A recent crackdown by the Securities and Exchange Commission on reverse mergers of Chinese company's looking to list on the U.S. exchanges is given as a reason why many China stocks trading as ADRs are down significantly so far in 2011. For example, the year old China Special Situations Fund is down 20 percent year-to-date. For investors looking to participate in China's projected 7 percent to 8 percent annual economic growth rates, the recent pull back in the prices of China stocks may be a buying opportunity.
Here is a list of a select group of five China ADRs which are either widely recommended or widely held by professional money or hedge fund managers.
New Oriental Education & Technology Group (NYSE: EDU) is 25 percent off its 52-week high of $131. The stock has a market cap of $4 billion. The company provides a wide range of educational and testing services in China. Revenue is projected to grow at a 26 percent annual rate for the next five years.
Sina Corporation (Nasdaq: SINA) is 40 percent below its 52-week high of $147. Sina provide internet portal and mobile content services. The company reported a revenue and earnings shortfall in recent quarters, but earnings growth is expected to rebound at a 40 percent annual clip for this and next year.
LDK Solar Company, Ltd. (NYSE: LDK) is more than 50 percent below the 52-week high. Net income is projected lower for 2011 and 2012 than in 2010, but the share price is at just 3 times projected 2011 earnings. LDK has a current market cap of $1 billion.
China Kanghui Holdings (NYSE: KH) is a choice for momentum stock pickers. KH has been in an up trend since its IPO in August 2010, doubling in value in 10 months. This medical supplies manufacturer is projected to triple net income for 2011 and the five year growth estimates are around 25 percent. Market cap is $500 million.
VanceInfo Technologies Inc. (NYSE: VIT) is a provider of information technology services in China. The share price is half off the 52-week high of $41. The five year projected growth rate for VIT is close to 30 percent per year. Current market cap is $900 million.
Chinese ADR shares can be very volatile, so timing can help if you find a stock or three here of interest. China's economic growth prospects significantly exceed what is expected in the U.S. and other established economies. Some China exposure in a stock portfolio makes sense, especially if the stocks can be picked up a bargain bin prices.