Stock markets around the globe are up significantly in the wake
of the U.S. "fiscal cliff" deal. Many stocks are benefiting, even
those with seemingly indirect links to the U.S. and its fiscal
woes. One Chinese stock is up more than 6%, but questions persist
for the company.
[caption id="attachment_76292" align="alignright" width="300"
caption="Yanzhou's Nantun Coal Mine located south of the
Yanzhou Coal Mining (YZC,
) is up significantly today, providing evidence that perhaps it has
It appears that YZC established a support level at about $14.00
per share between July and November of 2012. With the action
in the stock today it looks like it has broken above short term
resistance near $18.00 per share.
While it does look like it has turned a corner I'll refrain from
making an absolute call. The longer-term chart suggests there
needs to be a bigger move higher to consider the stock to have
begun a new bull phase.
On the three year chart YZC needs to get to approximately $20.00
per share to meet resistance. This means that the profits
shareholders are enjoying today might not last.
Fundamentally Yanzhou has things going both for and against
The current yield is about 5.25%. Yanzhou has a track
record of making dividend payments every year and has done so for
almost a decade and a half.
The dividend amount however has been inconsistent. Since 1999
the dividend has increased from $0.04 to $0.90 but it's been
lowered several times along the way.
It's business is not restricted to China. It also has
mining operations in resource-rich Australia.
The company should do well as China continues to grow. The
ongoing ascension of poor, rural Chinese to middle-class
status will undoubtedly keep coal demand high for years to
In the short-term we're concerned about that growth. China
is in the midst of a hyper-analyzed slowdown, though still growing.
The near term impact of the slowdown on YZC has not been
good. The stock has clearly been negatively affected and if the
current environment persists the stock price and/or the dividend
amount could come down further.
Based upon my research the consensus for the stock is "hold"
which of course could be interpreted to mean "sell". But I
wonder if the worst is now behind YZC. Look for those analyst
ratings to improve as China's economy strengthens.
I'll be keeping an eye on Yanzhou. I want to see that
dividend secured. Once China can
show consistent measurable improvements in its economy I
would expect to see YZC resume a reliable trend higher.
The 6% bump today is nice, but as with the Fiscal Cliff deal, it
could well be fleeting.