It was another day of ugly overnight macro data, all of it ouf of China, with industrial production (8.6%, Exp. 9.5%, Last 9.7%), retail sales (11.8%, Exp. 13.5%, Last 13.1%) and fixed asset investment (17.9% YTD vs 19.4% expected) all missing badly and confirming that in a world of deleveraging, the Chinese economy will continue to sputter.
By Max Magee
While the market was positive last week for the first time in six weeks, speculative segments continue to struggle, weighed on by economic concerns, and, for Chinese names especially, ongoing concerns about accounting irregularities.
The good news for stocks started overnight when the final Chinese HSBC Manufacturing PMI printed well below the 49.4 expected, or at 48.9, the biggest contraction in one year, which meant calls for more easing would be imminent. And naturally, after starting off eark, the Shanghai Composite closed near its highs, up 0.9%.
Positive economic data has lit a fire under Chinese equities. Regardless of whether the data is legit or fabricated, accelerated price action for Chinese stocks makes now a good time for a review of the key Internet stocks operating in China.
Chinese Internet stocks combine two of the of the most popular stories for equities post-crisis:
Chinese online real-estate stocks have made a strong start this year, following a significant sell-off in 2014. Three major Chinese online real-estate stocks, namely, SouFun Holdings Ltd (NYSE:SFUN), Leju Holdings Ltd (ADR) (NYSE:LEJU), and E-House (China) Holdings Limited (ADR) (NYSE:EJ), gained 11-14% on Friday.
Macquarie Private Wealth released its 2013 global outlook on Wednesday, predicting U.S. stocks would outperform Canadian stocks again this year and declaring the “resource price boom over.”
The S&P/TSX Composite index has lagged behind the S&P 500 two years in a row now. In 2012, the index rose 7.2%, but trailed the S&P 500′s much more impressive 16% climb. Macquarie expects the gap to continue in 2013 as resource prices hold steady this year.
The speculative fever in Chinese stocks has reached 11 on the Spinal Tap amplifier of euphoria. Last week saw a stunning 900,000 new stock trading accounts opened - the most since October 2007 (right before the Shanghai Composite collapsed 70% in the following 9 months).
Chinese export data over the weekend surprised investors and traders across the globe when it reflected a decline of 18.1% year-over-year (YoY) in February, missing analysts’ estimates of a 6.8% increase. China also reported a negative trade balance for February; the trade deficit was $22.98 billion while analysts had projected a $14.5 billion surplus. Following the release of the Chinese data, benchmark prices for iron ore fines 62% at the Tianjin port fell 8.3% to $104.70 per dry metric tonne, posting the second-biggest single-day drop.