Category: Stocks

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Fun Stocks

Danbin and Zhu Ping

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I added some Chinese financial blog under “blogroll”. Two notables are Dan Bin (CEO of a private equity in Shenzhen), and Zhu Ping (Guangfa Fund manager, a graduate from Shanghai Univ. of Finance and Economics). Both are disciples of Buffett. Dan Bin bought a share of Berkshire so that he could attend the Berkshire annual shareholder meeting in Omaha.

Here is an interesting story written by Dan Bin.

关于2007年9月11日市场下跌的短信记录: (text message transcript: amid yesterday’s China market drop).

朋友:今天跌得好凶啊,还会跌吗?怕怕的。Friend: What a big drop! Will it continue to drop?
但斌:有可能。 Danbin: It’s possible.
朋友：啊！时间会长吗？ Friend: Ouch. Will the drop last long?
但斌：这个上帝知道。 Danbin: Only God knows.
朋友：：-（那咋办 Friend: What should I do?
但斌：等我有时间帮你给上帝打个电话问问。
Danbin: hold on, let me call the God and ask the question for you.
……

Categories
China Stocks

WuXi Pharma Tech Q2 results

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Here are the results from Yahoo Finance, some highlights:

Second Quarter 2007 Highlights:

— Total net revenues increased 99.3% over the second quarter of 2006 to
US$30.2 million. (1H revenue $64 m, slight decline over Q1 2007?)
— Net income increased 482.1% over the second quarter of 2006 to US$7.1
million.
— Diluted earnings per American Depositary Share (“ADS”) for the second
quarter of 2007 was US$0.11. Diluted earnings per ADS excluding share-
based compensation expenses (non-GAAP) for the second quarter of 2007
was US$0.13.

The stock took a hit last Thursday because the market expected more for its year 2007 outlook. Currently the company expects rev of $128 to 132 million.

On business level, I like Wuxi’s business model and the global outsourcing trend in the pharma R&D. One concern of outsourcing is margin. I’m listening to its Conference Call now, will add comments if I find anything interesting.

Categories
China Stocks

The world is not flat

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At least on Internet front, as I read this post from Wang Jianshuo.

Similar thing can be said about the China stock market, the “open H-share to domestic investors” initiative took a pause this week. The new word is it will start in 2 months; and the minimum balance is 300 k Yuan (vs. previous 100 k Yuan). This news will certainlly boost the domestic A share market, as hot money stays inside China, for the moment. Sersiously I don’t think this policy will have too much effect to Hongkong, as some forward thinking Chinese investors already found their ways in Hongkong and US stock market. Just as I said in previous post, some foreign investors (e.g., Yale university) already found their ways in China A share market.

So, how about we say “the world is not flat; it’s in the process of becoming flat,…”

Categories
Stocks

Week in review 08/26 to 09/01

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I’m back from Sanya. Felt good about the beach and Marriot hotel, I will talk more about the trip later. The following are stuffs I recorded before the trip.

1) Ctrip service is good. Free pick up, delivery; SMS reminder; coupon book including shuttle ride from airport to hotel. By the way, I saw Ctrip’s rep at Sanya airport. She gave me a small tour guide book (free); the book seems very useful. I guess Ctrip is continuing to grow, and create stickness with its customers.

2) Got 2 shares of Vanke at its secondary offering. I bid 500 shares, and the allocate rate is about 0.46%, so I got 2 shares at 31.53 Yuan each. This is smallest stock purchase I ever made. I heard Vanke’s secondary attacted CNY 200 b to bid. Citic Securities slightly beat that with CNY 225 b.

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Categories
Career Stocks

Wall street 101

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The following is copied from the bbs at world famous mit. I pasted it here so people in China can get to it. The article explains the career path of wall street. For ordinary investors who are not going to wall street, this article also explains how finance works…IBD stands for investment banking division.

Let me know what you think.

(author: mywellness) 不少网友对投行以及其它金融行业都表现出了很大的兴趣。不过有不少道听途说的传闻
并不可信。而且很多帖子对一些概念定义比较混乱，不少人甚至对投行干些什么都不甚
清楚。我在这里科普一下，众位大牛不要见笑。这个帖子侧重于介绍金融的一些职业分
工，以及简单的职业道路介绍。

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Categories
Life Stocks

Step back

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The market is full of news these days, and it looks like the drama will be on for a while. But will “tape reading all the time” be helpful for investing? Interestingly I read an abstract of an article on this topic (written by a finance professor at Wash. U.), his conclusion is no. In other words, step back from the market may work out better. But the human nature of “making quick money” can be felt everywhere, especially in China these days. Do we really want to miss the next big thing?

As I was also reading Buffett’s essays (annual letter to his shareholders), I felt I need to learn systematically about finance. I also wanted to learn more about “how to valuate a business”, which is the key to long term investing.

Amid all these, I decided to scale back my blogging frequency a bit, from two posts a day to one post every 3, 4 or 7 days. This hopefull will also help relieve the stress of my hand. I wanted to save key strokes and mouse clicking, so that I can continue to work as programmer for the foreseeble future.

As a side benifit, I may be able to write better quality articles now that I’m scaling back…

Categories
China Stocks

Three ways to buy H shares

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With the Chinese goverment recent policy of “opening H shares to domestic investors”, there are three ways to buy H shares for China domestic investors, and people with different investment objectives and pockets can pick and choose.

1) QDII: there are many bank issued QDII products. Those products mostly invest in H shares, and it’s very likely the fund managers will buy something they are familar, the Chinese companies listed in Hongkong. This is indirect way of buying H shares; it carries modest risk and the return will also be moderate.

2) Open an account in Hongkong Stock Exchange directly: this is not officially endorsed by the Chinese regulators. But many people have done that, and I think those people at least enjoyed the recent “bump” after the “China life gate to H shares” news. In reality, I think those are “forward thinking” investors, and they usually have deep pockets. The down side of this approach is: it’s difficult to get the money in and out of China, because that’s not blessed by the goverment.

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Categories
China Stocks

Shanghai Composites and second offerings

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The Shanghai Composites Index closed above 5000 the first time on August 23, Thursday. The interesting thing is, this time Chinese goverment is not as nervous as last time around (May 30), because this run up is largely drived by so-called blue chips: especially large banks where the goverment is the majority owner (ICBC, BOC,…).

For smaller investor like us, I think we should look beyond the market, and look at individual companies. By incident (what an incident), two large blue chip companies, Vanke (000002), and Citic Securities (600030). Here is the bloomberg news for Citic Securities secondary.

The Beijing-based company will offer as many as 350 million new shares at 74.91 yuan on Aug. 27, it said in a statement today. It would be China’s third-biggest stock sale this year. The shares jumped 5.9 percent to a record 94.95 yuan in Shanghai.

Citic Securities, after passing Japan’s Nomura Holdings Inc. in market value this week, is seizing on investor enthusiasm for stocks that made China the world’s best-performing market this year. Chairman Wang Dongming, who boosted first-half profit more than fivefold, plans to triple capital at the futures unit to extend his lead over local rivals…

Valuation Premium

Today’s share price gain values Citic Securities at $37 billion, higher than Nomura’s $35 billion. The stock has more than tripled this year. The firm trails only Goldman Sachs Group Inc., Morgan Stanley and Merrill Lynch & Co. in market value.

Investors pay a premium for Citic. The stock trades at about 35.8 times estimated full-year profit, according to data compiled by Bloomberg. Goldman, the world’s most profitable securities firm, has a price-earnings multiple of 8.1.

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Categories
Business Stocks

Consumer series IV: China Youth Travel

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I am resuming this series as I am in Shanghai, and I got first hand look at the consumer spending here. Travel industry grew very fast in recent years due to several factors:

1) The golden week, where people got one week break in Chinese New Year, May 1, and Oct 1;

2) People have more money to spend in general, especially young people want to more DIY travel (freedom tour instead of the good old group tour);

3) More sites have been developed, e.g., Sanya, Lijiang (Yunan), etc.

But the travel industry is highly fragmented in China. The main players include: the scenic sites (Huangshan, e’Mei Shan etc.); the travel agency; the airlines; and the hotels. The profit margin of travel agency business is not high, especially the domestic travel.

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Categories
China Stocks

Q and A on China A shares

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1. Chinese stock market has started in early 1990s and it has not done well until 2005. Why the China A shares market suddenly became so hot since then?
When the Chinese stock market started in the early 1990s, it’s a way for the state owned companies to raise the capital, and market speculators to make money. It’s not friendly to small shareholders because there are two types of shares in additional to floating shares: the state shares and Fa Ren Gu (legal entity shares); those shares can not be floated. Normally the majority shareholder is the goverment (or some Fa Ren) and they have no incentive to help the stock (floating shares) price go up because their shares can not float.

This all changed in 2005 in the Gu Gai (stock reform): during which the floating shareholder are compensated, and the state owned shares and Fa Ren Shares can be floated within a pre-arranged time frame, just like the share plan of big shareholders in the US stock market (unlock period). Now all the shareholders have aligned their interest. The big shareholder and management have incentive to deliver.

Of course another reason is people got lots of money: Chinese has a more than 40% saving rate; the emerging middle class; people made money in business and investing (housing etc.)

2. How can I buy the China A shares?
At this time the A shares are open to Chinese residents. For foreign investors, they can buy through the QFII (source: ChinaDaily), stands for qualified foreign institutional investors, e.g., Morgan Stanley etc.

3. Why some companies like to buy “shell”?
In China there is this listing requirement that a company needs to be profitable before it can list. Some companies that did not meet this req. but want to list, have decided to buy the shell of already listed companies. That will drive up the stock price of the “shell” company. It often triggered lots of insider trading. Buying “shell” is generally not as good as IPO. Lately the Chinese securities regulatory commission (CSRC, equivalent of SEC in the US) has tightened this “shell buying” activities. This makes economic sense to me.

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