Chinese coal Stocks, What Next? China Sunergy Co Ltd (NASDAQ:CSUN), Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP), LDK Solar Co., Ltd (ADR)(NYSE:LDK)
The depressed Chinese stocks emerged stars of the markets in July. But, their outperformance was short lived and investors may not see the repeat performance anytime. The earlier surge was because of reassuring data on the country’s economy. The country was seen as a safe destination due to its closed system vis-a-vis other economies which were threatened by capital outflows when Fed cuts its asset-buying programme.
Jjoseph Tang, the investment director at Invesco Asia opined that this is not the start of a trend reversal. Tang manages US$1.3 billion in a number of China-focused funds. He added that it is early to say if the country’s equities have entered a long-term up trend.
Long-term domestic issues include industrial overcapacity, indebtness of firms as well as still-soft growth. The increase in mainland interbank lending rates in June resulted in raising fears of gloom in dragon nation’s economy, leading to a fall in global markets. But, a number of positives in August as well as July economic data along with the new Shanghai free trade zone has resulted in gains.
Capital flows data indicates that the interest in Chinese stocks is slackening. It seems that global macro funds are pessimistic on the country as well as its stocks especially in the banking sector.
Shares of mid-sized lender China Minsheng Bank have surged by 30 percent after the earlier crash. The MSCI China index is about 10 times ahead of 12-month earnings. This is below the historical mean indicating that the valuations are low. There are possibilities of near-term gains despite several risks which still exist. The reading of a private survey on the country’s factory activity is at 50.2 indicating that the manufacturing grew fastest in last six months.
The Offshore Chinese markets are also at risk.
China Sunergy Co Ltd(NASDAQ:CSUN)’s shares have doubled in the past one week, Suntech Power Holdings Co., Ltd. (ADR)(NYSE:STP) has risen 35% in past one week and LDK Solar Co., Ltd (ADR)(NYSE:LDK) added 22% in yesterday’s session.
Tags: China Sunergy Co Ltd (NASDAQ:CSUN), LDK Solar Co., Ltd (ADR)(NYSE:LDK), Ltd. (ADR) (NYSE:STP), Suntech Power Holdings Co.