Nov. 14, 2009 (Chinavestor) The DJIA rose 2.5% for the week setting a positive tone for Chinese ADRs. Under such circumstances, e.g. neutral U.S. markets with a positive bias, stock specific news dominated China stock trading. Earnings remained number one catalyst but airliners rallied on stronger passenger number while management change had an enormous effect on Semiconductor Manufacturing Intl. (NYSE:SMI).
Stock of interest in this report include JA Solar (NASDAQ:JASO), Suntech Power (NYSE:STP), Trina Solar (NYSE:TSL), and Solarfun Power (NASDAQ:SOLF) from the solar sector; WuXi Pharma Tech (NYSE:WX) and Sinovac (AMEX:SVA) from the pharmaceuticals; and NetEase.com Inc. (NASDAQ:NTES) and Sina Corp. (NASDAQ:SINA) from the internet sector.
On a stock level, strong earnings from JA Solar (NASDAQ:JASO) and Yingli Solar (NYSE:YGE) helped moving the solar sector away from the oversold position. We have been arguing for a long time that Chinese solar stocks offer bottom fishing, Chinese solar sector surprise, an assumption that has been proven right. We have undervalued solar stocks in the Weekly Stock Buy List and also within the Growth Portfolio. If you want to know what stocks we like, sign up for Advanced membership now. For detailed description of subscriber benefits visit the Premium Content page.The Chinese airliners is another sector our overbought / oversold indicator picked on November 2 Oversold China Stocks to Shine on Monday : "Chinese airliners, China Southern Airlines (NYSE:ZNH) and China Eastern Air (NYSE:CEA), are oversold. Both companies are priced below their trading envelope with a significant loss of momentum. But when markets rally, oversold companies typically outperform." As the following chart testifies, both China Southern Airlines (NYSE:ZNH) and China Eastern Airlines (NYSE:CEA) have moved significantly this week.As the chart suggests, upside is limited for China Southern Airlines (NYSE:ZNH) and smaller China Eastern Airlines (NYSE:CEA) for the short-term.
Semiconductor Manufacturing Intl. (NYSE:SMI) is a stock for giggles at this point. Share price for China's contact memory chip manufacturer jumped 60% overnight following news that its CEO resigned. Talking about a badly run company... We were right predicting a correction to follow the 60% jump but where the company is going to go from here is an open question.
As indicated before, earnings were the number one catalyst for stock last week. Besides the solar sector, China Automotive Systems (NASDAQ:CAAS) reported strong result, sending its share to new highs. Ctrip.com (NASDAQ:CTRP), Rino International (NASDAQ:RINO), Kandi Technologies (NASDAQ:KNDI) and Hong Kong Highpower Technology (AMEX:HPJ) also had very strong showing following Q3 results.
As the following chart suggests, upside is limited for China Automotive Systems (NASDAQ:CAAS) as the stock became overbought. Ctrip.com (NASDAQ:CTRP) is not in the danger zone just yet while WuXiPharma Tech. (NYSE:WX) is going to report on Monday after the close, giving direction for the stock. For a list of Chinese stock reporting Nov. 16-20, see earnings calendar here.
Top six overbought China stocks
Looking ahead, the earnings calendar is the page investors will want to follow. Sinovac (AMEX:SVA), WuXi PharaTech (NYSE:WX) and Sina Corp. (NASDAQ:SINA) are going to report on Monday. If earnings would be good, Sinovac (AMEX:SVA) can move up but if earnings will not impress investors, SVA is in big trouble. WuXi Pharma (NYSE:WX) is in a tight spot after a 34% run in a month. WuXi Pharma (NYSE:WX) is overbought but has more upside if earnings come out better-then-expected. Earnings of Sina Corp. (NASDAQ:SINA) will have ramifications for the whole Chinese internet sector, Sohu.com (NASDAQ:SOHU), NetEase.com (NASDAQ:NTES) are among those effected.
Going back to solar, big guns Suntech Power (NYSE:STP) and Trina Solar (NYSE:TSL) are going to report later this week after Solarfun Holdings (NASDAQ:SOLF). As I have said before, there is a lot of unleashed potential in the sector. Stock prices remain subdued while earnings have been strong.
NetEase.com Inc. (NASDAQ:NTES) is going to report this week, another important China Internet play. NetEase.com (NASDAQ:NTES) is the most profitable Chinese online game developer and operator. Its results will have effect on Shanda Interactive (NASDAQ:SNDA), Shanda Games (NASDAQ:SNDA), Giant Interactive (NYSE:GA) and Sohu.com (NASDAQ:SOHU) - Changyou.com (NASDAQ:CYOU).
E-House Holdings (NYSE:EJ) is another widely watched stock, we will follow it closely.
On the economic front in Asia, Japan's GDP reading is going to come out on Monday. Later the week Bank of Japan will decide what to do with interest rates, but is expected to leave it unchanged. on top of the news, President Obama will be in Asia for most of the week, giving the continent additional visibility.
On the home front, we're going to get a better understanding of the consumer behaviour. Home Depot, Lowes, Target, Sears are going to report Q3 numbers the week. FED Chairman Mr. Bernanke will disclose his opinion of the economy on Monday. We're going to have reading of the latest housing stats. and industrial output.
Have a great week, investor!
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