Bears Are Clearing Out of China

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Chinese Internet companies aren't racing back into fashion, but naysayers are starting to clear out of the world's most populous nation.

The market exchanges are out with their latest tallies on short sales, and the number of bearish wagers as of mid-April have been falling sharply for many of the country's bellwethers.

  • There were just 2.2 million shares of Dangdang (NYSE: DANG  ) sold short. That's a 52-week low for the Chinese e-tailer, and well below the 9.6 million shares that were sold short in May of last year.
  • SINA (NASDAQ: SINA  ) also clocked in with a new low. There were just 1.8 million shares in bearish wagers against the online portal behind the Twitter-like SINA Weibo platform. There were 9 million shares sold short 10 months ago.
  • Renren (NYSE: RENN  ) came in at 3.8 million shares sold short, near its low of 3.1 million just two weeks earlier. There were 24.9 million shares of Renren borrowed by skeptics of the leading social networking website operator in May of last year.

The exodus isn't universal. Youku Tudou (UNKNOWN: YOKU.DL  )  had 11.2 million shorted shares as of mid-April. The leading video streaming website hasn't had this many naysayers since late last year.

Then there's Baidu (NASDAQ: BIDU  ) . China's largest online search engine had a recent record 12.8 million shares sold short at the end of March. That number dipped to 12 million on April 15, but it's naturally too early to claim that the bears are moving on at Baidu.

However, the general direction or market sentiment is shifting away from shorting Chinese equities. It's a smart move. Yes, China's economy is having its growth hiccups, but these companies for the most part are growing a lot faster than their stateside counterparts.

Outside of SINA, these companies are expected to grow their revenue by at least 28% this year. SINA's 14% projected top-line spurt isn't exactly shabby, either.

The companies aren't perfect. Dangdang, Renren, and Youku Tudou are all presently losing money. Baidu fell short on the bottom line in its latest quarter. However, these are all companies that are clearly growing in popularity judging by the healthy double-digit revenue growth.

You're doing the right thing, bears. You don't want to get in China's way when it does bounce back.

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Read/Post Comments (4) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 25, 2013, at 4:22 PM, plange01 wrote:

    baidu headed back over $150 by mid summer

  • Report this Comment On April 25, 2013, at 4:54 PM, bjasleep wrote:

    And in other news, BIDU shares are dropping 8% in afterhours trading following release of quarterly earnings.

  • Report this Comment On April 26, 2013, at 1:16 PM, RRobertsmith wrote:

    nothing is worth a P/E of 106, GDam do your home work!

  • Report this Comment On July 16, 2013, at 2:09 PM, IQChina wrote:

    Bidu acquisition of Renn is an amazing possibilty. Stock would virtually double overnight! Renn is to Bidu as Facebook would be to Google! They would love to own facebook but missed the opportunity. Bidu is not only copying Google, perhaps they will learn from them as well! Bidu's recent acquisitions make this an even more likely possibility.

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