No Random Walking!

Somehow I got the feeling that China will have no choice but to have a one-time, big exchange rate adjustment...

Link to ??????????????????-????-???

Looking back, the market selloff due to the subprime crisis was the perfect time to buy Chinese internet stocks. It made great sense to load them up! Since then most of those companies have nearly doubled from the lowest prices.

Link to Sector Snap: Most Chinese Web stocks up after Sohu 1Q report | Chron.com - Houston Chronicle

I am writing this from a hotel in Changsha. Most decent hotels in China (with rate RMB200+/night) offer free Internet connection now. [I paid at a discounted rate of RMB 140]. This kind of hotel is perfect for business travel. I really don't see why one needs to stay in a four- or five-star hotel that runs from RMB 400 and up.

Just one of the brokerage companies that have reported great earnings in spite of the dismal performance in the A share market since the start of the year: [though  q/q data would be more interesting...]

????????????????????????????101.03%?????0.76???????????????????????????????????????????????????????????????2192.46???????????15.60%??????25.22??????????101.03%??????0.76?????81.10%??????????????4.77%?
???????????????????????????????????????1500?????????1800??????????????????????????????????????????????????
?????????????????????????????????57.93???42.38???????73.5%?72.6%?????????????????????????????????????????????????????????6.04???6680???????????????????????????????9.4???
????????????????????????????????20.81?????????????????????9.14???????????????????????????????????????????????????????????????????????????????????????????????
????????????????????????????????1%????????????????91.40%????????????????????????????????????????????????????5??

???????????????????10%????????????????????

???? 600109

???? 600030

???? 000783

???? 600837

???? 000562

?????????????JRJC)????????: JRJC ???A??????

...because of the Beijing Olympics. Affects both business travellers and tourists. Also expect longer processing time. 

Link to China imposes new visa rules

Chinese stocks traded in US have been surging lately, but SINA's out-performance over its competitors has been of special interest to me (though I don't own SINA at the moment). My guess for the reasons:

1. No matter what the competitors, especially SOHU, have tried to do, SINA still seems to be the leader in online news and blogs.
2. The Olympics is getting so close. It seems that more people are still going to SINA for Olympics-related news even though SOHU is one of the official sponsors.
3. The Tibet riot and ensuing country-wide nationalistic sentiment have been driving online traffic and SINA has benefited the most.
4. Somehow I think this is big: SINA has started promoting TopView stock trading data, which include Level II quotes, to its readers. It's an excellent move because of its young and high-income user base. If successful, it would provide a new revenue source, which SINA has been trying to achieve for years (through largely unsuccessful ventures in online games, blogs, music downloading, etc.). SINA would be a formidable competitor to other companies such as JRJC.

Speaking of JRJC, which I do own, its share price has moved up over 30% during the last four sessions, thanks to the perceived turn-around in the mainland stock market.

... That's what's happening in China today! Yes every stock is up by 10%, the limit that a stock is allowed to go up in a single day!

Also I leaned a term that seems very common to Chinese A-share stocks very often: "?10???10??5.00?(??)”. That's what happened to ???? ?600030?today. I am still confused by what it really is but my friend told me it's a good thing :=).

By the way that stock offers a classical example of how valuable my site is. See the chart. [ignore the last data point because it hasn't reflected the stock-split yet.] The best entry point was yesterday. If one is aggressive, the last couple of weeks were the best time to accumulate the stock, which has a trailing P/E of only 16 even after yesterday's surge.

One could have bought other Chinese stocks lately and got 15% or more in two days, but not everyone of them offered the clear pattern and blue-chip status that 600030 has.

Both companies reported earning today. I see HLIT gapping up and PLXS plunging tomorrow. This kind of stocks - low cap tech stock - tend to either gap up or down after earnings. We are used to it.

However the reason I want to write about them in a single post is a time-tested pattern I've observed. This pattern is obvious for PLXS three months ago and for HLIT right now. The pattern goes like the following:

1. The company has reasonable valuation.
2. The management of the company was very confident about the next quarter, which caused the price to jump afterwards. [This happened to PLXS six months ago (early November 07), and HLIT three months ago (late January 08)]
3. The market plunged afterwards [due to the subprime crisis], bringing down the company's price also, sometimes absurdly. [PLXS went from 32 to 18 in the following three months, HLIT from 11 to 7.4]. What appeared to have happened is that the market seemed to have completely forgotten about the management's confidence about its next quarter!
4. Days before next earning, the stock starts to act strong. [Some people are smart and/or informed]
5. The company reports great earning and the stock gaps up!

Link to Harmonic Announces First Quarter Results: Financial News - Yahoo! Finance

Six month later, PLXS went to as high as $29 from a long of $19. However it has been very weak lately [see chart and bearish trigger bar]. And the worst isn't over: The price is now below $23 after the new earning release:

Link to Plexus predicts fiscal 3Q revenue mostly below Street views 

That's why sticking to the trading rule (the trigger bar) is so important for this kind of stock, - if no further information about the company is available, or another over-ruling pattern is present. [My chart isn't intelligent enough to recognize patterns that are complex yet.]

Fow now this tax benifit only goes to IDG

While IDG and other investors previously avoided the local stock market, preferring instead to simply sell their investments, that is now changing. With money sloshing around, it’s far better to go public locally in China, because you can get a better valuation, specifically up to a “20 percent premium,” McGovern says, compared to a sale.

So far, McGovern’s IDG has had a field day. It paid $2 million for a 20 percent stake in Tencent, which is now worth $1.2 billion. It invested in search engine Baidu at $2 a share, and it is now $350 a share. It invested in Sohu at 22 cents; it’s now $45. He invested $6 million into Ctrip, and got a $800 million profit.

Source: In a first, China removes profit repatriation tax for U.S. investor | The Industry Standard

Disclaimer

This blog site is not meant to be a place where I offer stock picks to go long or short for other people. It is instead a way for me to record my investment ideas and thought process at the moment of writing as well as interesting articles that I come across online. From time to time, I may make comments about specific stocks that I think worth buying or shorting. However I do make mistakes. Sometimes I may change my mind after gathering more data and I may or may not write about the change of heart in a new blog post.

I am glad that you find my blogs worth reading. However please do not expect specific stock ideas here. Do trade on the basis of detailed research and/or using one of many time-tested trading strategies that you find comfortable with.

And the last but not the least: do it at your own risk. Good luck!