Energy Stocks Fuel Chinese Small Caps to Record Highs

by: China OTC Player

By Platinum Tiger

Heavy accumulation early last week drove up the prices of Chinese energy company stocks like L&L Energy (NASDAQ:LLEN) and Longwei Petroleum (OTC:LPIH) by an average of 9 percent, leading the 35 issue Rising China Stocks (RSC) index to its highest ever weekly close. With a 3.2 percent gain for the week, the index far outpaced the S&P 500, Russell 2000 and Shanghai Composite indices, winding up with a 16.4 percent gain so far this year.

By contrast, the Russell 2000 closed with a 9.3 percent gain, the S&P 500 with a 4.7 percent gain, and the Shanghai Composite was down by 8 percent for the year. The performance gap between Chinese small caps and Chinese large caps has continued to widen since the RCS index began its current bull run in late January.
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The consumer and media sectors also performed well last week, rising by more than 5 percent, with Soko Fitness (OTC:SOKF) and Home System Group (OTC:HSYT) both posting 10 percent gains. Pharmaceuticals and Mining & Materials stocks lost 1.4 percent and 0.6 percent respectively, and tech issues were flat for the week.

Chinese small caps have closed higher in 6 of the last 8 weeks, and with several companies set to announce their quarterly results next week, they may well continue their run. Look for earnings reports this coming week from China Electric Motor (OTCPK:CELM), Lihua International (NASDAQ:LIWA) and ZST Digital Networks (NASDAQ:ZSTN).

A word of caution: last Thursday and Friday were both reversal days (as was the case on the broader markets), with the RCS index opening above the previous day's close but then sharply reversing and closing lower than the prior day's low. Although selling volume wasn't strong enough to raise any alarm bells yet, I'm keeping a watchful eye for any further signs that the uptrend may be losing momentum.

Disclosure: Long LLEN, LPIH.OB, SOKF.OB, ZSTN