Chinese growth stocks stormed higher last week.
Baidu (BIDU 0.16%) busted through with a 15% pop on the week, fueled by its proposed $1.9 billion deal for China's leading mobile apps marketplace operator. Through its two leading exchanges, 91 Wireless has dished out 10 billion downloads for smartphones and tablets.
Baidu is the undisputed champ when it comes to desktop search in the world's most populous nation, but the former dot-com darling has been struggling to position itself as a growth play in the mobile boom that's taking place worldwide.
Baidu is still growing nicely -- and investors should see that when the search leader reports quarterly results on Wednesday -- but investors applauded the company's bold move to become a bigger player in mobile.
Are investors finally ready to buy back into China? Are the high growth rates and often reasonable valuations enough to outweigh the geopolitical risks of buying into Chinese growth stocks?
Let's take a closer look at some of the other winners from last week.
|
Company |
July 19 |
Weekly Gain |
|---|---|---|
|
Shanda Games (NASDAQ: GAME) |
$5.74 |
40% |
|
NQ Mobile (NYSE: NQ) |
$11.21 |
17% |
|
Xinyuan Real Estate (XIN +0.00%) |
$4.76 |
15% |
|
Dangdang (DANG +0.00%) |
$7.91 |
14% |
Source: Barron's.
Shanda Games was China's biggest winner, soaring 40% after making some serious headway with a brand new mobile app.
Million Arthur rolled out of beta into China's iOS App Store and within eight hours was the third highest grossing application across all categories.
Shanda Games specializes in massively multiplayer online games that are wildly popular in China's Internet cafes and the growing number of PC-equipped homes. However, just as Baidu is establishing itself as a force beyond desktop search, Shanda's early success in mobile shows that it's also ready to cash in on the migration. Shanda claims that it has several mobile games in its pipeline.
NQ Mobile moved higher after providing a rosy preliminary report on its second-quarter results. The Beijing-based provider of mobile Internet services now expects revenue to have topped $40 million for the period that ended in June.
Just two months ago, NQ Mobile was targeting just $38.5 million to $38.8 million in net revenue for the quarter. NQ Mobile also announced that it would be buying the minority stake of Beijing NationSky Network Technology that it didn't own in a $25.2 million deal.
It's also not just stateside homebuilders rallying these days. China's Xinyuan Real Estate Co. moved nicely higher last week after expanding its existing share buyback plan. The residential real estate developer approved an additional $60 million share repurchase program this week.
This isn't just lip service. Xinyuan has already bought back nearly half of the $20 million share repurchase program that it had announced just last month. The buybacks are a smart move since it's already paying what amounts to a 4.2% yield on its current shares outstanding.
Finally, we have Dangdang on the move.
The speedy yet profitless online retailer didn't have any company-specific news fueling its rally, but the entire Chinese e-commerce space cheered the robust quarterly results of its rock star. Alibaba -- the country's biggest player in e-commerce -- rallied after reporting that earnings roughly tripled in its latest reporting period.
Dangdang got its start selling books online -- just like this country's top dog -- but has gone on to expand to higher margin media and general merchandise. Dangdang has also embraced a commission-based marketplace where it resells goods for third parties.
Dangdang isn't expected to turn profitable until 2015 at the earliest, but it's expected to grow its sales at a better than 20% clip through the next couple of years.
Betting on China
There's plenty of growth still to be had if you buy the right Chinese growth stocks.
