Rallying Chinese Stocks or a $170 Million Titanic Replica?

Rallying Chinese Stocks or a $170 Million Titanic Replica?

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An energy company is resorting to an unconventional method to highlight waste: a massive replica of the Titanic.

Sichuan Seven Energy Investment Group (SSEIG), a Chinese energy company, takes risk seriously. So seriously, that it's willing to spend a billion yuan to "inspire responsibility" as Chinese growth begins to peter out. Rather than capital requirements, interest rates, or some of the other methods traditionally used to hedge against risk – Sichuan has another idea.

Build a huge replica of the Titanic

If you're wondering whether a $170 million copy of an industrial-era ocean liner is the best way to impart lessons about frugality, you're probably not Chinese. This isn't even the first time a large-scale replica has been considered. Ever since the 1997 film Titanic dominated box office revenues for over a decade, Chinese investors have salivated over ways to use Titanic fever to their advantage, particularly in less populated regions where there are fewer options for tourists. 

Sink or swim

The fact is, there are plenty of people who feel like it might be time to think outside of the box. China's growth has been mostly a result of fixed asset investment. Fixed assets are assets that can't be readily converted into cash – things like factories, buildings, or equipment. 

China has been investing heavily in fixed assets, which accounted for over 55% of GDP growth this year. But analysts are starting to wonder whether or not the government can continue building so much without incurring the risk of asset bubbles: China has already built more buildings than it needs.

Read more: Chinese Hydropower, Investing Idea or Just Another Industrial Complex?

So while it's hard to fathom how a scale model of the Titanic might address some of these fundamental problems, there is some optimism for China's economic policies in 2014. The government has already begun taking some steps to spur growth, particularly in the private sector. China has lowered the number of items which require government approval, and set up new special economic zones besides Shanghai. 

Investing ideas

Banks have a mean target for Chinese GDP growth that usually ranges between 6-8%. The real bet people are making is not whether China will embrace the cultural legacy of the Titanic, but how effective China's new government will be at implementing reforms. 

Now, while China's central government isn't so great at encouraging a free market – it can often move much more swiftly than American authorities can. And with a new leader who seems cautiously optimistic about the future of Chinese capitalism, low valuations for Chinese equities, and the restoration of Chinese IPOs – there are reasons why 2014's doubters may want to take a second look.

We decided to screen Chinese stocks that trade on US exchanges, looking for low risk options. To do that we looked for rallying stocks with a low beta. This indicates that these companies will improve moderately, in line with the Chinese economy. All of these stocks have a beta below 1.5, which means they are no more than 50% more volatile than the market as a whole (in theory.) These Chinese companies are also rallying at least 15% above their simple moving average (MA) for the last 200 days, a sign of strong upward momentum.

Just five US-listed Chinese stocks remained on our list. 

Click on the interactive chart below to view analyst ratings over time. 

Do you see any investing opportunities in these rallying, Chinese stocks? Use the list below to begin your analysis. 

1. New Oriental Education & Technology Group (EDU, Earnings, Analysts, Financials): Provides private educational services primarily in the People's Republic of China. Market cap at $5.07B, most recent closing price at $32.63.

Beta: 1.03

Trading 38.49% above 200 day MA. 

 

2. Giant Interactive Group, Inc. (GA, Earnings, Analysts, Financials): Develops and operates online games in the People's Republic of China. Market cap at $2.59B, most recent closing price at $10.84.

Beta: 1.08

Trading 27.83% above 200 day MA.

 

3. NetEase.com, Inc. (NTES, Earnings, Analysts, Financials): Engages in the development of applications, services, and other technologies for the Internet in China. Market cap at $10.19B, most recent closing price at $81.77.

Beta: 1.09

Trading 18.39% above 200 day MA.

 

4. Sina Corp. (SINA, Earnings, Analysts, Financials): Provides online media and mobile value-added services (MVAS) in the People's Republic of China. Market cap at $5.56B, most recent closing price at $85.72.

Beta: 1.45

Trading 17.59% above 200 day MA.

 

5. WuXi PharmaTech (Cayman) Inc. (WX, Earnings, Analysts, Financials): Provides laboratory and manufacturing services to support research and development for pharmaceutical, biotechnology, and medical device companies. Market cap at $2.68B, most recent closing price at $37.67.

Beta: 1.3

Trading 48.4% above 200 day MA.

 

(List compiled by James Dennin. Analyst ratings sourced from Zacks Investment Research. All other data sourced from Finviz.)

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One Response to “Rallying Chinese Stocks or a $170 Million Titanic Replica?”

  1. Frank says:

    Searching a good source is tough task but I easily find you. Thanks for providing a great article. I love to read informative blogs to get best knowledge.

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