Big moves in China stocks

Stock price action offers signs of encouragement for China’s beleaguered market. The Shanghai Index climbed +2.9% on impressive volumes, taking markets back to where levels were before the big run-up in September and breaking through key technical levels above 2000. 

Public Domain image courtesy Alex Needham: http://en.wikipedia.org/wiki/User:Alex_Needham

The Shanghai Stock Exchange, Pudong

Technical calls have been highlighted in the last few days by well-respected market strategists like Tom DeMark, and even big shops are painting China as the trade for 2013.  

Last night’s HSBC PMI services was slightly weaker but still expanding. Banks and life insurance names remain strong and well-bid as buyback programs are underway and cross investment is being encouraged by government.   

What we are beginning to get is more clarification on policies and this is what markets need more than anything. Xi Jingping and the Politoboro have made their first formal announcements on policy continuity and pushing for more urbanization (can you say stimulus?)

Meanwhile cellular names are catching the Apple (AAPL, quote) bid. China Unicom (CHU, quote) claims to have pre-orders through the roof on the first day. China Mobile Limited (CHL, quote) is still the granddaddy play on this trade with 660 million potential new iPhone users waiting. (Although to be clear, I’m not expecting that many).

It’s been an ugly time to be in Chinese internet stocks however, and trading in the U.S. exchanges major moves lower yesterday for all the big players.

New Oriental Education & Technology Group Inc. (EDU, quote)    -7.85%

Qihoo 360 Technology Co Ltd (QIHU, quote)    -4.15%

Baidu Inc. (BIDU, quote)    -6.17%

Sina Corp  (SINA, quote)     -8.16%

Ctrip.Com International Ltd  (CTRIP, quote)     -9.64%

Big money auditors in the U.S. are now caught in the crossfire of Chinese and U.S. regulatory disputes.  The SEC is accusing the local branches of brokerages of breaking securities laws after refusing to bring forth paperwork related to an investigations into accounting fraud at nine Chinese companies. 

It’s not time to invest here yet, especially if these stocks get de-listed. Do you really want to own local BIDU shares (if you can actually buy them) and you don’t want any stock that sees a falloff in liquidity like we are seeing? Kind of funny/sad/ironic that this U.S./China standoff is coming right after Barron’s featured Chinese gaming stocks and Macao as a huge opportunity this week. 

Macau games were thumped. 

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