China-Related Stocks Zoom on Trade Optimism
Move over, Internet-stock mania: The new mania is for anything China-related.
U.S.-traded stocks of many Chinese companies--and of some companies that merely hope to do more business in China proper--rocketed on Wednesday, reflecting a panicked hunt for businesses that could benefit from the new U.S.-China trade pact.
The gains in some of the stocks put even some of this year’s hottest U.S. Internet stocks to shame.
Among the day’s biggest winners was Hong Kong-based paper distributor Dransfield China Paper, whose Nasdaq shares have traded only four days since Oct. 1.
Their previous quote was 44 cents a share on Monday. On Wednesday they rocketed as high as $29, then closed at $11.13, for a 2,430% one-day net gain.
More than 1.3 million shares changed hands--compared with average volume of just 8,533 shares the last three times the stock traded.
Veteran Wall Streeters could only shake their heads, wondering why investors would pay such stratospheric prices for companies it’s doubtful they know much about--other than the China connection.
The trade pact signed Monday is expected to pave the way for China’s entry into the World Trade Organization. China wants to join the WTO to boost its economic prospects.
Under the pact, China will allow foreign investors into its telecommunications industry, which has so far been untouchable by outsiders. Foreign investors will also be able to hold stakes in Chinese Internet-content providers.
The Internet element had fueled a surge in shares of Net service company China.com in recent days. But on Wednesday they fell $22.88 to $105 on Nasdaq--as investors piled into other China-related stocks.
China, with 1.2 billion people, is of course a huge potential market for companies worldwide.
Still, many of the beneficiaries of a more open Chinese economy are likely to be established multinational corporations such as General Electric and Lucent Technologies.
By contrast, the stocks that soared Wednesday are primarily small players, such as China Resources Development, a Hong Kong-based distributor of rubber in China. Its Nasdaq shares leaped 317%.
Like Dransfield China, China Resources’ shares have traded sporadically in recent months.
Some China-related companies cranked up their PR machines this week. Orient Packaging Holdings of Hong Kong issued a press release saying that lower import duties on raw materials, one aspect of the trade pact, will cut the company’s production costs in China. The firm’s shares surged 73% Wednesday to $1.56 on the OTC Bulletin Board.
Ironically, shares of many larger Chinese companies that trade on the New York Stock Exchange failed to participate in Wednesday’s rally. Jilin Chemical fell 56 cents to $9.94, and China Eastern Airlines fell 88 cents to $14.
Some of the Chinese firms may be considered vulnerable to foreign competition.
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One-Day Wonder
Nasdaq-traded shares of Dransfield China Paper, a paper distributor in Southeast Asia, soared Wednesday as investors hunted for China plays. Hourly prices:
Peak: $29
Wednesday close: $11.13
Tuesday close: 44 cents
Note: All Times Eastern
Source: Bloomberg News
China Fever
This week’s rally in U.S.-traded Chinese stocks, fueled by Monday’s landmark trade accord, reached epic proportions Wednesday. Some of the day’s biggest winners:
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Tues. Wed. Intraday 1-day Company Ticker close close high % gain Dransfield China Paper DCPCF $0.44 $11.13 $29.00 +2,430% China Resources Devel. CHRB 6.00 25.00 49.00 +317 Qiao Xing Universal Tel. XING 3.13 11.50 15.88 +268 China Prosperity Intl. CPIH 11.06 32.06 80.00 +190 Amtec ATC 1.13 2.75 3.50 +144 Jinpan Intl. JST 2.38 4.56 6.00 +92 China Yuchai Intl. CYD 1.88 2.88 3.94 +53 Ek Chor China Motorcycle EKC 2.63 3.88 4.94 +48 U.S.-China Industrial CHDX 17.88 25.94 44.00 +45 China Tire Holdings TIR 8.50 10.63 11.63 +25
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Sources: Times research, Bloomberg News
