Chinese stocks trading in the U.S. plunged to a five-week low
last Thursday, with
) leading the pack. The country's largest Internet search engine
fell to its lowest point in a month. The Bloomberg China-US
Equity Index lost 2.7%, falling to 96.49. The Ukrainian crisis
and disappointing economic data were blamed as the major reasons
for this slump.
Dismal Economic Data
According to figures released this month, the official
Purchasing Managers' Index declined to its lowest level in eight
months in February. At 50.2, the figure was lower than January's
reading of 50.5.
Figures released last week were in keeping with this downward
trend. Combined industrial output for January and February
increased 8.6% on a yearly basis. This is the lowest start to a
year in five years. Meanwhile, retail sales for the same period
increased 11.8%. This is the most sluggish pace in nearly a
Tensions regarding the Ukraine crisis subsided after a weekend
vote in Crimea ended peacefully. Moreover, 'modest' economic
sanctions on some Russian and Ukraine officials did not affect
investor sentiment. Consequently, investors pulled out of the
Yen, which is viewed as a safe haven. This was also in keeping
with the weak Chinese economic data released recently.
But the extent of its decline, a fall to an 11-month low was
also a result of the epochal broadening of the currency's daily
trading band. Last Saturday, the People's Bank of China expanded
the daily trading band for the Yen from 1% to 2%.
This is being viewed as a move to discourage speculation, a
result of a continuous appreciation against the U.S. dollar. This
will also go a long way to liberalize the country's current
account and increase international exposure.
Pangs of Change
In fact, this is one of a series of reforms being carried out
by the Chinese government to reduce structural problems. These
include widespread pollution, corruption and vice. Other measures
are aimed at reducing local governmental debt and dubious banking
However, these measures have also reduced consumption, and
affected sectors such as cement and steel. Meanwhile, the
government has fixed its growth target at 7.5% for the year,
considerably lower than the double digit figures achieved over
the last thirty years. However, Chinese Premier Li Keqiang has
said job growth and environmental issues will take precedence
over headline growth going forward.
Slowdown, Not a Recession
Several analysts have suggested that given the economy's
inherent strengths such as large new private savings, low
inflation and massive foreign reserves, it is unlikely that soft
data suggests anything more than a moderation of growth. This
allows the government enough room for further intervention if
Below we present three China stocks which possess the
potential to grow appreciably, each of which also has a good
Noah Holdings Ltd.
) operates in the wealth management space, catering specifically
to high net worth individuals in China. Noah Holding conducts its
operations via Shanghai Noah Rongyao Investment Consulting Co.,
Ltd which handles the bulk of its business. The company's
insurance brokerage operations are carried out by Shanghai Noah
Investment Management Co., Ltd.
Noah Holdings Limited holds a Zacks Rank #1 (Strong Buy) and
has expected earnings growth of 115.90%. The forward
price-to-earnings Ratios (P/E) for the current financial year
(F1) is 12.87.
SouFun Holdings Ltd.
) owns and operates real estate, home furnishing and home
improvement websites in China. These websites offer ecommerce,
listing, marketing and other real estate related services in
China. The company has around 100 offices catering to local
customers. Its primary website www.soufun.com offers information
on real estate for over 320 Chinese cities.
Currently, the company holds a Zacks Rank #1 (Strong Buy) and
has expected earnings growth of 66.70%. It has a P/E (F1) of
JinkoSolar Holding Co.,
Our third choice is
JinkoSolar Holding Co., Ltd.
). The company manufactures products related to solar power.
These products span the complete value chain, from recovered
silicon materials to solar modules. JinkoSolar caters to both
domestic and foreign markets. Its major products are solar
modules and cells as well as silicon wafers.
Apart from a Zacks Rank #2 (Buy), JinkoSolar has expected
earnings growth of 110.70 %. It has a P/E (F1) of 9.14.
Though the near term outlook may seem far from optimistic,
China remains an attractive investment destination. These three
stocks can leverage the country's strong fundamentals and would
make good additions to your portfolios.
BAIDU INC (BIDU): Free Stock Analysis Report
JINKOSOLAR HLDG (JKS): Free Stock Analysis
NOAH HLDGS LTD (NOAH): Free Stock Analysis
SOUFUN HLDG-ADR (SFUN): Free Stock Analysis
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