China Stocks: April Was Kind

April has turned out to be a pretty good month for equity investors. After all three major indices dropped to 52-week low in early March, stocks rebounded last month after financial firms indicated that the worst part of the current crisis may be over. The Dow ended April with a gain of 4.54%, the S&P added 4.75%, and the NASDAQ climbed 5.87%.

Chinese stocks traded on U.S. exchanges also had a solid month in April, rising along with U.S. stocks. Chinese ADRs also got support from favorable policies adopted by Chinese security regulators aimed to stabilize the market after the Shanghai Composite Index (^SSEC) lost half of its value in less than half a year. For the month, SSEC jumped 6.35% and the Hong Kong’s Hang Seng Index (^HSI) surged 12.72%. Among Chinese ADRs, VanceInfo Technologies (VIT) led the way with a gain of 142.60%, followed by Sohu.com (SOHU)’s 53.18%. Chinese search engine Baidu.com (BIDU) also recorded a 52.57% gain in share price. The month’s biggest loser was Agria (GRO), China’s agriculture products, such as seeds and feeding products, provider, which saw its share tumbled nearly 50%, despite record food price.

Name	Symbol	04/30/08 Price	April return	YTD return
3SBio	SSRX	10.45	19.57%	-29.77%
51Job	JOBS	18.4	13.23%	2.11%
Acorn international	ATV	6.86	-9.97%	-26.47%
Actions Semiconductor	ACTS	3.86	29.98%	-5.39%
Agria	GRO	4.33	-48.14%	-53.59%
AirMedia Group	AMCN	19.86	24.91%	-11.26%
Aluminum Corp of China	ACH	42.82	5.91%	-15.44%
APT Satellite	ATS	1.53	-0.65%	-28.84%
ASAT Holdings	ASTT	0.00%	0.00%
ATA*	ATAI	10.67	20.43%	12.32%
Baidu.com	BIDU	365.6	52.57%	-6.21%
China Architectural Engineering	RCH	5.45	0.00%	-36.99%
China Digital TV	STV	16.8625	-9.97%	-37.50%
China Eastern Airlines	CEA	43.39	-15.58%	-55.57%
China Finance Online	JRJC	18.45	32.73%	-16.14%
China Grentech	GRRF	4.72	-7.81%	-46.61%
China Life Insurance	LFC	65.6	26.01%	-14.25%
China Medical Tech	CMED	37.4	-8.98%	-15.75%
China Mobile	CHL	86.32	15.08%	-0.63%
China Nepstar	NPD	11.77	-13.46%	-33.05%
China Petro & Chemical	SNP	107.51	25.04%	-27.46%
China Southern Airlines	ZNH	32.84	-17.18%	-49.82%
China Sunergy	CSUN	8.22	12.60%	-50.24%
China Techfaith	CNTF	5.46	-0.36%	-5.86%
China Telecom	CHA	67.59	7.58%	-13.42%
China Netcom	CN	61.05	5.28%	2.78%
China Unicom	CHU	21.57	1.41%	-3.71%
ChinaEdu	CEDU	7	5.58%	-17.65%
City Telecom (HK)	CTEL	4.51	0.67%	-20.18%
CNinsure	CISG	14.05	21.86%	-12.13%
CNOOC	CEO	177.55	20.96%	6.04%
Ctrip.com	CTRP	62.06	17.05%	7.99%
E-House	EJ	16.72	27.15%	-29.84%
eLong	LONG	9.37	9.85%	13.16%
Focus Media	FMCN	36.89	4.95%	-35.06%
Fuqi International	FUQI	8.25	15.71%	-0.60%
Giant Interactive	GA	16.28	28.70%	25.42%
Global Sources	GSOL	13.89	-6.46%	-50.83%
Guangshen Railway	GSH	28.88	9.81%	-18.97%
Gushan Environmental Energy	GU	12.5	-4.36%	33.69%
Home Inns & Hotel	HMIN	22.41	13.81%	-37.09%
Huaneng Power	HNP	33.65	10.18%	-18.52%
Hurray!	HRAY	2.77	0.36%	-30.40%
Hutchison Telecomm	HTX	21.05	-2.14%	-7.06%
JA Solar	JASO	24.01	29.09%	3.18%
Kongzhong	KONG	4.23	-2.31%	-30.54%
Las Vegas Sands	LVS	76.22	3.50%	-26.04%
LDK Solar	LDK	31.74	17.56%	-32.48%
Linktone	LTON	2.15	-20.37%	-30.42%
Longtop Financial Tech.	LFT	19.95	5.67%	-15.75%
Melco PBL Entertainment	MPEL	13.2	15.99%	14.19%
Mindray Medical	MR	34	17.48%	-20.88%
Netease.com	NTES	22.32	16.19%	17.72%
New Oriental Education	EDU	75.06	15.73%	-6.86%
Ninetowns inter	NINE	2.23	-4.70%	-30.09%
Noah Education*	NED	6.161	10.81%	-23.56%
O2Micro International	OIIM	7.52	-2.72%	-34.84%
Perfect World	PWRD	28.72	26.46%	3.01%
PetroChina	PTR	151.14	20.61%	-13.87%
QiaoXing Mobile Comm.	QXM	6.43	6.99%	-23.91%
Renesola*	SOL	16.75	47.45%	28.85%
Semiconductor Manufacturing	SMI	3.81	8.55%	-26.59%
Shanda Interactive	SNDA	34.29	17.84%	3.03%
Simcere Pharmaceutical	SCR	12.59	20.36%	-9.10%
Sina	SINA	46.2	31.06%	4.29%
Sinopec	SHI	39.55	13.03%	-35.23%
Sohu.com	SOHU	69.13	53.18%	26.80%
Solarfun Power	SOLF	13.43	11.36%	-58.87%
Spreadtrum Communications	SPRD	8.71	0.11%	-28.96%
Suntech Power	STP	44.73	10.28%	-45.66%
The9	NCTY	21.47	4.73%	0.19%
Tongjitang Chinese Medicine	TCM	8.2	-0.24%	-16.75%
Trina Solar	TSL	42.18	37.22%	-21.60%
UTstarcom	UTSI	3.25	14.44%	18.61%
VanceInfo Technologies	VIT	14.75	142.60%	63.89%
Vimicro International	VIMC	3.39	23.29%	-9.84%
VisionChina Media	VISN	14.75	33.12%	73.53%
WSP Holdings	WH	6.62	-4.06%	-27.25%
Wuxi Pharmatech	WX	18.44	-17.53%	-36.94%
XinHua Finance Media	XFML	4.15	31.33%	-30.83%
Xinyuan Real Estate	XIN	9.03	7.63%	-36.54%
Yazhou Coal Mining	YZC	92.68	30.48%	-4.51%
Yingli Green Energy	YGE	22.03	28.83%	-43.02%

*2008 IPO

For the month, two widely held EFTs that mainly invest in China also rose sharply. iShares FTSE/Xinhua China 25 Index (FXI) gained 17.50% in April while PowerShares Gloden Dragon Halter USX China (PGJ) climbed 15.55%.

Comments

[globalmacro:]

There are some really high quality names on this list. China's consumer is just beginning to come of age and I suspect that China's consumer will have an equal weight with the US consumer a few years prior to the 2020 target set by a number of prominent economists and research firms. The 50% selloff in China's A share market is a great opportunity.

2008 May 05 03:33 PM

[Armagedon:]

How can a government propping induced rally be viewed as a fundamental reason to buy? Chinese stocks are incredibly expensive with 40x and 50x P/E. The implied yield is 2% they would literally have to be safer than US Treasuries or the individual stocks would have to guarantee huge increases in sustainable growth. Please remember these are stocks not the Chinese economy. No company can grow into infinity at 10%. Furthermore, the Chinese economy is 20% export and 40% foreign direct investment. With Europe and the US heading to recession, what will happen to that 60% of the economy.

2008 May 05 05:59 PM

[theoilyboy:]

Kraken,
I appreciate your comments but I have a few questions

-if the US and Europe are in recession, won't that free up FDI to go where there is growth, ie China?

- 20% exports can easily be sucked up into domestic China or re-routed to other growing Asian economies. This might also have the effect of reducing domestic Chinese inflation as well

-The US economy is growing at <1% and companies are still growing. Good companies are growing at significantly better than 10%. China's economy is is growing at >10%, what type of growth rate would you expect is reasonable for Chinese companies serving a domestic China consumer (BIDU, SOHU, LFC, COGO, CTRP, CHL, FMCN, EDU, etc)?

- Infinity is a very long time, but can't good companies grow at 10% for a very long time? Or could they at least grow long enough to make good investments for long term investors not to mention short term traders?

- If safety is your objective, go to TIPS

I am not trying to be flippant, but where else can you find compelling growth opportunities in real companies serving a strong growth environment?

2008 May 05 08:26 PM

[User 107925:]

you said:
Shanghai Composite Index (^SSEC) lost half of its value in less than half a year. For the month, SSEC jumped 6.35% and the Hong Kong’s Hang Seng Index (^HSI) surged 12.72%. Among Chinese ADRs, VanceInfo Technologies (VIT) led the way with a gain of 142.60% ... go BIDU... I'm long.
...........
I'm relatively new at this but VIT on 3/31/08 closed @ $6.80 and 4/30/08 closed @ $8.55. If we're using stock price to determine *value* woud that be 15.8% increase for April.

2008 May 06 08:31 AM

[huangjin:]

Check out the article in the LA Times. Chinese are investing in the U.S. now because it is cost competitive. At least some of the FDI to China is money rushing to get in ahead of a revaluation, and once it happens, Chinese money will flow out.
www.latimes.com/news/n...

2008 May 06 08:56 AM

[User 107925:]

your chart appears to be wrong on VIT. I did not check any others. VIT IPO's 12/12/07 trading high @ $10.95 on 12/14/07, ended 12/31/07 @ $9.00. I've owned it since first day. VIT closed 4/30/08 @ $8.55. not 14.75 as your chart shows. VIT reports earnings this Friday. I'm long BIDU, AAPL, LVLT, EMC, VIT.

2008 May 06 12:29 PM

[globalmacro:]

Lord Kraken, what about all the stocks trading on the NYSE? They're not trading at a 40/50 PE. In fact some of the NYSE traded multiplayer online game companies like GA and PWRD, have half of their market capitalization in cash, 60-80% operating margins, growth rates over 100%, and trade at forward PEs under 20. You're clearly only focusing on the stocks that local Chinese can buy. As an American, you can buy the cream of the crop at very reasonable valuations.

2008 May 06 01:01 PM

[Coffeygrinds:]

Sun,
We are seeiing activity in Sina Corp as you know less known internet related company than the GOOG, YHOO, BIDU and others, but raises attention every few months. The Market cap is well below those big 3, but like NTES and SOHU, does maintain near a $3 Billion market cap with the growing backdrop of China in the horizon.

Earnings are expected Wednesday and the stock has already run into the early section of this slower Monday morning. The stock has spiked 7%, our HeatSeeker has been lighting up with the increased market action of buyers positioning in the SINA May 55 calls paying $.75 and $.80. Those large institutional buyers have sparked some retail follow up buyers, paying increased prices. This jump in the price of the stock and the options has us looking for a pullback and an opportunity to consider if the institutional buyers will return….

your thoughts on this action?

2008 May 12 12:59 PM