Chinese stocks continued to outperform yesterday and may portend
a broader sentiment shift that could last weeks or even months into
optionMONSTER's Heat Seeker tracking system detected a surge of
bullish activity in names such as Baidu.com, Sohu, and Sina, which
ripped to new all-time highs. Most of the attention focused on
companies in the Internet and e-commerce sectors.
BIDU, as usual, was the most active stock, followed by SINA. Both
traded about twice as many contracts as average amid heavy call
volume and put selling, which reflects a belief that downside is
limited and more gains are likely.
SOHU stood out relative to its normal activity, with more than
21,000 contracts trading compared with 3,623 in a typical session.
Calls outnumbered puts by about 5 to 1 as new money flowed into the
April 100s and the April 110s. The stock ended the session up 7.06
percent to $97.30.
SOHU and SINA are web-portal businesses similar to Yahoo or AOL,
offering a mix of media and services, while BIDU is a search engine
Another stock that caught attention was online travel agency
Ctrip.com International, which has soared 13 percent in the last
two weeks. Melco Crown Entertainment, an operator of casinos in
Macau, also surged amid a wave of call buying.
The iShares FTSE/China 25 Index (
), which tracks Chinese equities, rose another 1.89 percent to
$46.35 yesterday and is up 11 percent in the last two weeks. It's
outperformed most other emerging markets and delivered almost
triple the return of the S&P 500 over that period.
Most of the options activity in the fund, however, was bearish
because investors tend to use it as a hedging instrument.
The recent enthusiasm follows about a year of weakness, during
which investors worried about rising inflationary pressures. As
optionMONSTER anticipated in early March, those concerns are now
easing and developing countries' long-term secular bullish trends
appear to be resuming.
One noteworthy exception to the optimism in Chinese stocks was the
solar sector, which continued to struggle yesterday. See this
recent article for more on the problems facing that industry.