Two Chinese Stocks in Review: China Presenting Value Oppty
I’m becoming convinced that Chinese stocks are presenting an opportunity for swing traders. These particular stocks accomplish their moves in gaps. Here is China Life Insurance (LFC):
To see China Life trading in the $50 range after last year’s parabolic run, which began in many of these names last August, for the institutional long-term buyers, this is somewhat of a reprieve. The market is overly discounting China right now, a lot of bad p.r. around the Olympics, but the stimulus injection the Olympics will undoubtedly create will be felt this year and next.
At the very least, I think a more appropriate price for China Life is much closer to $75. Continued strength in the Yuan will have a positive effect on these names, so $85 could be forecast by some estimates. On the flip side, to attach a bearish pair to this long idea, one might consider Aluminum Co. of China (ACH). At $40, it remains overvalued and the same positive factors influencing China Life are acting as a headwind for China Aluminum. I see fair value for ACH close to $24.
China Southern is the country’s largest carrier, and their growth is mind boggling but not surprising. Look at these ratios:
Long term weekly chart of China Southern (ZNH):
My numbers suggest China Southern is worth closer to $50 based on their recent earnings release. Again, institutional long-term buyers are relieved about where prices are now compared to the runaway in early ’07.
