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Oversold FUQI leads China stocks on Wednesday

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advance8 March 24, 2010 (Chinavestor) Big movers of the China stock universe by noon: shares of Fuqi International (NASDAQ:FUQI) bounced back off over +10% today after a disastrous -44% fall last Wednesday. While this may be a dead cat bounce the oversold monitor foretold of this rally.  Shares of Baidu.com (NASDAQ:BIDU) advanced $15.79 or +2.65% breaking through the $600 level at ease. Quality internet company, Ctrip.com (NASDAQ:CTRP), advanced +4.52% today followed by China Automotive Systems (NASDAQ:CAAS) and Melco Crown Entertainment (NASDAQ:MPEL). Large cap Chinese solar makers, Trina Solar (NYSE:TSL) and LDK Solar (NYSE:LDK), are up as investors snap up assets of quality solar companies on valuation. Volatile Gushan Environmental Energy (NYSE:GU) moved big in percentage terms but only $.06 in dollar terms. Vow volume suggests the rally is legging long term support.

Stocks with the largest percentage drop by noon include China Eastern Airline (NYSE:CEA) followed by China Transinfo Technology Corp. (NASDAQ:CTFO) and online game operator and developer NetEase.com Inc. (NASDAQ:NTES). Smaller cap AsiaInfo Holdings (NASDAQ:ASIA) and less liquid China Infrastructure Investment Corp (NASDAQ:CIIC) conclude the five worst performers of the day.

Additional notable losers include China Unicom (NYSE:CHU) falling on worse-than-expected 2009 Q4 profits and soft outlook. China Unicom 2009 financials disappoint.

Perfect World (NASDAQ:PWRD) is down -4.07% on online game sector weakness while China Southern Airlines (NYSE:ZNH) trailed China Eastern Airlines (NYSE:CEA) lower. We can't add much to the assessment we had this morning "Chinese airliners are expected to suffer on the NYSE; China Southern Airlines (NYSE:ZNH) and China Eastern Airlines (NYSE:CEA) will be under pressure on Wednesday." Earnings, upgrade lift China stocks in Asia.

top_2010324_noon

Details: The rally of Fuqi Intentional (NASDAQ:FUQI) comes as no surprise to us, given the excessive sell-off last week. We wrote that "The -37.3% drop of Fuqi International (NASDAQ:FUQI) looks way excessive and calls for a quick correction." Oversold China stocks ready to bounce back. Besides technicals, we noted that the magnitude of the restatement itself doesn't justify such a dramatic loss in capital. Don't panic FUQI investor!

Strength of Baidu.com (NASDAQ:BIDU) are driven by a couple of factors. For one, Google is exiting China and it's just the matter of time when the government will completely shut down operations of the U.S. search giant. For two, Baidu.com (NASDAQ:BIDU) has been delivering strong revenue and earnings growth suggesting the company is strong on its own merit. Current stock price of $600 isn't out of sync with expected profits as the following chart testifies.

BIDU_09Q4_revenue_earnings

Ctrip.com (NASDAQ:CTRP) is considered by many as a company like BIDU from a financial point if view. Both companies not only portray potential but actually deliver revenue and earnings growth.

China Automotive Systems (NASDAQ:CAAS) is going to report earnings tomorrow before the market open, so today's run up is explained by the additional excitement surrounding the earnings release.  For additional information, read China stock earnings calendar, March 22-26, 2010.

Uptrend with significant volume is spotted for Melco Crown Entertainment (NASDAQ:MPEL), a sharp contrast to Gushan Environmental Energy (NYSE:GU) - a stock that's lacking money flows. Shares of Melco Crown Ent. (NASDAQ:MPEL) were not overbought this morning. China stocks watch list for March 24, 2010.

To illustrate the extreme volatility Chinese airliners have been experiencing lately, consider this: shares of China Eastern Airlines (NYSE:CEA) rose six days in a row last week and fell three days in a row this week. There are three major factors driving Chinese carriers. For additional coverage, read the second paragraph of Chinese shares up in HK but fell in Shanghai on Tuesday.

China Transinfo Technology Corp. (NASDAQ:CTFO) fell -5.3% by noon with HEAVY volume. The company reported 2009Q4 earnings on Monday, jumped +3.3% but and have fallen ever since. CTFO give up morning gains by the close.

Shares of NetEase.com Inc. (NASDAQ:NTES) fell with relatively high underlying volume, suggesting investors have started to rotate out of the stock. While we're optimistic about the future of the company, based on strong fundamentals, current sell-off might leave investors in the red for the time being. Illustration: NTES reported strong revenue and earnings growth for the last quarter of 2009 - something that just a few Chinese online game developers could master.

NTES_2009_Q4_revenue_earnings



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