Jan. 23, 2010 (Chinavestor) The third week of trading brought sharp correction to American and international markets alike yet economic indicators suggest a milder course. Investors chose to see the glass half empty rather than half full. Stocks mentioned in this report include Spreadtrum Communications (NASDAQ:SPRD), Chindex International (NASDAQ:CHDX), kyPeople Fruit Juice, Inc. (AMEX:SPU), JA Solar (NASDAQ:JASO), China Sunergy (NASDAQ:CSUN), City Telecom (NASDAQ:CTEL), Baidu.com (NASDAQ:BIDU), Yanzhou Coal (NYSE:YZC) and Aluminum Corp. of China (NYSE:ACH).
Chinese shares tumbled as investors grew anxious about an early stimulus exit and fear from credit tightening after China reported Q4 GDP growth of 10.7%, exceeding expectations. Inflation picked up and grew 1.9% in December, the second straight month of increase after 13 months of decline as the economy recovered. It looks as if China got punished for too fast of a growth - and America got punished for lack of it. Chinese policy makers reacted swiftly by increasing reserve ratios for banks to curb liquidity, increased one-month T-bill rates the highest in 16 months to fight inflation and signaled that government stimulus will gradually fade away, keeping government debt in check. Yet, investors reacted if China would choke off growth prompting a heavy selloff.
In the U.S., the DJIA tumbled -552.45 points or -5.2% in the last three days and was off 4.1% for the week following news that President Obama is seeking to limit role of banks in the investment segment thus hurting their profitability. Slower American economic growth and higher unemployment numbers signaled that the economic recovery will be gradual. Markets shrugged off strong earnings from Intel (NASDAQ:INTC) and UnitedHealth (NYSE:UNH), among others, and focused on the negative instead. And finally, the DJIA took a dive on Friday afternoon as support for renomination of FED Chairman Ben Bernanke waned.
Only a handful of stocks surprised to the upside for the week. Spreadtrum Communications (NASDAQ:SPRD), a TD-SCDMA phone maker, jumped 12.9% - but TD-SCDMA service provider, China Mobile (NYSE:CHL) fell. Chindex International (NASDAQ:CHDX) was an oversold China stock that was ready for a bounce back. We highlighted CHDX last Friday in the overbought/oversold report and picked in for the TOAST list for Advanced Members. Chindex Int. (NASDAQ:CHDX) jumped 7.5% on Tueasday and ended 4.5% higher for the week. Strong Friday post market gains suggests more upside is on the road for the stock.
SkyPeople Fruit Juice, Inc. (AMEX:SPU) reported strong preliminary numbers with a sweetened outlook, enjoyed a Roth upgrade to BUY - sending her shares up 26.09% for the week. We published an article Wednesday morning after the Tuesday jump, giving investors some insight into the company.
But most of the action took place on the oversold end of the Chinese stock universe. Solar stocks got into a double whammy as price of oil dived to three months lows and German subsidies, the largest market for solar products, got curbed. JA Solar (NASDAQ:JASO) fell -18.4% for the week followed closely by China Sunergy (NASDAQ:CSUN) and Trina Solar (NYSE:TSL). Outlook for solar stocks remain good for the medium term, and is expected to get a reaffirmation as they're going to report Q4 earnings early in February, but volatility is here to stay for the sector.
City Telecom (NASDAQ:CTEL) got hammered the week - but that is just a technical correction in our opinion. City Telecom (NASDAQ:CTEL) have appeared within Chinavestor growth portfolio last year and have achieved a remarkable run, but the stock became overbought last week and was ready for a pull back. When a stock is overbought while markets head south, sharp correction is inevitable.
This was the case for Baidu.com (NASDAQ:BIDU), China's largest search engine company. News that Google Inc. (NASDAQ:GOOG) will exit China sent shares of BIDU up $75 to $470 at one point, but BIDU became extremely overbought and got punished when markets turned around. See a 7 day price chart of Baidu.com (NASDAQ:BIDU).
Shares of Yanzhou Coal (NYSE:YZC) and Aluminum Corp. of China (NYSE:ACH) fell sharply for the week. Price of coal is following international oil prices very closely in China and when oil is at three months low, coal markets are hurt. Weakness was not limited to Yanzhou Coal (NYSE:YZC); share price of China Shenhua (HKG:1088), the largest Chinese coal miner, fell 8.98% for the week.
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