This is too funny. At least for me. Here is the following article I just came accross at Motley Fool's site:

Add a Lump of Yanzhou Coal to Your Portfolio by Will Frankenhoff February 4, 2008

Talk about making a bad call. Back in August 2006, I wrote an article telling investors to stay away from Yanzhou Coal Mining (NYSE: YZC). Since that time, as the only U.S.-listed Chinese coal company, it has advanced steadily and is up more than 150% since my shortsighted recommendation. Ouch.

Well, I'm making a U-turn now and urging investors to consider taking a position in this high-margin coal play. Simply put, shares of Yanzhou are likely to put in another strong performance in 2008 because:

• Coal prices are only going up.
• The company boasts some of the highest margins in the industry.
• The shares continue to carry an attractive valuation.

Article continues here.

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This article is just too funny. I just turned bearish on Yanzhou Coal for the short-term, telling investors in my Newsletter that power outages in China is partially blamed on coal mines and Beijing is considering to interviene in coal prices to keep supply abundant for power generators. The problem for power generators is that their margins are squeezed big time. While coal prices are determined relatively freely - there is an actual coal futures market in place in China believe or not - power prices are under strict governemet control. Now, Beijing wants to put brakes on inflation, the highest in 17 years in last November, and power compaines are generating power at a loss. They are paying market price for coal yet they can't surpass that extra cost to consumers. In return, they re generating less power. (Source of info: here)

The government is well aware of this and they plan to interviene in coal prices, so power companies will generate enougt to get through this current situation. This is eveything but favorable market condition for coal companies like Yanzhou.

BTW, the market seems to buy my argument. Looking at the trading today, all major Chinese stocks rallied- despite weakness in the U.S. - and Yanzhou lacked momentum. YZC gained 1.8% today while the broad Chinese index, FXI, rallied 2.52%. The factors this Motley Fool advisor gave were well known two months ago.

This is why I had YZC in the Growth portfolio for 6 months.

Don't be a fool. When it comes to Chinese stocks you beter listen to the experts. Wish you all successful investing.

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