Category: China

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China Economy

Tax rebate, President Hu and work around

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US Tax Rebate
The US congress and president are on the same page for one thing: help every American buy an iPod (a.k.a. the tax rebate thing). For me while I am glad to get some of my tax dollor back (rather than been blew away in Iraq, or paying a Carribean trip for some congress members…). I think the mantra of quick fix is so prevelant in this country. Sometimes yours truely also fall into this. For instance:

*Got a headache? Take an Tylenol.

*Need some stimulus for work? Got a coffee. I did this every morning.

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China Stocks

Yucheng Tech’s POS revenue

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I am always interested in recurring revenue business, debit/credit card transaction fee is one. Yucheng Tech (YTEC), the smaller rival of Longtop (LFT), is entering POS business this year. According to my friend Nawar Alsaadi’s analysis (quoted below):

“POS Revenue projections

The company mentioned in an investor presentation in February 2007 that the average business processed on a POS machine in China is 200,000 USD…Assuming an average transaction cost of 1.5% charged by the bank, the average revenue per machine will be $3000, and if we assume that Yucheng is awarded a 3rd of the transaction cost, this would net the company $1000 in transaction revenue per year. Thus, based on the company’s expected rate of merchant sign up, the company could generate as much as $50 million dollar in recurring transaction revenue by the end of 2009 as they sign up over 50000 merchants on their network…”

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China IPO

Earning quality of Chinese IPOs

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What is earning quality?
As a new investor, I used to look at earning of a company heavily. I think earning is also the driver of a stock price in the wall street. If a company issues earning report which beats the street, and offers upbeat outlook for next quarter (or next year), the street will bid up the stock, vice versa. But there is two problems when we solely focus on earnings. For one, growth company, especially IPOs like Google and Salesforce in 2004, and Baidu in 2005 may not be profitable. Or if they are profitable, they don’t make too much monney thus its PE ratio is usually high.

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China

Snow, going home

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I heard about the snow storm in China, and it hurt the “going home crowd” in terms of traffic. The situtation seems much more severe than I thought, from read the blog post from DBANotes and Wang Jianshuo.

In recently days the Chinese stock market has dropped a lot too. Similar to the temporature. But I think this “going home for new year” is a much urgent and important, for Chinese people. So hopefully the weather can turn around in next few days.

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Business China

Wang Shi spoke about housing price

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Q&A about housing price in China, by Vanke (000002.SZ) Chairman Wang Shi. He wrote those Q&A in his own blog.

I put it together here because it’s a bit hard to read 7 articles separately. I left out couple tables because it’s hard to paste.

I’m interested in the Chinese housing for two reasons:
1) My wife and I are thinking about work and live in China in the future.
2) Like the Chinese stock market, the China housing market is also very interesting. I think there is a lot to learn from the leader like Vanke (how they got here, which direction are they going), either from business or social point of the view.

Q7 问：高档住宅供应少，调整的可能性不高，不是吗？
答：就本次调整而言，金融环境的变化、市场信心的起伏具有统一性，对各个细分市场都会有影响。但各个城市的各个细分市场发展阶段和供求情况有所差异，不可一概而论。一般而言，普通住宅主要是满足中等收入家庭的自住需要，这部分住房需求比较稳固，基数也比较大，我们并不认为这个市场面临较大的价格下滑风险。高档住宅供应少，早已在大家的普遍预期之内，其绝对价格已经包含了这一因素。在高档住宅供应比例保持稳定的情况下，过快的价格涨幅同样会蕴含风险。

Q6 问：工厂化生产的住宅更贵，性价比并不高，您怎么看？

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China Stocks

William Ding Lei

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William Ding Lei is the founder, and Chairman of NetEase. He talked a little on the bubble in the stock markets during an interview lately (link here).

I shared Ding Lei’s insights because he has been through the full cycle of the stock market: right after NetEase (NTES) came to Nasdaq in 2000, the dot com crashed and his company’s stock traded under $1.00 for a few years, during that time he worked hard on the online gaming projects. Eventually the stock bounced back, went up as high as $100 (before split) because he made his company profitable.

股市本来虚高 暴跌回归本位

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China Stocks

Is sky falling in stock markets?

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It looks like it. On Monday Jan 21 we have the biggest drop of global stock markets in recent years (see the quoted news below).

I want to talk a little about the Chinese market in specific. It appears to me two pieces of news helped driving the market down. The huge secondary offering of $22 billion from Ping An Insurance (SHA:601318); the talk of starting stock index future market and a Nasdaq-like Market in China after March 2008, by Mr. Cheng Si Wei, Chairman of Finance Committe of National People Congress. 成思危：创业板和股指期货准备工作基本就绪.

But as individual investors I think we should remain calm even in this crazy market. It may be a good idea to get rid of some bubble-priced stocks because we are not going to see that price for a while. Note bubble is relative the intrinsic value of a company, not compared to the previous high price (e.g, VMW, AAPL, N,…are all risky to me).

Quoted news
AP news: stock markets plunge worldwide.

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China IPO

E-House China secondary offering

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Quoting Reuter News: E-House China (EJ), filed with U.S. regulators on Thursday for an offering of $175 million of its American depositary shares. Note the company recently formed alliance with some major home builders in China (read the news from CNNMoney).

Now they are asking more money from the market, the shareholders (old or new). From my observation the China housing market is at a psychological tipping point, i.e., it is facing a correction to say the least. But in long term, I do believe there are rooms to grow.

I am not planning to buy the EJ. But for reference (Yahoo Finance), it closing price today $21.71 represents PE (ttm) of 44, and Price/sales (ttm) of 16.7.

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China IPO

Lessons from Longtop

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Well, Longtop did not turn out to be long top, it was a short top if you will. I sold most of the shares today (still 50 shares pending in Scottrade).

The problem with Longtop (LFT) is not fundamental, it’s rather valuation. In current market, I think an unproven Chinese financial software (IT service) company like Longtop can not sustain its bubble price at IPO.

Some lessons:

1) Be careful of IPO (maybe I got MR at pure luck, but I did not get it in the first day). Also be careful of all underwriters: from JP Morgan (NINE), WR Hambrecht (XFML, GSIT), and Goldman Sachs (LFT)…NINE and XFML are in my Hall of Shame list, will LFT join them too?

2) Again valuation. A good company does mean good stock. Look at Baidu during 2004 IPO to 2006.

3) Don’t averege down if I haven’t made any money from a stock, e.g., SBUX, LFT,…I think CROX is different because I made money on this one, and has some knowledge on it. In other words, if average down too many times, something must be wrong here.

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China Stocks

China ADR crashed

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(Update) Halter US China Index closed down 7.89% and FXI down 7.55%. China Mobile (CHL), a major component of both index, is down 7.79% today.

FXI (FTSE Xinhua 25) dropped 7.23% as of now 11:27 AM US CST.

Halter US China Index (web site), which is more broad based Chinese ADRs traded in the US (although PetroChina, China Mobile has a bigger weight), dropped 7%.

And last but not least, trader818 China ADR index, dropped 8.4%.

Sounds a lot like the Feb 28, 2007, except the bear comes early this year. Although the general US market also dropped a lot, this Chinese drop seems a bit excessive. I unloaded some LFT today (yes I decided to take the bite, rather than hanging there dead). I think going forward small cap Chinese ADRs, especially newly listed IPOs, will perform wose than the large cap ones. Just like the “2-8” and “8-2” phenomena in China domestic market, when things are uncertain, stay with the big guys 🙂

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