The shorts are circling around one of this year's best equity
investments in Greater China - Tencent - as well as
targeting a handful of smaller Chinese property stocks such as
Evergrande that have underperformed.
** Over the past year when short-selling in Tencent (as a
percentage of daily turnover) gets to levels seen last week a
squeeze has followed. link.reuters.com/fyg83v
** Risk of a global sell-off in tech remains but Tencent
offers large, liquid access to a sector that has Beijing's
blessings and is uncorrelated to the broader economy and as such
will continue to stay on the radar of longer-term institutional
** In the Chinese real estate market some investors are
smelling blood after the bounce back in share that came partly
on valuations, and as central government efforts to rein in
prices did little to dent demand.
** Among the constituents of the MSCI China smaller Chinese
property firms such as Evergrande, Agile and
Guangzhou R&F Properties have a better ROE and trade
at a lower P/B than the index median. (Median ROE for MSCI China
firms is about 20%, while median P/B sits at 1.6 times).
** But analysts warn that new property curbs that come from
local governments are likely to be more effective and smaller
developers will feel the pinch.
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