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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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Squeeze the bubble

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In last few days many new Chinese IPO listed in the US are under pressure, notablly:

E-House China (EJ), China Digital TV (STV), Wuxi Pharma (WX)

and last but the least, Giant Interactive (GA), the No. 1 online gaming company in China, owned by well known Chinese entreprenur Mr. Shu Yuzhu. According to CnAnalyst, GA also has the highest margin in all Chinese stocks listed in the US, with a gross margin 90% and net margin 70%. It sounds to me they are in drug dealing business 🙂 Because those numbers easily beat monopoly companies such as PetroChina (PTR) and China Mobile (CHL), or leading search company Baidu (BIDU).

All right, I shall be more positive in my blog: actually I like Wuxi Pharma among those new companies, along with the Longtop (LFT) I mentioned earlier. Because I think their business are more sustainable.

Wuxi Pharma Tech pic

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Is the Chinese bull market over?

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(Update Nov. 17) Shuipi of ChinaTimes(水皮华夏时报) wrote this interesting piece on his newspaper.

(Original) It looks like it, from the highs at 6,200 in early Oct to 5,200 now. But wait a minute, recently the US stock market suffered big loss because of the sub-prime meltdown, and weakening of the dollar. How could the mess in the US drag down the Chinese stock market?

Well, one can say we are in a global economy now, the ripple effect of US sub-prime meltdown means the US business and consumer will watch their wallet more carefully, which is bad for Chinese exporters. We all know the Chinese economy depends a lot on exporting to the US.

China Mobile logo

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