Value Investing Practical Applications
Nearly 500 stocks drop and hit the maximum daily limit (10%). What has happened oversea?
Hi there, this is Changsheng.
I should have a new post last night, but I had too many things going on last night with the Chinese Stock Market.
This is what basically what happened last night.
- Nearly 500 stocks (473) hit the maximum daily fall limit (-10%).
- Out of 3,278 companies, only 155 are reported to have growth yesterday.
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| SSE Composite Index daily candle sticks |
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| SSE 07/17 minute chart |
- Shanghai Composite Index (SSE Composite Index) Ticker: SHA000001 -45.96 (-1.43%)
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| SZSE Component Index candle sticks |
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| SZSE minute chart |
- Shenzhen Component Index (SZSE Component Index) Ticker: SZSE399001 -371.99 (-3.57%)
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| Chinext Price Index candle sticks |
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| Chinext Price minute chart |
- China Growth Enterprise Market Index (Chinext Price Index) Ticker: SHE399006 -89.13 (-5.11%)
In fact, people actually did not lose that much
Cause Chinese government has big invest of those Weighted stock, so the index usually won't drop that much as other.
Cause Chinese government has big invest of those Weighted stock, so the index usually won't drop that much as other.
What is the reason, why it suddenly drop that much?
Possible Reasoning for the Drop:
- China Growth Enterprise Market Index Weighted stocks (Le.com, Guangdong Wens Foodstuff Group Co Ltd, Beijing Sanju EP& New Materials Co Ltd, etc.) drop because of big Negative New.
- A lot of Small cap stocks have really low Volume. And China doesn't have Market maker system when people sell, there is no fluidity. And this situation will spread like a virus, finally become a vicious circle.
- I think this is the most important point, Chinese stock market has a lot of stocks that have no investing value. They have really high PE ratio, low net assets, and don't have any cash flow. So when something happened, that big money won't get involved in the mess.
Recommendations:
- Get away from those "useless trash" as soon as possible.
- Look for stocks that got "Manslaughter".
- Allocation part of the position on blue chips, "Nifty Fifty" appropriate.
- If not able to sell the stocks (cause the Limit rule), buy in July Chinext Price Index put options, Exercise price 1600 or 1550.
My position:
- PingAn Insurance Company of China. Ticker: SHA.601318
- Gree Electric Appliances Inc of Zhuhai. Ticker: SHE.000651
- Kweichow Moutai Co., Ltd. Ticker: SHA.600519
- SAIC Motor Corporation Limited. Ticker: SHA.600104
- GF Securities Co., Ltd. Ticker: SHE.00776
Recently position changed:
1, Sell out Shanghai Fosun Pharmaceutical (Group). Ticker: SHA.600196
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| Fosun Pharmaceutical daily candle sticks (March~now) |
Reason:
06/22 China Securities and Exchange Commission has a report that is about Fosun Group investing over-sea in America. The report only mentioned Fosun Group have a big investment in America but didn't say any specific about how is the investment. But the market over thought about the information, so Fosun Pharmaceutical dropped 8.02% that day.
Since that day, Fosun has never made it way back to 32.50, I feel like its shape is already bad.
And combine what happened yesterday, I make a decision to sell all of the shares.
2, Sell part of the Kweichow Moutai Co., Ltd. Ticker: SHA.600519
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| Kweichow Moutai daily candle sticks (March~now) |
Reason:
Even those it is one of the "Nifty Fifty" stock, but it also is the most expensive stock in China.
It hit ￥485 per share in 06/26 after then it starts falling back. So I'm thinking to sell some of it and buy back when the next wave comes.
That is about all of it for today.
Remember to keep your eye on inside value of the stock.
曾昶升
2017/07/17
20:47
Disclaimer:
All the information is collected online.
All investments involve risk, including loss of principal. Past performance does not guarantee future results. There is no assurance that the investment process will consistently lead to successful investing. Asset allocation and diversification do not eliminate the risk for experiencing investment losses.
All the recommendations is base on personal experience, I'm not responsible for any action taking based off of my recommendations.
Disclaimer:
All the information is collected online.
All investments involve risk, including loss of principal. Past performance does not guarantee future results. There is no assurance that the investment process will consistently lead to successful investing. Asset allocation and diversification do not eliminate the risk for experiencing investment losses.
All the recommendations is base on personal experience, I'm not responsible for any action taking based off of my recommendations.
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