4 Rallying Stocks Standing Above the Turbulence in Chinese Markets

4 Rallying Stocks Standing Above the Turbulence in Chinese Markets

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Investors in Chinese companies have been through a wild ride over the last few days. Many stocks plummeted Monday after the People's Bank of China issued strong words of warning to the country's banks, long reliant on cheap and easy cash, illegal inflows of capital and an entire shadow banking sector.

The volatility continued on Tuesday, with the Shanghai Composite Index 0.2% lower at market close, after falling as much as 5.7% during trading. Analysts see further downside to the Chinese market, which has dropped nearly 20% since its peak in mid-February, and is currently trading at the lowest level recorded in four years.

But the bad news shouldn't scare away investors entirely – maintaining some Chinese stocks helps to balance a portfolio across regions (i.e. ex-USA) and brings exposure to companies serving customers with different needs. To find good investment opportunities in the Chinese market, we searched for companies that are rallying despite the current overall declines. 

We screened for companies that are rallying above their 20-day, 50-day and 200-day moving averages (MA), a good indication of strong upward momentum. Next we limited our results to those stocks that are also on winning streaks measured by a persistence of days in which the stock outperformed the S&P 500, and little to no persistence of days underperforming the index. We measured this by the ratio of the longest winning streak (in days) divided by the longest losing streak over the last month.

There were four Chinese companies trading on US exchanges that met our criteria. 

The List

Click on the image below to see returns over time. Monthly returns‪ sourced from Zacks Investment Research.‬​

Do you see investment opportunities in the Chinese market? Use this list as are a starting point for your own analysis.

1. Phoenix New Media Limited (FENG, Earnings, Analysts, Financials): Provides content on an integrated platform across Internet, mobile, and TV channels in the People's Republic of China.

Market cap at $399.48M, most recent closing price at $5.21.

Average daily alpha vs. the S&P 500 index stands at 0.96% (measured close to close, over the last month). During this period, the longest winning streak lasted 6 days (i.e. the stock's daily returns outperformed the S&P 500 for 6 consecutive days). The longest losing streak lasted 1 day (i.e. a win streak / losing streak ratio of 6).

20-day MA: 2.61%        

50-day MA: 20.25%

200 day MA: 39.25%

2. The9 Limited (NCTY, Earnings, Analysts, Financials): Engages in the development and operation of online games, and Internet and Website related businesses in the People's Republic of China.

Market cap at $90.06M, most recent closing price at $3.68.

Average daily alpha vs. the S&P 500 index stands at 0.98% (measured close to close, over the last month). During this period, the longest winning streak lasted 7 days (i.e. the stock's daily returns outperformed the S&P 500 for 7 consecutive days). The longest losing streak lasted 3 days (i.e. a win streak / losing streak ratio of 2.33).

20-day MA: 0.47%        

50-day MA: 15.35%

200 day MA: 14.08%

3. Ninetowns Internet Technology Group Company Limited (NINE, Earnings, Analysts, Financials): Engages in the sale of enterprise software, and provision of related after-sales and technique consulting services in the People's Republic of China.

Market cap at $64.92M, most recent closing price at $1.72.

Average daily alpha vs. the S&P 500 index stands at 0.78% (measured close to close, over the last month). During this period, the longest winning streak lasted 8 days (i.e. the stock's daily returns outperformed the S&P 500 for 8 consecutive days). The longest losing streak lasted 3 days (i.e. a win streak / losing streak ratio of 2.67).

20-day MA: 4.40%        

50-day MA: 9.79%

200 day MA: 8.68%

4. Spreadtrum Communications Inc. (SPRD, Earnings, Analysts, Financials): Operates as a fabless semiconductor company that designs, develops, and markets baseband processor and RF transceiver solutions for wireless communications and mobile television markets.

Market cap at $1.21B, most recent closing price at $25.73.

Average daily alpha vs. the S&P 500 index stands at 2.06% (measured close to close, over the last month). During this period, the longest winning streak lasted 6 days (i.e. the stock's daily returns outperformed the S&P 500 for 6 consecutive days). The longest losing streak lasted 2 days (i.e. a win streak / losing streak ratio of 3).

20-day MA: 26.59%        

50-day MA: 27.78%

200 day MA: 38.62%

 

 

(List compiled by Emily Smykal. All data sourced from Finviz.)

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