Feb. 20, 2010 (Chinavestor) A low profile week makes history: shares of Baidu.com (NASDAQ:BIDU) closed above $500 for the first time in the stock's history. The week started slowly with President's Day Holiday on Monday, shutting down U.S. equity markets. The Chinese economic calendar was basically empty as most of China is shut down for the week in observance of the Chinese New Year. The Hong Kong Stock Exchange (HKEx) was closed from Monday to Tuesday while exchanges in Shanghai and Shenzhen were closed for the whole week.
And while U.S. equities ended the week higher Chinese stocks continued to edge lower with low underlying volume. The earnings calendar for the week was extremely light, only China Precision Steel (NASDAQ:CPSL) reporting on Tuesday. Better-than-expected earnings propelled the stock up 20% for the day but the company failed to gain traction and edged lower for the rest of the week. This came as no surprise to us as we issued a somewhat bearish assessment of our own after the earnings: Take a second look at China Prec. Steel.
But the real story of the week is China's dominant search engine company, Baidu.com (NASDAQ:BIDU), breaking through the $500 barrier. We were bullish about the stock on Wednesday saying that "Looking at the China stock universe this morning, Baidu.com (NASDAQ:BIDU) is a stock to watch. The stock has been strong after 2009 Q4 numbers and is likely to give the $500 level a try. Shares of Baidu.com (NASDAQ:BIDU) are not overbought at this point," in the Baidu and other promising China stocks article. And here it comes, Baidu.com (NASDAQ:BIDU) made history by closing at $500.15 on Friday.
We are somewhat cautious looking forward for the stock. Reason being that the stock will need a catalyst to remain above the $500 mark, something that is just not there at the moment. This is why we issued the following email alert to Chinavestor Premium Members on Feb. 16: "Baidu.com (NASDAQ:BIDU) is on the “February Growth Portfolio” with $411.71 price on 1/29/2010. The stock is getting overbought – time to consider shorting it. I think it will give a run to $500, presenting a 25% profit for those of you who follow the portfolio updates. My suggestion is to SHORT Baidu.com (NASDAQ:BIDU) at $499 or better."
Looking at Baidu.com (NASDAQ:BIDU) from another angle, upside is limited from there - says the overbought monitor. Both BIDU and China Precision Steel (NASDAQ:CPSL) appear among the most overbought Chinese stocks, but it's Synutra International (NASDAQ:SYUT) that is truly overbought according to the chart below. It is important to keep in mind that overbought is not necessarily the same as being bearish. It merely infers that the stock has risen too far too fast and might be due for a pullback. Investors, be careful with SYUT for the upcoming week!
Looking forward we're going to see more earnings the upcoming week. Most of the excitement is going to come from the Chinese online game developer and operator sector: NetEase.com Inc. (NASDAQ:NTES) is going to report on February 24 after the close while Shanda Interactive (NASDAQ:SNDA), Shanda Games (NAASDAQ:GAME) are scheduled at the end of the week on Feb. 28. These two/three companies represent over 50% of the gaming market - expect Giant Interactive (NYSE:GA), Perfect World (NASDAQ:PWRD) and the rest of the online game market be volatile.
For a complete earnings calendar for the upcoming week, read China Stock Earnings Calendar Feb. 22-26, 2010.
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