Nov. 21, 2009 (Chinavestor) Earnings dominated China stock trading for the week with solar and internet stocks in focus. Stocks mentioned in this weekly recap include Sina Corp. (NASDAQ:SINA), Sinovac (AMEX:SVA), China Green Agriculture (AMEX:CGA), China Mobile (NYSE:CHL), E-House Holdings (NYSE:EJ), NetEase.com Inc (NASDAQ:NTES), Trina Solar (NYSE:TSL), Suntech Power (NYSE:STP), LDK Solar (NYSE:LDK), Solarfun Power Holdings (NASDAQ:SOLF), China Southern Airlines (NYSE:ZNH) and American Orintal Bioeng. (NYSE:AOB).
Looking ahead, we're going to see most earnings squeezed into Monday for the short Thanksgiving week. housing data will dominate news from Monday through Wednesday seasoned with jobless claims and GDP data on Tuesday. Asian economic calendar will focus on Japan where the BoJ will release report on the economy on Tuesday followed by household spending, CPI and unemployment numbers on Friday.
Sinovac (AMEX:SVA), this tiny vaccine maker reported in-line earnings on Monday but fell for the rest of the week making investors wonder where the bottom is going to be. Based on a five year trading patter of Sinovac (AMEX:SVA), the bottom may just well be in the $4 range... This is bad news for a lot of investors who bought in for a quick profit after an astronomical ride on the back of the H1N1 flu panic. While Sinovac (AMEX:SVA) delivered strong revenue and earnings growth for Q3, outlook is uncertain with the flu subsiding. Remember, revenue and earnings growth drive stock prices and a one time big shot, like Q3 for Sinovac (AMEX:SVA), doesn't justify high stock price for any company. Assuming revenues will drop significantly in the first part of 2010, current stock price over $7 at 24 P/E seems way too high.
Sina Corp. (NASDAQ:SINA) reported better-then expected after the close on Monday and jumped 10% the next day. But weak numbers from related NetEase.com (NASDAQ:NTES) and E-House (NYSE:EJ) later the week had taken most of the wind out of Sina's sail. Sina Corp. (NASDAQ:SINA) ended the week 4.9% higher. Outlook for Sina Corp. (NASDAQ:SINA) is missing a short-term catalyst because all major internet pays have already reported earnings.
Netase.com Inc. (NASDAQ:NTES) reported after the close on Wednesday and fell hard on Thursday. Revenue growth was not exciting but the unexpected drop in net income came as a surprise. Most of the problem was caused by WoW, the title it acquired from The9 Ltd (NASDAQ:NCTY) but filed to secure regulatory approval to run it. NetEase.com Inc. (NASDAQ:NTES) ran the title for two month for free just to see regulators shut the door on the game. The title brought in no revenue but incurred costs, reflected in the books of NetEase.com Inc. (NASDAQ:NTES). Looking forward the company is expected to release a significant number of new titles in the fourth quarter, including the "Fly For Fun". With online games it's always difficult to tell which title will be a hit, but given the well diversified game portfolio of NetEase.com (NASDAQ:NTES), the glass is half full rather than empty.
Widely watched E-house Holdings (NYSE:EJ) reported all right but fell 5.3% for the week. There is uncertainty about the Chinese real estate market in general, a possible asset bubble theory resurfaces every so often. But the real story with E-House (NYSE:EJ) is that while the Chinese property market is full of exuberance all that was not captured in the books. According to statistical data the number of property transactions is on the rise along with stronger real estate prices. It seems that the market was expecting a bit better from E-House (NYSE:EJ) than delivered. Another interesting factor is the relative weakness of property developers in general. At Chinavestor we track the China real estate ETF (NYSE:TAO) from a technical point of view and it looks that the TAO is legging behind major indices. This implies a widespread weakness of real estate stocks, E-House (NYSE:EJ) included.
Another widely watch stock, China Green Agriculture (AMEX:CGA), is worth a quick look. The company reported strong revenue and earnings growth but the real catalyst came a few days later in for of a VAT exemption for organic fertilizer. Investors jumped on the wagon on the news sending shares of China Green Agriculture (AMEX:CGA) up 31.3% for the week. Considering that all this price appreciation took place with very heavy volume, short term outlook looks bright for China Green Agriculture (AMEX:CGA).
China Mobile (NYSE:CHL) advanced 3% for the week on no particular news. But devil is always in the details and if you read our special report concerning China Mobile (NYSE:CHL), you may have the answer. Skeptics are quick to point out that with a 500 million plus subscriber base already, upside is limited for China Mobile (NYSE:CHL). While it is hard to argue that the Chinese mobile market is getting saturated, the switch from 2G to smartphones is going to be a catalyst for carriers, helping them to squeeze more money out of each subscribers pocket. If the Mini 3 phone from Dell goes on sale in December and gains traction as expected, expect China Mobile (NYSE:CHL) to report strong 3G growth and a nice jump in its stock price.
American Oriental Bioengineering (NYSE:AOB) reported and fell but this is a stock it's worth remembering. American Oriental (NYSE:AOB) RESTATED 2006 -2008 numbers, a very bad sign for any company. Remember, 51job Inc. (NASDAQ:JOBS) did the same thing and has never recovered from such misuse of investors' trust. After the incident we removed American Oriental Bio (NYSE:AOB) from the TOAST list and will not recommend and comment on this stock for at least 6 months.
We have wrote about the Chinese solar sector extensively in November. We remain optimistic about the outlook for the sector based on fundamentals. What we've seen from Solarfun Power Holdings (NASDAQ:SOLF), Trina Solar (NYSE:TSL) and Suntech Power (NYSE:STP) this week is very reassuring our previous assumption. We have said that we see a lot of upside for the sector based on higher revenue and improved margins. According to the overbought report, Solarfun Holdings (NASDAQ:SOLF) is the most overbought China solar play at the moment while Trina Solar (NYSE:TSL) is second. But LDK Solar (NYSE:LDK) hasn't reported yet but is widely expected to come out with a strong report as well. Short term upside may be limited for Solarfun Power (NASDAQ:SOLF), Trina Solar (NASDAQ:SOLF), Suntech Power (NYSE:STP) and LDK Solar (NYSE:LDK), but a 20% plus upside is certainly an option for solar plays in the medium run. Here is our latest coverage of the sector for your review:
- http://www.chinavestor.com/news-archive/71152-the-trend-is-your-friend.html
- http://www.chinavestor.com/solar/71124-chinese-solar-sector-surprise.html
- http://www.chinavestor.com/solar/71121-china-solar-stocks-for-bottom-fishing.html
Finally, Chinese airliners draw your attention at the bottom of the following overbought chart. China Southern Airlines (NYSE:ZNH) and China Eastern Airliners (NYSE:CEA) became overbought earlier the week. given that China Southern Airliners (NYSE:ZNH) was on the Conservative Portfolio, we sent the following SELL email alert to Chinavestor subscribers on Monday, November 16:
China Southern Airlines (NYSE:ZNH) advanced $1.21 to $17.80 last Friday and became overbought. China Southern Airlines (NYSE:ZNH) advanced 20% just in November. China Southern Airlines (NYSE:ZNH) was added to the “Conservative” portfolio last November at $7.88. That is a 127% return.
It was an excellent call, just in line with numerous other email alerts such as Yanzhou Coal (NYSE:YZC) or LDK Solar (NYSE:LDK).
Most overbought China stock list
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