China's On Fire: Still Time to Jump In?

These past several weeks have been very reminiscent of the internet bubble period, where you could buy shares of anything with the words "tech" or ".com" in the name and you were virtually assured double digit gains week over week. Well, now with several Chinese equities, we're seeing day over day double digit gains from many Chinese ADRs.

A quick snapshot of some high fliers on Tuesday:

Baidu.com Inc (BIDU) +13%

KongZhong Corp (KONG)+15%

China Technology Development Group Corp (CTDC) +45%

China Finance Online Co Ltd (JRJC) +17%

Yingli Green Energy Holding Co Ltd (YGE) +13%

China Natural Resources Inc (CHNR) +75%

China Sunergy Co Ltd (CSUN) +16%

E House China Holdings Ltd (EJ) +13%

...and the list goes on. If you ran screens for these stocks for a one month check, you'd find that many have more than doubled.

Based on valuation and revenue growth, China is still considered to be THE value market of the BRIC four by many prominent investors and economists. However, before long, Vietnam, Columbia, and others could start to draw some of the speculative emerging market funds seeking 50%+ returns per year.

Given the massive runup in share prices in recent weeks, it would be prudent to take some money off the table. However, pulling out altogether could result in missing the investment opportunity of a lifetime. A good approach would be to continue to leave the speculative portion of your portfolio in SOLID Chinese stocks. This would include companies with some history, proven earnings, and you should be able to articulate what this company does.

If it's just a hot ticker than ran up 75% yesterday and you're jumping on for the ride, that's not even speculative investing...that's gambling.

Personally, I took 50% off the table in BIDU and FMCN last week following 130%+ returns, as well as some US stocks, but I still have a solid 40% of my taxable trading portfolio in international markets.

Disclosure: In Chinese equities, the author is long CHL (not listed here), FMCN and BIDU.

Comments

[Yuan Zi:]

Over half the names here, esp in the wireless service industry, do not see a substantial improvement in fundementals. Earnings are still in the negative region, and the market environement just became worse. I am seeing a short interest accumulating as the China Story runs to the final phase. Having said that, Hong Kong and other Neighbourhood Asian countries could benefit from more capital liberalization policies from mainland China and relative valuation attractiveness.

2007 Oct 03 07:45 AM

[ckrmohan:]

great service good to know when china stocks are going to blow up big time.

2007 Oct 03 08:18 PM

[turk42:]

TNRO is the latest Growth stock in PRC. COPPER & STEEL Production ramping up in brand new facilities. Last Year showed Rev gains from 6 Mil to 284 Mil.

Expansion cost are behind them now. Look for profits to surge

2007 Oct 04 10:27 AM

[Mathews:]

Many of China stocks are overvalued in my opinion, including those mentioned in the article. However, one still can find undervalued ones, mainly in OTCBB market. For example, SUOT is a new stock in OTCBB, just announced the result of the year ended June 30. Revenue grew 59.2% and net income grew 78.0%, with EPS = $0.59. The price now is under $6.

2007 Oct 05 01:04 PM

[James Camron:]

great service indeed

2007 Oct 10 07:41 AM