China Stock Ideas

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>>> Asia’s Growth Stocks May No Longer Fly High, Buy Boring SOEs For Value.


By Shuli Ren

Nov 11, 2013



http://blogs.barrons.com/emergingmarketsdaily/2013/11/11/asias-growth-stocks-may-no-longer-fly-high-buy-boring-soes-for-value/?mod=yahoobarrons&ru=yahoo



Bank of America Merrill Lynch issued another note this week suggesting investors sell the high-flying growth stocks and buy the cheap state-owned enterprises.

The bank sorted the largest 100 Asia ex-Japan stocks by price-to-book. Year-to-date, the 20 most expensive stocks (by price-to-book) rallied up an average 52% to their respective highs. By contract, the 20 cheapest stocks lost 16% to their recent lows.

But there are signs some of the most expensive names are coming down. In India, Hindustan Unilever, trading at a whopping 44.3 times book value, lost 7.3% this quarter versus the S&P BSE SENSEX Index‘s 6.8% gain. Stocks that trade at such high multiples can be extra sensitive to earnings revisions and Hindustan Unilever has a 4.3% consensus downside. Tobacco company ITC, which trades at 11 times, is now 15% below its July peak.

Or take the Macau gaming stocks, for example. While still elevated year-to-date, the stocks have come down in value. Wynn Macau (19.3x P/B), a unit of Wynn (WYNN), is now 10% lower than its October high. Sands China (10.9x P/B), a unit of Las Vegas Sands (LVS), is down 8.6%. Galaxy Entertainment (9.1x P/B) is 8.8% below the peak.

Chinese Internet stocks have also come down. Tencent (12.5x P/B) lost 9% and Baidu (9x P/B) (BIDU) retreated 11% from their recent highs.

There are also signs the cheap (price-to-book) stocks may be recovering. From this year’s lows, China Construction Bank (1.1x P/B) has gained 16.7%, PetroChina (1.2x P/B) (PTR) gained 10%, Kunlun Energy (2.2x P/B) advanced 21.1%, and China Unicom (1x P/B) (CHU) rallied 22%.

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