China Stocks Down 20% in the Second Quarter

U.S. listed China stocks fell completely out of fashion in the Second Quarter and the average stock lost about 20% in the three months from April to June 2010. Similar to the First Quarter, OTC/BB listed stocks again fared better than those listed on Nasdaq or NYSE. Several of the best known names in the sector like China Agritech (CAGC), Fuqi International (FUQI) or Rino International (RINO) lost half of their value and belong to the biggest overall losers in the U.S. markets last quarter.

There are many reasons for this carnage, from trust issues to short-selling hedge funds, a slew of secondary offerings, restatements, fear mongering about a China collapse and widespread fraud in the sector. However, the business outlook for most China names has not deteriorated. Instead it is still very positive, improved even for companies as China Armco (CNAM), Longwei Petroleum (LPIH) or Universal Travel Group (UTA).

Valuations in the China sector are extremely attractive with many solid players sporting a forward P/E in the low single digits now. It is only a matter of time until renewed interest in value investing and improved sentiment for Chinese stocks will bring the focus of investors back to fundamentals. For now, fear and uncertainty are clearly dominant and suppressed demand for China stocks might lead to lower lows in the near future.

Here is an overview of the Second Quarter highlights:

Main China Index (NYSE, NYSE Amex or Nasdaq)
- 809.03 (down 21.58% in the Second Quarter)
- 4 stocks are up, 35 are down, 1 unchanged

Top Five

• China Yida Holding (CNYD) +15.92%
• Funtalk China Holdings (FTLK) +10.42%
• China XD Plastics (CXDC) +9.67%
• China Information Security (CPBY) +2.56%
• China Biologic Products (CPBO) 0.00%

Bottom Five

• China Agritech (CAGC) -55.86%
• SinoCoking Coal (SCOK) -55.03%
• Xinyuan Real Estate (XIN) -41.38%
• RINO International (RINO) -40.94%
• American Oriental Bioengineering (AOB) -38.99%

OTC China Index
- 1009.04 (down 18.71% in the Second Quarter)
- 5 stocks are up, 34 are down, 1 unchanged

Top Five

• China Swine Genetics (CSWG.OB) +53.75%
• Jingwei International (JNGW) +17.17%
• Emerald Dairy (EMDY.OB) +6.97%
• China Baicaotang Medicine (CNBI.OB) +6.15%
• China New Energy Group (CNER.OB) +3.44%

Bottom Five

• China Carbon Graphite (CHGI.OB) -72.00%
• Changda International (CIHD.OB) -68.05%
• Jade Art Group (JADA.OB) -60.65%
• China Jo-Jo Drugstores (CJJD) -57.92%
• China Industrial Waste Mgmt (CIWT.OB) -49.65%

Quarterly Revision (Third Quarter)

Both China indexes are revised at the beginning of each quarter. Stocks that do no longer meet the requirements are being removed. Reasons could be posting a loss in the most recent quarter, uplisting to a higher exchange or just a huge decline in share price. Following is a list of all changes for both indexes.

Trading China Main Index (NYSE, NYSE Amex or Nasdaq)

Additions

• A-Power Energy (APWR)
• American Dairy (ADY)
• Duoyuan Global Water (DGW)
• eLong (LONG)
• Harbin Electric (HRBN)
• ShengdaTech (SDTH)
• VisionChina Media (VISN)

Removals

• Century 21 China Real Estate (CTC)
• China Agritech (CAGC)
• China Green Agriculture (CGA)
• China North East Petroleum (NEP)
• China Recycling Energy (CREG)
• China Sky One Medical (CSKI)
• Fuqi International (FUQI)

Trading China OTC Index

Additions

• BioPharm Asia (BFAR.OB)
• China Ceramics (CCLTF.OB)
• China Digital Animation Development (CHDA.OB)
• China Energy Corporation (CHGY.OB)
• China Pharmaceuticals (CFMI.OB)
• China Redstone Group (CGPI.OB)
• Energroup Holdings (ENHD.OB)
• Far East Energy (FEEC.OB)
• GC China Turbine (GCHT.OB)
• Kingold Jewelry (KGJI.OB)
• LianDi Clean Technology (LNDT.OB)
• Nutrastar International (NUIN.OB)
• One Bio Corp (ONBI.OB)
• Yayi International (YYIN.OB)

Removals

• Biostar Pharmaceuticals (BSPM, uplisted)
• China Carbon Graphite (CHGI.OB)
• Changda International (CIHD.OB)
• China Industrial Waste Mgmt (CIWT.OB)
• China Jo-Jo Drugstores (CJJD, uplisted)
• China New Energy Group (CNER.OB)
• China RuiTai International (CRUI.OB)
• China Shuangji Cement (CSGJ.OB)
• China Linen Textile (CTXIF.OB)
• China Yongxin Pharma (CYXN.OB)
• Jingwei International (JNGW, uplisted)
• Sino Clean Energy (SCEI, uplisted)
• Sino Gas International (SGAS.OB)
• Shengtai Pharmaceutical (SGTI.OB)