
March 12, 2010 (Chinavestor) Mixed economic news left China stocks with no direction by the end of the week. The Hang Seng Index advanced +2.0% the week but is still in the red for the year. The S&P 500 advanced +1.3%. Most of the gains took place at the first three days of the week for Chinese stocks but higher inflation numbers in China prompted a sell-off in Shanghai and rendered trading in Hong Kong to a narrow range. With a slightly positive bias on their back, Chinese stocks took advantage of earnings and related stock specific news. Some of the best performing Chinese ADRs of the week were China Southern Airlines (NYSE:ZNH), Fushi Coperweld (NASDAQ:FSIN), ATA Inbc. (NASDAQ:ATAI), China Architectural Engineering (NASDAQ:CAEI), Agria Corp. (NYSE:GRO), and New Oriental Education (NYSE:EDU).
Notable decliners of the week include Acorn International (NYSE:ATV), WuXi Pharmatech (NYSE:WX), Gushan Environmental Energy (NYSE:GU), Home Inns & Hotel Management (NASDAQ:HMIN), General Steel Holdings (NYSE:GSI), and ReneSola Ltd. (NYSE:SOL).
China Southern Airlines (NYSE:ZNH) advanced +21.3% from last Friday as trading resumed after a long break. The company got significant cash injection from her state owned parent to shore up its balance sheet and make it ready for acquisitions. But after two days of huge gap up shares of the company became overbought and started to decline. Related overbought chart from Wednesday- Momentum is back for China stocks according to technical indicators.
Strong earnings of Fushi Copperweld (NASDAQ:FSIN) continued to rally after earnings as both revenues and net profit increased from previous quarter. Shares of the company became overbought and are subject to a short term pullback. Earnings related analysis: Fushi Copper reports record profit, strong sales - guides lower.
Shares of ATA Inc. (NASDAQ:ATAI) ran up $.50 in the last 30 minutes of trading on Friday. This huge uptick was not accompanied by similar increase in volume, suggesting money flows were weak during the rally. This is a bearish sign - or a sign that downside risk is greater than upside potential.
Shares of China Architectural Engineering, Inc. (NASDAQ:CAEI) advanced +13.4% for the week but light volume suggests most of the rally is over. Another factor to consider is that most of the gains took place on Wednesday and Thursday while Friday was flat. Some may think it was just a breather but we're of a view that most of the gains are over and CAEI is unlikely to replicate similar gains the upcoming week.
Shares of small cap Agria Corporation (NYSE:GRO) advanced $.37 or +16.74% on Friday making up most of the gains for the week. Heavy volume accompanies the significant increase, a sign that there have been some gains left for Monday. But investors have to be careful because shares of Agria Corp. (NYSE:GRO) became overbought and a technical pullback is likely to happen.
New Oriental Education (NYSE:DU) is a stock that has some upside left despite a significant run this week. The stock is not overbought yet and is fueled by a Deutsche Bank upgrade. The company has a solid balance sheet, plenty of cash - so the rally might have more room to go.
Most of the weakness for the week are earnings related. Acorn International (NYSE:ATV) fell apart on Friday following worse-than-expected quarterly and full year financial report. Weak numbers prompted the resignation of the chief financial officer of the company. Despite a significant drop in share price this week, don't expect Acorn Int. (NYSE:ATV) to recover next week. Five reasons to shun ATV after '09 Q4.
WuXi Pharmatech (NYSE:WX) issued a positive outlook but current numbers failed to impress investors, sending shares of the company -12.7% for the week. The stock became oversold and considering that earnings were not as horrible as the stock price would suggest, WuXi Pharmatech (NYSE:WX) may be up for a pleasant surprise next week. WuXi Pharma lacks growth, promises more.
If you wanted to guess which China stock will be kicked off the NYSE, Gushan Environmental Energy (NYSE:GU) would score high. Low share price, light volume and a disastrous quarterly and full year financial report is a sure recipe for a delisting. Gushan has it all. Revenues fell -77% YoY and net loss widened. One thing is for sure: Gushan Environmental Energy (NYSE:GU) is not investment grade.
Another stock we downgraded was UTStartcom (NASDAQ:UTSI). This small cap company is still a fraction of her former size and is not out of the woods yet. While revenues recovered from previous quarter, net loss widened. UTStarcom 2009 Q4 - not investment grade.
Shares of Home Inns & Hotel Management (NASDAQ:HMIN) suffered a heavy blow this week as earnings disappointed the Street. Chinavestor analyst team was much more impressed than Wall Street as the following report testifies. Don't be goofed by Q4 results. Home Inn remains undervalued.
Shares of ReneSola Ltd. (NASDAQ:SOL) fell -5.83% for the week as earnings disappointed. Revenues and shipment of modules increased but losses widened- a significant deviation from industry leader Suntech Power (NYSE:STP) or Trina Solar (NYSE:TSL). These latter two reported revenue and earnings growth; STP accelerated profitability throughout 2009. For a ReneSola Ltd. (NYSE:SOL) specific story, read: ReneSola is in the red for 2009 but says worst is over. For a comprehensive solar sector overview, read Complete 2009 Q4 China solar stock guide.
Shares of General Steel Holdings (NYSE:GSI) fell five days in a row and are becoming oversold. This in turn suggests a technical rally is likely in the first part of the upcoming week. But it's going to be earnings that will dominate next week - the company is schedule to release earnings on Monday.
Another notable development of the week was China's largest search engine company making history. Shares of Baidu.com (NASDAQ:BIDU) broke through the $550 ceiling making investors wonder if $600 is next... Related story: Baidu.com makes it to $550.
Looking forward, earnings are going to dominate on Monday. Global Sources Ltd. (NASDAQ:GSOL), China Finance Online (NASDAQ:JRJC), General Steel (NYSE:GSI), Focus Media Holdings (NASDAQ:FMCN), Simcere Pharma (NYSE:SCR), and China TechFaith Wireless (NASDAQ:CNTF) are among those Chinese companies that will release earnings that day.