Market in China : Big Divergences Make China Stocks Look Higher

Posted on February 3, 2012 by Editor

Two Big Divergences
US China Large Caps Diverging
Market In China

Market In China – Two Big Divergences

Despite the fact that the US market is roaring, the Chinese market still looks to be rather Ursine (a fancy Latin work for bearish).

But wait- Is it really still a Bear Market for China stocks, or are the China markets looking up?

The Shanghai A shares- the China equivalent of our S&P 500, still looks pretty darn weak.

Market In China - Shanghai A Shares

There’s been a little bit of resurgence in this index. There’s also a week of trading missing as this market was closed last week for Chinese New Year, and they are just getting underway in China again.

This index is struggling to get through its 50DMA, which would confirm at least a short term up trend is getting underway. It’s not even close to its 200DMA, which would confirm a longer term bullish trend when we see those levels pierced.

The Shanghai A shares were down about 36% in 2011- as I like to say- an absolutely brutal year.

US China Large Caps Diverging the Market in China

The performance of the Shanghai A shares is anemic compared to China stocks trading with US listings.

Let’s start with the Granddaddy of all the ETFs- FXI is the China 25 Index fund- it represents China’s equivalent of the DOW, and contains the 25 largest public companies in China. These are the mega caps owned partially by the government.

Market In China - FXI

The FXI is showing far greater signs of life than the Shanghai A shares, having broken above its 50DMA in January, and well above its 200DMA, suggesting all is well in China Large Cap world.

Here’s the charts of two individual stocks that are still featured by EmergingChinaStocks- check out Baidu (NASDAQ: BIDU) and Sina Corp (NASDAQ: SINA).

Here’s the Google of China:

Market In China - Baidu (NASDAQ: BIDU)

BIDU has been on a 25 point tear this year, and on Friday managed to trade above the 200DMA for the first time since November. I suspect the 200DMA will become resistance for a little while, but that stock looks headed to break through that barrier rather easily.

Market In China - Sina Corp (NASDAQ: SINA)

SINA is a little bit more like the Yahoo! of China with a lot of mobile and digital entertainment components.

As you can see, this stock has run up nearly 30 points in the last month, and is gunning for its 200DMA. SINA was one stock short sellers absolutely vilified when it looked like the government might restrict some of their content. It really never happened.

The Shanghai A index is trailing the US large caps at this time. The China stocks are trading as if the investment community is now expecting a “soft landing” scenario in China.

China small caps are not trading as well as their larger brethren yet- but they will catch up as soon as there are some big break outs. Shorts are covering, but still have huge positions, and as these stocks trade up on lighter volumes, short sellers are going struggle with closing out their positions at lower prices.

One of my 3 favorite China stocks rocketed to a level it hasn’t seen since early September on Friday. The two others had a sideways week, but earnings are coming soon.

And, don’t forget to sign up for my free Webinar on:

How China Companies Commit Fraud

Warmest Regards,

Larry Isen

Chinese Markets Go 5 for 7 – Chinese Markets

Posted on October 6, 2011 by Editor

The Shanghai A shares were down .25%, and the B shares down .14%.

The price of copper, considered one of the leading indicators of industrial demand and the health of China’s manufacturing economy, fell to a 14 month low. Many believe this signals another global recession.

We’re going to need some economic numbers out of China suggesting the impending recession is not as bad as the market is pricing in, and the growing Chinese consumer can pick up any shortfall their export manufacturing might experience.

Here’s a few other news items out of China today:

Hedge fund manager and highly respected Bear and Short sell Jim Chanos estimates China’s debt to GDP ratio is close to 200%- worse than European countries. He says their debt crises will lead to 0% growth in 2012. He believe China will write of 7.5% to 10% of GDP to bad loans.
Resource investing news reports electric car demand is strong in Brazil, India, and China- price being the key sticking point.
In a move that many see as an “In Your Face” to the US Senate, China has frozen its currency at the current level. By a wide margin the US Senate recently passed a initiative to start crafting a bill that would allow the US to impose big tariffs on the imports of countries who do not allow their currencies to float. This is aimed directly at China. However, China observers point out- the last time China did this, it was three months out in front of a massive stimulus program.

That’s it for today. Perhaps better news tomorrow.

Continuing South – China has officially become the world’s largest consumer of energy

Posted on October 5, 2011 by Editor

Not much news out of China over night. The Shanghai Markets were lower for a 3rd straight day and for 5 out of the last 7 trading sessions. The China markets are flirting with the lowest levels in 2 years.

In Wednesday’s trading, China’s Shanghai A shares were down .25%, and the B shares down .14%.

There’s a couple of news items out of China worth mentioning- Here you go:

Premier Wen Jiabao was out urging stronger financial support for China’s small businesses. He’s suggesting some bank credit support, preferential tax treatment, and a relaxing of the standards for non performing loans. Also, he wants banks to avoid “adminstrative intervention”. Now, there’s a concept we could use in the US.
China has officially become the world’s largest consumer of energy according to BP’s statistical review world energy. BP reports that in 2010, China used 20.3% of the world’s energy, while the US used 19%.
Llloyd Private Banking just completed a survey of private investors which concluded China has now become the most attractive market on balance of risk and return, with the UK, Brazil, and Russia coming in distantly behind. The Lloyds private banking customers noted they were mostly concerned about the Greek situation.

That’s it for today.

Total Annihilation for China Small Cap Stocks

Posted on October 3, 2011 by Editor

Is it 2008, or is it 1997? If it’s 2008, we have six more months of a Bear Market, and the possibility of substantial further sell downs in equities as China stocks have been absolutely annihilated by the market in the last 3 days.

In short, they are selling everything, and selling them very hard. This could be the big final blow off, or it could be six more months of very ugly performance for anyone who’s long a stock.

The last 10 Bear Markets all ended in October- with the exception of 2008 which ended in March. So, if it’s a normal Bear, the bottom should be made this month. If it’s like 2008, you’re going to lose a lot more money between now and the bottom if you’re long any stock.

I’m not sure which it is yet, but it’s a tough call. Here’s the news out of China today:

The Shanghai A shares were down .25% and the B shares were down .14% in Monday’s trading. We’re at the lows of July 2009 right now.
China Manufacturing orders were up in September as reported by the China Federation of Logistics and Purchasing. The reading came in at 51.2, which suggests expansion. It was the highest level since May, and suggest the global economic slow down might not be as bad as the market is pricing in right now.
Analysts are saying if growth slow to -1% in the US, and -3.5% in the Eurozone, growth in China would slow to about 4.5% in 2012, implying a hard landing. Hence, the massive blow off in China stocks.
That’s all for today.

Another China Snore Fest Today

Posted on September 1, 2011 by Editor

Here’s what’s happening in China:

There was almost no movement in the major China indexes today with the Shanghai A shares down .46%, and the B shares up .02%.
BIDU has been on a tear of late, but lost about 6 points from yesterday’s high thanks to a report by something called the Bedford Group suggesting China internet firms are under attack from their own government, and censorship is wide spread. They also suggest the censorship might help those big boys by eliminating some of the small competition. The stock has been on a tear of late, but is down 6 points from yesterday’s high of $151.
China manufacturing rebounded slightly in August, put costs were higher as well. The HSBC purchasing manufacturers index rose to 49.9 from 49.3. At the same time, new exports fell from 50.4 to 48.3. On these indexes, readings under 50 suggest contraction- over 50 is expansion. As a perfect reflection of the rest of the world, China export numbers suggest we are teetering at the brink of recession vs expansion. I suspect this will be the slowest period as the global news flow has to be slowing expansion appetites.
In a move I believe shows China’s commitment to help their rapidly expanding consumer class, the Chinese government has decided to eliminate income taxes for 60 million people. This will increase disposable income for the poorest people in the work force. This will also help mitigate some of the social unrest that is brewing thanks to rising food costs in China.
China Daily reports a new study suggests consumer lending in China could triple by 2015 to $3.3 trillion. This requires annual average growth of 24%. In terms of new financial products in China, mortgages are #1 and credit cards are #2. Currently, there are about 230 million credit cards in China- with young card holders averaging 2.6 cards per person.
That’s it for today. This will pick up next week as Wall Street’s big boys get back to work.

Emerging China Stocks

Tag Archives: China manufacturing