and US-listed China companies ended the week slightly up. In case you missed it, the SEC and Deloitte reached a deal on the auditor’s work on Longtop Financial that gave the market some hope that the initial salvo from the SEC may have been more bark than (eventual) bite. Here is a link to the Bloomberg article on the agreement

Investors may not be “feeling” much of a bounce in their portfolios, partially due to the drubbing stocks took the week before. In any event, the fact that there was some recovery in the sector can be taken as a positive, particularly when considering the mid-week release of the final PMI reading from HSBC/Markit, which came in lower than the flash.

The official PMI reading hit the wire over the weekend, and although it did not point to contraction like the HSBC/Markit figure did, the data clearly showed a weakening trend. Next week should be interesting, with limited news flow out of China (most of the country is “closed” for Chinese New Year) but some eco data due for the US (ISM, initial claims, nonfarm payrolls).

Here’s a recap of some noteworthy moves and some color. Please feel free to get in touch (TwitterGoogle+email) if you have any suggestions on names that we’ve missed.


ETF Round-up

FXI: 1.1% (both US-listed and HK stocks, weighted toward financials)

MCHI: +0.5% (holds both mainland Chinese and overseas-listed China stocks, weighted toward financials)

PGJ:  +1.5% (holds US-listed China stocks, weighted toward Information Technology)


Stock Advancers:

Qihoo 360 Technologies (QIHU; company profile): +19.3%; it looks like the stock rebounded during the week on some bargain hunting following the previous week’s drubbing. Investors may remember that QIHU plummeted nearly 9% on Friday the 24th, which led to a decent bounce on Monday (+6%) and a continued run up after the SEC-Deloitte news mid-week. Possibly adding to the interest in the stock was a bullish piece from IBD that hit newsstands on Wednesday.

Shanda Games (GAME; company profile):  +14.2%; the big news for this stock was the receipt of an MBO proposal, in a move similar to competitor Giant Interactive (GA) late last year. The news hit on Tuesday, and helped push the stock up all week. As of Friday, there was still a bit of a gap (about 7%), so investors confident the deal will close still have an opportunity to make a buck or two. (WBAI): +10.8%; a decent bounce-back after Deutsche downgraded the stock on the 23rd, which added to the pressure in an otherwise tough week. The company announced a tie-up with China Mobile (CHL) mid-week which could help it push services on mobile devices. 

Trina Solar (TSL): +9.0%; the majority of the stock’s gain came on Monday (about 6%) when a Deutsche analyst took the view that China wouldn’t be cutting its solar generation target as had been incorrectly reported earlier, according to Deutsche Bank.

HollySys Automation Technologies (HOLI; company profile): +8.6; the stock followed the same theme as many other US-listed China stocks, bouncing back after the SEC-Deloitte news mid-week. HOLI wasn’t beaten down as hard as some other names, and after initial buyer interest wore off, volume drifted lower, bringing the price down with it by Friday, giving up some earlier gains.


Stock Decliners:

Montage Technology (MONT): -4.4%; the stock seems to have fallen victim to some profit taking, not terribly shocking considering it bumped up around $27 on January 17, a strong run from its IPO at $10 back in September. The company also announced a follow-on offering on Friday, priced at $21, with the company likely to raise about another $20 million. For more information on the deal, click here (SINA): -6.9%; unlike many other US-listed China names, SINA hasn’t managed to bounce back after the SEC-Deloitte news. One of the issues that has been impacting the company (hence the stock) is Tencent’s Weibo challenger, WeChat. A story on the Telegraph on Thursday concluded that users were dropping the service in droves, in part due to the government’s crackdown on “socially harmful rumors”. It’s perhaps worth noting that WeChat groups are much less anonymous than the traditional “follower” relationship on Twitter/Weibo, potentially one reason users feel more safe using the service.

Nam Tai Electronics (NTE): -8.3%; the company reported dismal earnings early in the week, and included in the release was news that the company was going forward with plans to divest from its manufacturing business and become a property developer, starting with its land parcels in Shenzhen.

ChinaCache International (CCIH): -8.6%; after an early bounce back on Tuesday (about +9%), the stock didn’t really move much for the rest of the week. The stock has been a monster run in January (up nearly 90% at one point), so there may be some degree of risk-off that stood in the way of further recovery.

Actions Semiconductor (ACTS): -10.1%; the company reported Q4 and FY2013 earnings at the beginning of the week, and the weak Q1 outlook (estimated revenue -24% YoY) didn’t seem to give investors to get back into the stock. Investors in ACTS may note that judging the YoY figure only isn’t really “apples to apples” because of the year ago launch of its OWL chipset that drove revenue growth in Q1 FY2012.

Last modified on Sunday, 02 February 2014 22:01