The research team at Hedgeye Risk Management recently produced a report on China titled "Risk Managing China." The article's main takeaway is that near-term policy catalysts will trigger short-term weakness in the Chinese equity market.
Historically, investors have been hesitant to invest in Chinese companies due to the lack of financial information. Recently the political, and macro environment has added to that risk. Keeping this negative sentiment in mind, we created a screen that might interest you.
Beginning with a universe of Chinese companies trading on the U.S. exchanges, we looked through their 13F's in search of bearish sentiment from institutional investors, with significant net institutional sales over the last quarter representing at least 5% of share float. This indicates that institutional investors such as hedge fund managers and mutual fund managers expect these names to underperform.
Hedge funds are signaling that these Chinese stocks pose a risk. Do you agree with their sentiment? Use this list as a starting point for your own analysis.
For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.
1. Shanda Games Limited (NASDAQ:GAME): Engages in the development and operation of online games in the People's Republic of China.
- Market cap at $821.82M
- Net institutional sales in the current quarter at -4.5M shares, which represents about 7.57% of the company's float of 59.44M shares. The 2 top holders of the stock are Prudential Plc., and Macquarie Group Limited
2. NetEase.com, Inc. (NASDAQ:NTES): Engages in the development of applications, services, and other technologies for the Internet in China.
- Market cap at $6.8B
- Net institutional sales in the current quarter at -3.7M shares, which represents about 5.08% of the company's float of 72.83M shares. The 2 top holders of the stock are Orbis Holdings Ltd., and Capital Research Global Investors.
3. Renren Inc. (NYSE:RENN): Operates a social networking Internet platform in China.
- Market cap at $1.1B
- Net institutional sales in the current quarter at -14.8M shares, which represents about 6.01% of the company's float of 246.42M shares. The 2 top holders of the stock are Morgan Stanley, and Allianz Asset Management AG.
4. Sina Corp. (NASDAQ:SINA): Provides online media and mobile value-added services (MVAS) in the People's Republic of China.
- Market cap at $3.67B, most recent closing price at $52.26.
- Net institutional sales in the current quarter at -3.9M shares, which represents about 6.2% of the company's float of 62.95M shares. The 2 top holders of the stock are T. Rowe Price, and Capital Research Global Investors.
5. 7 Days Group Holdings Limited (NYSE:SVN): Operates limited service economy hotels under the brand name of "7 Days Inn" in the People's Republic of China.
- Market cap at $638.24M
- Net institutional sales in the current quarter at -1.2M shares, which represents about 5.6% of the company's float of 21.43M shares. The 2 top holders of the stock are Warburg Pincus, and Tremblant Capital.
* Institutional data sourced from Fidelity, all other data sourced from Finviz
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: Business relationship disclosure: Kapitall is a team of analysts. This article was written by Sabina Bhatia, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.