China's Economic Miracle Going Down the Tubes: 10 Stocks to Watch

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(Written by Rebecca Lipman. List compiled by Eben Esterhuizen, CFA)

Is China’s economy actually going down the tubes? That’s the argument made by famous Chinese finance professor and television personality Larry Lang, and somehow his lecture isn’t causing quite the surprised reaction one might expect.

According to Lang, the Chinese regime is in a serious economic crisis and on the brink of bankruptcy. He even goes so far as to speculate every province in China is like Greece.

Government Censorship

“The restrictions Lang placed on the Oct. 22 speech in Shenyang City, in northern China’s Liaoning Province, included no audio or video recording, and no media. He can be heard saying that people should not post his speech online, or ‘everyone will look bad,’ in the audio that is now on Youtube,” reports The Epoch Times.

Behind closed doors Lang advised that under China censorship he would not be allowed to pronounce his views, although he claims it is all based on fact.

He is reported to have said: “The media cannot report anything at all. Those of us who do TV shows are so miserable and frustrated, because we cannot do any programs. As long as something is related to the government, we cannot report about it.”

Chinese Economy in Reverse

Lang assessed the Chinese regime to be bankrupt on the the basis that debt was too high (36 trillion yuan, or $5.68 trillion US), and taxes are too high (he assessed the individual tax rate to be at 81.6%).

He also says the regime’s officially published GDP of 9% is a fabrication, and that according to his calculation is actually decreased 10%. In addition, the officially published inflation rate of 6.2% is false. According to Lang the real inflation rate is 16%.

Lastly, “there is serious excess capacity in the economy, and that private consumption is only 30 percent of economic activity. Lang said that beginning this July, the Purchasing Managers Index, a measure of the manufacturing industry, plunged to a new low of 50.7. This is an indication, in his view, that China’s economy is in recession.”

Support for Lang

Lang’s speech has received support from several commentators. For example, Professor Frank Xie at the University of South Carolina, doesn’t believe the official figures produced by lower level officials and believes it entirely plausible China’s economy is in recession.

Cheng Xiaonong, an economist and former aide to ousted Party leader Zhao Ziyang, says there is enormous waste and corruption in China, and money is not properly spent on quality-of-life systems such as education, welfare and healthcare.

“Cheng says that for the last decade the Chinese regime has accumulated its wealth primarily by promoting real estate development, buying urban and suburban residential properties at low prices (or simply taking them), and selling them to developers at high prices,” reports The Epoch Times.

Looking for Proof?

We’ve collected price data for about 180 U.S.-listed Chinese stocks, and identified 10 Chinese stocks that have been on long losing streaks over the last 30 days.

All of these Chinese stocks have underperformed their U.S. counterparts over the last month.

Does this reflect the bearish views on the Chinese economy, or have investors become too negative on Chinese stocks?

Analyze These Ideas (Tools Will Open In A New Window)

1. Access a thorough description of all companies mentioned
2. Compare analyst ratings for all stocks mentioned below
3. Visualize annual returns for all stocks mentioned

List sorted by market cap.

1. 21Vianet Group Inc. (VNET): Provides carrier-neutral Internet data center services in China. The stock's average daily alpha vs. the S&P500 index stands at -1.26% (measured close to close, over the last month). During this period, the longest losing streak lasted 9 days (i.e. the stock's daily returns underperformed the S&P 500 for 9 consecutive days). The longest winning streak lasted 2 days (i.e. a win streak / losing streak ratio of 0.22).

2. eLong Inc. (LONG): Operates as an online travel service provider in the People's Republic of China. The stock's average daily alpha vs. the S&P500 index stands at -1.2% (measured close to close, over the last month). During this period, the longest losing streak lasted 4 days (i.e. the stock's daily returns underperformed the S&P 500 for 4 consecutive days). The longest winning streak lasted 2 days (i.e. a win streak / losing streak ratio of 0.5).

3. Noah Holdings Limited (NOAH): Engages in the distribution of wealth management products to the high net worth population in China. The stock's average daily alpha vs. the S&P500 index stands at -0.82% (measured close to close, over the last month). During this period, the longest losing streak lasted 5 days (i.e. the stock's daily returns underperformed the S&P 500 for 5 consecutive days). The longest winning streak lasted 1 day (i.e. a win streak / losing streak ratio of 0.2).

4. China Ming Yang Wind Power Group Limited (MY): Designs, manufactures, sells, and services megawatt-class wind turbines in China. The stock's average daily alpha vs. the S&P500 index stands at -1.09% (measured close to close, over the last month). During this period, the longest losing streak lasted 6 days (i.e. the stock's daily returns underperformed the S&P 500 for 6 consecutive days). The longest winning streak lasted 2 days (i.e. a win streak / losing streak ratio of 0.33).

5. Bitauto Holdings Limited (BITA): Provides Internet content and marketing services for the automotive industry in the People's Republic of China. The stock's average daily alpha vs. the S&P500 index stands at -1.24% (measured close to close, over the last month). During this period, the longest losing streak lasted 5 days (i.e. the stock's daily returns underperformed the S&P 500 for 5 consecutive days). The longest winning streak lasted 2 days (i.e. a win streak / losing streak ratio of 0.4).

6. China Biologic Products, Inc. (CBPO): Engages in the research, development, manufacturing, and sale of plasma-based pharmaceutical products. The stock's average daily alpha vs. the S&P500 index stands at -1.51% (measured close to close, over the last month). During this period, the longest losing streak lasted 4 days (i.e. the stock's daily returns underperformed the S&P 500 for 4 consecutive days). The longest winning streak lasted 1 day (i.e. a win streak / losing streak ratio of 0.25).

7. VisionChina Media Inc. (VISN): Provides advertising services in the People's Republic of China. The stock's average daily alpha vs. the S&P500 index stands at -1.21% (measured close to close, over the last month). During this period, the longest losing streak lasted 6 days (i.e. the stock's daily returns underperformed the S&P 500 for 6 consecutive days). The longest winning streak lasted 3 days (i.e. a win streak / losing streak ratio of 0.5).

8. China Medical Technologies Inc. (CMED): Develops, manufactures, and markets immunodiagnostic and molecular diagnostic products. The stock's average daily alpha vs. the S&P500 index stands at -1.25% (measured close to close, over the last month). During this period, the longest losing streak lasted 9 days (i.e. the stock's daily returns underperformed the S&P 500 for 9 consecutive days). The longest winning streak lasted 1 day (i.e. a win streak / losing streak ratio of 0.11).

9. Hanwha SolarOne, Ltd. (HSOL): Provides various energy solutions including silicon ingots, wafers, monocrystalline and polycrystalline solar cells, and solar modules. The stock's average daily alpha vs. the S&P500 index stands at -1.12% (measured close to close, over the last month). During this period, the longest losing streak lasted 4 days (i.e. the stock's daily returns underperformed the S&P 500 for 4 consecutive days). The longest winning streak lasted 2 days (i.e. a win streak / losing streak ratio of 0.5).

10. Tudou Holdings Limited ADR (TUDO): Operates as an online video company in the People's Republic of China. The stock's average daily alpha vs. the S&P500 index stands at -0.98% (measured close to close, over the last month). During this period, the longest losing streak lasted 5 days (i.e. the stock's daily returns underperformed the S&P 500 for 5 consecutive days). The longest winning streak lasted 1 day (i.e. a win streak / losing streak ratio of 0.2). 



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks


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