6 Deeply Undervalued Chinese Stocks

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 |  Includes: CSUN, DYP, GAME, PWRD, STP, YGE
by: Rougemont

The stock market in China has underperformed other markets for months now and that has created some new buying opportunities. The Chinese stocks below are trading at valuations that would appeal to most value investors. These stocks have pulled back from their highs, and it could be time to start accumulating shares in these names.

These companies have low PE ratios, and strong balance sheets. In some cases, these stocks appear oversold. I am looking at the earnings power and the Relative Strength Index (RSI) levels which can indicate oversold conditions. Stocks with an RSI rating around 30 can signal that the shares are oversold and due for a rebound. To learn more about RSI, read this.

Here are the six companies:

Perfect World Co., Ltd. (NASDAQ:PWRD) has pulled back to $19.80 today. The relative strength index is about 35. PWRD is one of the leading online gaming companies in China. These shares have fallen from a 52 week high of $42.18. The 50 day moving average is $22.36 and the 200 day moving average is $24.82. PWRD earnings estimates are over $2.50 per share in 2011. This puts the PE ratio at about 8 which is low for one of the leading online gaming companies. The balance sheet is extremely strong with almost $5 per share in cash.

Duoyuan Printing, Inc. (NYSE:DYP) shares have crashed in the past few months, and trade at just over $2 per share. The relative strength index is about 39 which indicates the stock is at oversold levels. This company manufactures high end printing equipment. These shares traded as high as $10.80 in the past year. For more details on why shares plunged read this.

As of the last financial report, DYP shows an extremely strong balance sheet with about $90 million in cash and very little debt. That amounts to about $3 per share in cash for a stock selling for about $2 per share! If the board appoints a new auditor, this stock could have serious upside potential long term. The 50 day moving average is $2.48 and the 200 day moving average is $4.90. DYP is estimated to earn over $1 per share in 2011. This puts the PE ratio at about 2 which is extremely undervalued for one of the leading printing equipment companies. This is the most speculative stock mentioned here. It appears to have found a bottom around $2 per share. You can see the sophisticated printing equipment they manufacture and read more on the DYP website.

China Sunergy Co., Ltd. (NASDAQ:CSUN) has pulled back to about $4.38. This company manufactures solar cells. The relative strength index is about 44. The 50 day moving average is $4.48 and the 200 day moving average is $4.27. CSUN is estimated to earn about $1.06 per share this year. This puts the PE ratio at about 4. The book value is reported at $4.70. CSUN is scheduled to release earnings on March 7, 2011. To see an in depth analysis on CSUN from someone who I have found to be extremely knowledgeable on solar stocks, read this.

Suntech Power Holdings Co., Ltd. (NYSE:STP) currently trades for about $9.83. STP is a leading solar products manufacturer. The relative strength index is about 55. These shares have fallen, from a 52 week high of $15.55. The 50 day moving average is $8.96 and the 200 day moving average is $9.09. These shares are close to seeing the 50 dma cross over the 200 dma which would be a bullish "Golden Cross Formation" on the charts. STP has earnings estimates of about $1.22 per share for 2011. This puts the PE ratio at about 8, well below the average market PE ratio. STP is scheduled to report earnings on March 8, 2011.

Shanda Games Limited (NASDAQ:GAME) has been rising and closed at $6.82 today. GAME is one of the leading online gaming companies in China. The relative strength index is about 65. The 52 week high is $7.61 so these share are close to hitting new highs. The 50 day moving average is $6.15 and the 200 day moving average is $6.06. These shares recently saw the 50 dma cross over the 200 dma which indicates a bullish "Golden Cross Formation" on the charts. GAME has earnings estimates of about 65 cents per share for 2011. This puts the PE ratio at about 10.

Yingli Green Energy Holding Co., Ltd. (NYSE:YGE) closed at $11.57 today. The relative strength index is about 45. These shares have a 52 week high of $14.29. The 50 day moving average is $11.32 and the 200 day moving average is $11.19 so the shares are trading close to support levels. Estimates for YGE are about $1.61 per share in 2011. This puts the PE ratio at about 7 which is higher than the other names above but still a huge discount to the stock market average.

These stocks can be volatile, and I suggest scaling into any positions over time. I think the pullback in some of these names represents a solid buying opportunity.

The data is sourced from Yahoo Finance. The information and data is believed to be accurate, but no guarantees or representations are made.

Disclosure: I am long PWRD, DYP.