Playing the Turnaround in the Chinese Economy

U.S.-listed Chinese stocks that are bouncing off their all-time lows are plentiful, and there is now a lot of value in this group. We know that China is experiencing a slowdown from its recent economic growth; this was engineered and encouraged by policymakers to contain a housing bubble. The combination of weaker business conditions and the virtual abandonment of Chinese stocks by institutional investors has created significant opportunities to try the buy low/sell high investment strategy. What’s clear is that it will take a while for China to recover from its current slowdown. It may be a little too early to take on new positions in Chinese stocks, but there are many worth following for the future.

One such Chinese stock that just bounced off its all-time low is China Ceramics Co., Ltd. (NASDAQ/CCCL). The company manufactures and sells ceramic tiles in China for exterior siding and flooring. Customers are in both residential and commercial markets. The company’s backlog of orders is in decline and it has already pre-announced weak expectations for the fourth quarter. But this is a stock worth keeping on your radar screen, because when China’s real estate market reaccelerates, so will business conditions for companies like China Ceramics. The company’s stock chart is featured below:
Of course, it goes without saying that Chinese stocks are super high-risk securities; they’ve proven this in recent history. But value is value, and I’d rather speculate in Chinese stocks that are down and out over any other type of strategy in this group.

Another small U.S.-listed Chinese stock that’s struggled on the stock market for the last two years is Lihua International, Inc. (NASDAQ/LIWA). While the company’s growth is slowing, its latest quarterly results were strong, and its share price is about equal with the amount of cash per share it has in the bank. Lihua’s stock chart is below:
As is always the case, timing is everything in the investment business. I suspect that it’s a little too early to consider new speculative positions among Chinese stocks. The group doesn’t have any momentum in this market. But I do think that if China’s economy can improve in 2013, then a lot of these stocks will turn around. There will be a time when value among Chinese stocks returns to growth, but we’re not quite there just yet.

Source: http://www.pennystockdetectives.com/