Opinion

George Chen

Put a pause on China concept stocks

George Chen
Jul 22, 2011 04:02 UTC

By George Chen
The opinions expressed are the author’s own.

Two Chinese dotcom companies have apparently become the latest victims of the growing market concern about China “concept” stocks in the wake a series of accounting scandals.

Online video firm Xunlei Ltd and Chinese e-book firm Cloudary Corp have postponed their U.S. fundraising plans. They both blamed volatile global markets. Volatile markets? Really? Aren’t the markets always volatile?

More or less, to some extent. We still see other companies lining up to list in the U.S. although the near-term outlook for China IPOs to land in the U.S. market doesn’t look too bright. In return, such concerns — warranted or not — are growing about Chinese companies listing in Hong Kong and Singapore.

There were some early signs about Xunlei’s difficulties to go public. It failed to win direct investment from News Corp. And some analysts say Xunlei could face challenges from some Hollywood movie makers over copyright issues.

For Cloudary, it’s a different story. The company changed its name from Shanda Literature before the IPO plan, as the firm seeks to brand itself as an e-book maker and seller — trying to convince U.S. investors it could become “China’s Kindle maker”. In the end, the rebranding campaign didn’t make headway.

Is China Inc still credible?

George Chen
Jun 9, 2011 03:19 UTC

By George Chen
The opinions expressed are the author’s own.

Chinese Premier Wen Jiabao once said there’s something even more important and precious than gold — people’s confidence.

In recent weeks, I’m afraid global investors have been losing confidence in Chinese stocks from the New York to Shanghai markets. Sino-Forest Corp became the latest victim of a slump in overseas-listed Chinese companies. The company earlier this week accused short-seller and research firm Muddy Waters of defamation for alleging in a report that it had fraudulently exaggerated its Chinese forestry assets.

Unfortunately, this is just the beginning of the hit to confidence over Chinese stocks, especially small caps listed at home or abroad, for example in Hong Kong, Singapore, New York and even on the second-tier board of the London Stock Exchange.

Is there really a China story?

George Chen
May 26, 2011 05:09 UTC


By George Chen
The opinions expressed are the author’s own.

I remember a veteran trader once told me of the three scenarios under which one should sell stocks.

First, sell when you start to sense the government is beginning to tighten market liquidity, indicated for example by a sudden influx of IPOs or a tougher monetary policy. Second, sell when you see almost everyone, from monks to neighborhood grandmothers, is buying. Third, when you see big banks such as Goldman Sachs downgrade their economic forecasts, which basically means they know they misunderstand something and have to fix the misunderstanding, sell.

So, this week Goldman Sachs trimmed its economic growth forecasts for China to 9.4 percent this year, from 10 percent previously, citing a recent run of surprisingly weak data, high oil prices and supply constraints. Goldman’s report created a buzz in the market, pushing some investors to sell further amid already weak sentiment. More banks are expected to follow Goldman’s move to trim their China forecasts in coming days and weeks.

One country, two problems

George Chen
May 23, 2011 04:51 UTC

By George Chen
The opinions expressed are the author’s own.

There’s a new problem with the “one country, two systems” policy for Hong Kong and mainland China — the appreciation of the yuan can ease inflation in mainland China but not in Hong Kong.

In Hong Kong, the former British colony that returned to Beijing’s hands in 1997, things unfortunately work the other way round.

Peter Wong, HSBC’s Asia-Pacific top boss (and widely considered the most handsome banker in Hong Kong) said at a forum in Shanghai last week that because the Hong Kong dollar is pegged to the U.S. dollar, whose value is falling almost every day, food prices in Hong Kong are set to increase as Hong Kong needs to pay more to import food products from the mainland.

Japan, Australia, if not China?

George Chen
May 17, 2011 02:59 UTC

By George Chen
The opinions expressed are the author’s own.

I am hearing more complaints these days from trader friends about how boring the market is these days. Why boring?

Trading volume is low and there are apparently more risks than opportunities as investors seek clear signals about the central bank’s monetary policy direction and about what global funds think of China for the second half of the year.

With investors uncertain about the outlook for the Shanghai and Hong Kong stock markets, some are beginning to rethink their positions on Japan. Concerns about radiation are easing and I hear more people talking about the big potential for Japan’s market and economy to rebound amid massive reconstruction there. An old and new question then arises: can we bet on the Nikkei, again?

What happened to B shares?

George Chen
Apr 28, 2011 07:24 UTC

By George Chen
The opinions expressed are the author’s own.

Few people outside of China really know what B shares are.

“B shares? Does that mean they are not as good as A shares?” That’s a typical question I hear from foreign friends when they first come to the mainland market and by chance learn some buzz about the B-share index.

B shares probably only attract public attention when trading gets excitable, as is the case now. The U.S. dollar-denominated B shares index sank more than 7 percent at one point on Thursday after ending down more than  5 percent on Wednesday.

So, what happened?

First, the B shares index tumbled on Wednesday without any clue or warning, surprising most people in the market. On Thursday, it retreated further, even after Beijing attempted to clarify a rumour about capital gains tax that was believed to have triggered the market panic. China was  not likely to start taxing investors on capital gains any time soon, a tax official told Reuters on Thursday.

Where China traders meet

George Chen
Apr 4, 2011 03:09 UTC

IPOBy George Chen
The opinions expressed are the author’s own.

My readers on Reuters.com know me as a columnist who regularly writes about China and I also run a Chinese-language column, Mr. Shangkong, about Shanghai where I was born and Hong Kong where I call home now, on Reuters.com.cn, the China portal.

In fact, my day job is not just about writing columns but more about Trading China, a young and energetic Thomson Reuters project. It’s a public holiday in China today and the markets are relatively quiet, so I’d like to share something different in today’s column as I want to talk a bit about Trading China, which comprises Carmen, Joseph and myself.

Since receiving a call about a year ago from my boss North Asia Editor Phil Smith, aka “chart guru” in the Trading China community, I was quickly sent to Dubai to learn about and launch Trading China. Dubai is the place where Sex And The City 2, the movie, was not allowed to be filmed and our sister project Trading Middle East was launched smoothly.

Firing and hiring

George Chen
Apr 1, 2011 02:39 UTC

GS

By George Chen
The opinions expressed are the author’s own.

Today is April Fools’ Day, a rare opportunity to make fun of friends and colleagues with pranks and practical jokes. Ever ahead of the game, Goldman Sachs produced an amusing mistake yesterday making it look more than a little foolish, as many investors and rival bankers may attest.

The bank’s Asia structured products unit said yesterday that trading in four index warrants it issued in relation to the Nikkei 225 was abruptly suspended in Hong Kong because of errors in supplemental listing documents. The formula of “cash settlement amount per board lot” for the warrants was misstated, Goldman Sachs Structured Products (Asia) Ltd said in a filing with the Hong Kong stock exchange. Click here to read the Goldman Sachs statement (PDF).

Before being suspended, the warrants surged by between 130 and 1,077 percent on Thursday morning, which local media reported could cost the bank millions of dollars.

Post-earthquake concept stocks

George Chen
Mar 24, 2011 04:01 UTC

By George Chen
The opinions expressed are the author’s own.

Have you had breakfast or lunch yet? In Hong Kong, I’m guessing few people are choosing sushi these days.

Many restaurants in Hong Kong, even Japanese restaurants, have been quick to distance themselves from the crisis in Japan since the earthquake as concerns about food safety are growing in many Asia-Pacific cities, including Beijing, Seoul and Sydney.

The Japanese authorities announced this week that they would widen a ban on exports of a wide range of food products from areas surrounding the earthquake-hit Fukushima Daiichi nuclear power station. In fact, even before the official ban, the health authorities in China, Hong Kong and South Korea were already monitoring all such imports from Japan.

Japan, in danger and opportunity

George Chen
Mar 14, 2011 03:41 UTC

earthquake

By George Chen
The opinions expressed are the author’s own.

You might consider yourself very smart, powerful or perhaps wealthy, but after watching live coverage on TV of the devastating earthquake and tsunami in Japan on Friday afternoon, what was your reaction? We’re all nobodies in the face of the forces of nature.

On Friday afternoon before the earthquake, the benchmark Shanghai Composite Index showed unexpected signs of recovery but the rebound was unfortunately short-lived. Immediately following the news alert about Japan’s worst earthquake in decades, stock markets from Hong Kong to Shanghai all retreated quickly.

This was a very natural reaction to such a massive natural disaster. Almost the same reaction was seen after the earthquake in China’s Sichuan province in May 2008. When investors feel uncertain and then the market sentiment becomes anxious, they sell. Fair enough – who really is in the mood to trade after seeing such a horrible event?

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