China Cuts Rates by 1% - Most in 10 years!

So the Chinese are stimulating their economy by spending nearly $600 billion by the government (announced last week and posted here on the blog).
http://betterbizbooks.blogspot.com/2008/11/chinese-economy-slowing-down-quickly.html


Now they are trying to stimulate their local economy by encouraging more lending. People will be paid less to save so they will need to invest their $$$ (both banks and individuals). As I have pointed out, China's economy is 50% export based so their economy gets beaten up pretty good when Americans stop buying stuff due to the credit crunch and concerns about their economy. Will it spark increased spending amongst the Chinese consumers? Time will tell....I am not holding my breath though :)



Dan Ross
http://www.betterbizbooks.com/

Chinese Investing - Wind Power

So by now anyone reading this blog nows how bullish I am regarding the Chinese economy in the 21st century. I think their work ethic is 2nd to none, their economy is still in its infancy, there are TONS of geographic/trend plays still ripe for the picking and a middle class that is JUST NOW developing. I compare it to the U.S. in the 50s/60s but with the potential for wealth creation of the U.S. in the 80s as geographic expansion occurred.

If you are a growing economy you need more power. You get it from coal, nuclear, wind, solar, etc. Coal drives something like 70% of U.S. power. The Chinese have done this as well but their pollution controls haven't been as strong as ours. They have been focused TOO MUCH on low cost stuff up until now. With the growth of their manufacturing sector, their environment is in SHAMBLES.

So they are increasingly turning to solar power and wind power, which they hope to export to the rest of the world later one. One way to play the "green revolution" with a strong China focus is APWR (A-Power Energy). Something to look into....Due your DD.







The weekly trends still appear downward for now but the short-term charts are pretty flat. You can see from the MACD curves that there is potential for a HUGE breakout at some point. The 10 week moving average is still coming down but it is at $9.00. An 80% bounce could happen and then get SLAMMED by the market quickly. I think I'll keep on building my cash balances and put some $$$ to work with APWR early in 2009. Same goes for Gulf Resources, which is now consolidating but the weekly trends are still coming down. That stock appears further along in its consolidation pattern and next week should indicate a crash of the stock or a potential run as the stock is now trading RIGHT AT the 10 week moving average. It is Overbought on the daily charts but NOT on the weekly charts :) We'll see which trend is more powerful....

Dan Ross
http://www.BetterBizIdeas.com

Still cautious on the stock market despite intraday reversal here

So here are a few articles I have come across in recent days as well as observations

http://seekingalpha.com/article/105472-why-i-sold-my-china-positions

1) Nortel, JCPenney & Pizza Hut all had layoffs here in Dallas.

2) American Express became a bank. They now get access to the gov'ts coffers via discount window and can sell their securitized credit card balances to the government. They get liquidity. WOW!

3) There is more push to get these auto manufacturers part of the bailout package. Did you know that GM, less than a decade ago, paid out dividends & bought back stock worth $20 BILLION? If you knew that, how would you feel about bailing out the auto manufacturers, investors and unions? If they didn't pay out the cash the unions would have taken it via DEMANDING higher wages for an "honest day" of work.

Which then brings me to this CNBC/LinkedIn.com poll. Looks like most American's, by state or career path, don't agree with the auto manufacturers getting one penny....

http://www.cnbc.com/id/27593480/

4) Finally, unemployment / weekly job claims data today stunk. Below are some graphs re: unemployment and the trends. With every passing week and datapoint I see (lots of new data) I get more adamant that 10% unemployment is possible.

Dan Ross

http://www.BetterBizBooks.com/

Chinese Economy Slowing Down Quickly

http://blogs.barrons.com/techtraderdaily/2008/11/10/focus-media-warns-on-slowing-china-ad-market-stk-falls/

It wouldn't surprise me to see Chinese stocks down notably tomorrow. After the bell, an industry stalwart (Focus Media) and big chinese holding of many mutual funds/hedge funds announced they are missing guidance slightly this quarter but guiding down EPS estimates SIGNIFICANTLY for next quarter.

Which begs the question.....How much is the Chinese economy slowing down? Will even 5% growth happen next year? Is their stimulus package enough? How much will Google's stock price fall since their EPS is based on advertising as well. Yes, this is China vs. the U.S. but people have been hearing rumors about a slowdown in online advertising spending and an "informal, unofficial" hiring policy per the video below.



Dan Ross
http://www.betterbizbooks.com/

China's $586 billion stimulus package announced today

Today China announced a $586 billion spending package to boost domestic demand while vowing to carry out "moderately easy monetary policies." China's Cabinet has approved a plan to invest $586 billion on infrastructure and social welfare by the end of 2010. They also say they will adopt an "active" fiscal policy and will offer tax help of 120 billion yuan to enterprises.



Key Questions/Points:
1) This dwarfs the $150 billion amount the U.S. spent in February to stimulate the economy.

2) Where will the Chinese get the $$$$? That question alone will cause a ripple effect as people will anticipate that they will be buying fewer U.S. treasury bonds and take more of their currency reserves back home with them to spend on their local economy. This might hurt U.S. stocks/bonds further and cause the U.S. stock market to pull back.

3) This should boost Chinese-based companies that do the bulk of their business in China and sell primarily into their economy/market. Remember 50% of their economy is export related.

Dan Ross
http://www.BetterBizIdeas.com

Great Article re: China and their growth in the next century

Bill Mann, of the Motley Fool, thinks Chinese stocks are priced ridiculously cheap right now.

http://www.fool.com/investing/international/2008/11/07/why-i-believe-in-the-chinese-miracle.aspx?source=ihprlklcb0000002


Dan Ross
http://www.BetterBizIdeas.com

Supply / Demand gone upside down in China?

First off, China finds some serious amount of natural resources in their country. It will take time to be mined & shipped (needs infrastructure) but it does have global implications for supply/demand for natural resources over the long-term. They want to import less and use more domestic sources of commodities.

http://english.people.com.cn/90001/90776/90884/6520297.html

Since the beginning of September, major Chinese steel manufacturers have announced to slash production upon falling steel prices on the domestic market.

http://english.people.com.cn/90001/90778/90857/90860/6517391.html

The Aluminum Corporation of China Ltd. (Chalco), the country's largest aluminum producer, said on Wednesday it would cut production in line with falling demand and prices. The total capacity reduction would be 720,000 tons a year or 18 percent of the company's annual production, said a company statement.

http://english.people.com.cn/90001/90776/90884/6520346.html

My take: It should be noted that the Chinese were GOBBLING up every conceivable natural resources before the Olympics to feed their economy. Since then, they have really quieted down and, as supply/demand levels are coming back to true equilibrium, the volatility in the commodity and financial markets has been STAGGERING.

I personally think they got wind of the slowing economy and put the brakes on their purchases of raw materials. After all, they would bring in the raw materials and export products worldwide. Their economy is 50% export right now from what I have read. They are trying to stimulate internal, domestic demand to offset the weakness in their export economy. I expect quite a few more rate cuts in China over the next 1-2 years, which will stimulate their consumer economy at some point.

Dan Ross
http://www.BetterBizIdeas.com

China: Significant Policy Change in Property Market - loosening of credit to increase domestic consumption

So the number of real estate deals is down 72% Y-Y during their holiday period. Some people are now taking a "wait and see" approach and are staying on the sidelines. People say that the remaining potential buyers are "marginal" buyers who have to stretch to afford a home.

http://english.people.com.cn/90001/90776/90884/6510493.html

The government is easing credit requirements to buy property. This should help to sustain real estate prices. Please note, however, that Chinese finance rules say down payments of 30% are being reduced to 20%. I guess they never heard of our 0% down financing here stateside and the wonderful results it has generated :)

http://www3.uobgroup.com/assets/pdfs/Flash_1023A.pdf

Source: http://english.peopledaily.com.cn/200208/09/eng20020809_101182.shtml

Then there is the rumor of U.S. Investment banks selling their chinese owned properties. Chinese politicians/developers are worried that this may cause a drop in commercial real estate values.

http://english.people.com.cn/90001/90776/90884/6511242.html



My take: There are a few investment plays on China real estate.

XIN - XINYUAN Re: Holdings (real estate development) - It focuses on developing residential projects consisting of multiple residential buildings that include multi-layer apartment buildings, and sub-high-rise or high-rise apartment buildings, as well as auxiliary services and amenities comprising retail outlets, leisure and health facilities, and kindergartens and schools. The company also develops small scale residential properties; and leases certain properties, including an elementary school, a clubhouse, a kindergarten, and parking facilities, as well as offers real estate related services, including landscaping and installing intercom systems. As of December 31, 2007, it completed 14 projects with total gross floor area (GFA) of approximately 1,001,199 square meters; 7 projects with a total GFA of 1,069,144 square meters under construction; and 6 projects with a total GFA of 1,452,013 square meters under planning. The company was founded in 1997 and is headquartered in Beijing, the People�s Republic of China.

EJ - E House Holdings - Basically a real estate broker. More volume = more profits (once they cover their costs) This is the safer play on chinese real estate development. It primarily offers real estate agency services to real estate developers of residential properties. The company also provides real property brokerage services, and intends to provide listing and brokerage services, which include sales and rentals. E-House (China) Holdings focuses its secondary real estate brokerage services in three metropolitan areas within China, including Shanghai, Wuhan, and Hangzhou, as well as in Hong Kong and Macau. Its real estate consulting services include land acquisition consulting and real estate development consulting; and other consulting services to investors interested in purchasing businesses with land or other real estate assets, as well as to banks, real estate trade associations, and governmental property and planning agencies. The company�s real estate information services comprise the CRIC system, which supports its primary and secondary real estate services, and consulting and information services. The CRIC system consists of real estate sales data in China covering information on land, residential, office, and commercial spaces, as well as real estate related advertisements. The company was founded in 2000 and is headquartered in Shanghai, the People�s Republic of China.

Dan Ross
http://www.BetterBizIdeas.com/

Advanced Battery Technologies (ABAT) Announces New Contract

Advanced Battery Technologies Announces New Contract

What is interesting here is that you have a $45 million company (2Q'07-2q'08 revenue) that just signed a contract for $27 million and the stock only moved up 8%? That just shows how beaten down investors are right now. I hope to buy some shares at current levels over the next few months. I think, in the long-term, they'll pay off handsomely, as Lithium Ion Batteries become more popular in vehicles.

One interesting sidebar is A123 Power, which was to go public late in the summer/this past fall. The private company never got their IPO done and it should be interesting to see what kind of buzz there is with oil coming down and gas prices coming down. Those folks were working with GM and their Chevy Volt batteries for cars.

ABAT does LI-ION batteries for electric bicycles, scooters, Buses and, in the future, cars......The technology still has a way to go but I like a company that actually makes $$$ in a business where too many competitors lose $$$ by buying marketshare (low margin sellers) or overinvest in overhead WAY too early in the game. Based in China, where most manufacturing happens, this is an interesting company to watch over the next few years.

Dan Ross
http://www.BetterBizIdeas.com

Chinese Products Getting PUMMELLED

And deservedly so.......

Lets go through some history

Dog food with melamine in it awhile back.

Then it was toys exported with lead paint.

Now it is milk with melamine, candy with melamine & infant formula with melamine. Over 20 dairy companies now have been found guilty of doing this. This is NOT some limited issue.

The real questions is "Are Chinese products safe?" It is going to temporarily hurt exports, hurting chinese exporters.....and for a DAMN good reason. While cheaper costs attract businesses there if consumers won't buy a darn chinese product there will be ZERO benefit of producing in China. The first guy over china's product safety was SENTENCED to death over a year ago and apparently the problems with their countries product safety continue.

"Melamine, which is high in nitrogen, is used to make plastics and fertilizers and experts say some amount of the chemical may be transferred from the environment during food processing. But in China's case, suppliers trying to boost output are believed to have diluted their milk, adding melamine because its nitrogen content can fool tests aimed at verifying protein content.
Melamine can cause kidney stones, leading to kidney failure. Infants are particularly vulnerable. Melamine has been associated with contaminated infant formula and other Chinese products containing milk protein. On Wednesday, the Chinese government identified 15 more Chinese dairy companies as producing milk products contaminated with melamine, bringing the total to 20 companies. At least 100 batches of milk powder have been found to contain the chemical, according to data on the food safety administration's Web site."

Dan Ross
http://www.BetterBizIdeas.com

Get bullish on Alternative Energy Stocks

The federal government has no other choice but to put forth a massive bailout plan.

When the fed does this the value of the dollar is going to decline, which will cause the prices of commodities (oil in this case) to go higher.

This will cause a long-term demand for alternative energy products. This isn't some short-term fad.

I expect solar stocks to start taking off here in the next few weeks. I'll post some charts later tonight showing how they are bottoming out and set for a take-off.

The price of oil was trading at a low of $91.11 a barrel on September 17 and it closed at $108 or so on Friday, Sept 26th. That's a gain of 18% in a week or so.

Dan Ross
http://www.BetterBizIdeas.com

Chinese Milk Scare! Interesting link

http://seekingalpha.com/article/95885-synutra-goes-beyond-government-orders-in-infant-formula-recall

"A second child in China has died after being given tainted infant formula, and more than a thousand other children became sick from various forms of the product. China’s Ministry of Health has determined the problem lies in the chemical additive melamine. The chemical is never supposed to be used in infant formula, but its addition increases the reading levels of protein in milk, though not the actual amount of protein. The MOH theorizes that the chemical was added by collection centers, rather than individual farmers or formula companies.

The scandal reminds the worldwide public of safety problems caused by poor regulation in China-sourced food and drugs, even though China-produced formula is not exported. The milk powder that caused the problem came from the Sanlu Group, one of the largest producers of dairy producers in China. Sanlu recalled its milk powder last week. However, there have been complaints of problems for almost six months. The first child died on May 1 and the second on July 22. The long time lag has caused complaining in some quarters that the company has been dragging its feet before taking this drastic action. The action is certainly drastic: the MOH says that over 10,000 tons of milk powder have been recalled.

Melamine was also the culprit in the China dog food scandal that occurred last year. "

Dan Ross
http://www.BetterBizIdeas.com/

ABAT & Stock Price movement

From a post I made on a stock message board a few days back...

"The stock is CLEARLY going to $3. I agree with those levels and stated that, if $3.65-$3.75 was broken that $3.00 was the likely next point "

Well, 3 days have past now and ABAT is quickly approaching $3.00. At $3.00 I'll be buying some ABAT shares for sure.

Dan Ross

http://www.BetterBizIdeas.com

Blog on China from Reuters

Interesting blog worth bookmarking....

http://blogs.reuters.com/summits/category/china-century-07/

Dan Ross
http://www.BetterBizIdeas.com/

Lithium Ion Batteries (ABAT) and Hybrid Automobiles...

Lithium Ion Batteries far out from deployment in cars

http://www.reuters.com/article/technolog... <--not with oil at $100! and http://seekingalpha.com/article/95552-en <--disagrees re: lithium ion and their mass deployment in cars anytime soon but has a biased opinion based on stock interests (my 2 cents). and LG Chemical states that Lithium Ion batteries will rule the hybrid world for the next 15-20 years http://news.yahoo.com/s/nm/20080917/tc_n...

Hopefully everyone can form their own opinions. My 2 cents is that LI-ION WILL become the standard, they will make improvements in the technology and that A123 Power Systems (a filed IPO for later this fall) will likely lead to an increase in ABAT's stock price.

Dan Ross
http://www.BetterBizIdeas.com

Nasdaq-listed Zhongpin Inc (HOGS.NASDAQ) Link

http://thechinaperspective.com/articles/livingonthepig039sback4419/index.html

A few key takeaways....

"New pork processing industry regulations take effect at the start of August. How will these affect your company? We view this as a positive for Zhongpin as the new regulations will definitely speed up the modernization of the pork processing industry in China and encourage the transition from the traditional wet market to modern “dry” market processing. We expect that some processors who cannot meet the national standard will eventually leave the industry and consumers will have better access to safer and healthier pork products. As a leading meat and food processing company that utilizes state-of-the-art equipment and advanced technology in our production, we believe the new regulation will enable us to seize opportunities for further expansion and increase our market share, especially in second and third-tier cities"

"When do you expect to complete your new factories, and how will this increase your total production capacity? The new factory in Luoyang City had already started production at the end of June and the Shangqiu plant will begin operations by the end of the fourth quarter of 2008. These two plants will increase our capacity of chilled and frozen pork to 471,560 metric tons, excluding outsourcing from OEMs, equivalent to a 42% year-over-year growth rate. In September 2008, a new facility in Changge City with 28,800 metric tons of prepared meat will start production, which indicates our capacity will increase 114% to 54,000 metric tons per year after completion. Our annual production capacity of fruit and vegetables will increase by 114% to 56,280 metric tons when a facility in Changge comes on-line by the end of this year."

Dan Ross
http://www.BetterBizIdeas.com/

Chinese Stocks to Double....Street.com link

The video below talks about how Chinese stocks are being SIGNIFICNATLY undervalued right now. I 100% agree with him.
http://cosmos.bcst.yahoo.com/up/player/popup/?rn=289004&cl=9469944&src=finance&ch=633473

Additionally, a new Earthquake in China, of 6.2 magnitude. Last time that happened CPSL stock soared due to thoughts re: re-building and the need for steel. Granted, it should help GSI more than CPSL as CPSL primarily is involved in sheet metal (think appliances, end devices and not steel beams.)
http://news.yahoo.com/s/ap/20080831/ap_on_re_as/china_earthquake

Dan
http://www.BetterBizIdeas.com

Some Economics of Food.....for thought :) UPDATE

This is an update with some updated factoids for people to chew on.....VERY interesting numbers

from http://www.pigsite.com/

"Processing is the most vulnerable player in the Canadian pork industry today, says Bouma, with the U.S. holding a significant advantage in terms of capacity and labour intensity. Comparing the productivity of the top U.S. and Canadian processors highlights this gap. Today, the U.S.’s largest 29 plants process 21,000 hogs per day while Canada’s largest 29 produce an average of 3,200 hogs per day. The result? U.S. producers put an estimated six to 10 more dollars in their wallets per hog sold compared to their Canadian counterparts. "

So how does this compare to Chinese Pork/Production???

From HOGS/FEED (two chinese pork raisers/processors). Here are their recent filings. Both companies are growing ENORMOUSLY. Wall Street seems to indicate that HOGS is the most undervalued of the two.

HOGS
http://biz.yahoo.com/prnews/080811/cnm010.html?.v=59

FEED
AgFeed Industries bought 4 more Hog Farms recently and has been consolidating the industry throughout China.

From http://www.forbes.com/

http://www.forbes.com/2008/08/22/china-agricultural-imports-markets-econ-cx_tw_0821markets29.html?partner=yahootix

"Given the rapid rise in food prices in China amid increasing wealth, investors could stand to gain from exposure to U.S.-listed Chinese companies with 90% to 100% exposure to China, such as AgFeed Industries (nasdaq: FEED - news - people ), American Dairy (nyse: ADY - news - people ), HQ Sustainable Marine Industries (amex: HQS - news - people ), Synutra International (nasdaq: SYUT - news - people ) and Zhongpin (nasdaq: HOGS - news - people )."

I saved the best udpate for last :) Looks like this company is hiring some a very senior american to help develop its company.

http://biz.yahoo.com/iw/080820/0426486.html

"NASDAQ Global Market listed AgFeed Industries (http://www.agfeedinc.com/) is a US company with its primary operations in China. AgFeed has two profitable business lines -- premix animal feed and hog production. AgFeed is China's largest commercial hog producer in terms of total annual hog production as well as the largest premix feed company in terms of revenues. China is the world's largest hog producing country that produces over 600 million hogs per year, compared to approximately 100 million hogs in the US. China also has the world's largest consumer base for pork consumption. Over 65% of total meat consumed in China is pork. Hog production in China enjoys income tax free status. The pre-mix feed market in which AgFeed operates is an approximately $1.6 billion segment of China's $40 billion per year animal feed market, according to the China Feed Industry Association."

Original Post

China, 1995: average person eats 55 lbs of meat per year. China, 2007: average person eats 116 lbs of meat per year. Here is what I can't tell you. What kind of meat?

It takes 15 lbs of grain to produce 1 lb of meat. According to expert figures, China has increased grain requirements to 350 million metric tonnes in 2007 from 150 just 12 years earlier. That’s a +133% increase just so the average Chinese citizen can enjoy more meat.

Fertilizer is used to produce grain to feed the animals – in fact, for every pound of beef produced, a steer must consume 15 pounds of grain. This further drives up the demand and the cost of fertilizer. So we can understand why there is a demand for more fertilizers and why stocks such as Potash, Mosaic, etc. are going through the roof right now.

How much feed does a pig need though? I'll get that in the upcoming days.....Info. re: beef isn't applicable. Why?

Pork occupies a special place in the Chinese diet and economy. It is estimated that the Chinese consume more pork than any other nation. This makes sense given that pork is also estimated to account for two-thirds of the average Chinese's protein intake. According to this article below

http://www.smallcapinvestor.com/smallcapinsights/china/2008-07-17-check_on_china_agfeed_industries

"It is prepared in almost every conceivable way, from roasted whole suckling pigs, commonly served during holiday .easts, to sweet and sour pork, whose Americanized version is a Chinese restaurant staple."

Dan Ross
http://www.BetterBizIdeas.com

Small Cap Returns in August

From http://www.smallcapinvestor.com/

"Small-cap stocks in China posted double-digit losses on average during August, while small caps in India were virtually unchanged in the month through Aug. 25, according to a Press Trust of India report that cited data from Citigroup Global. For the region as a whole, 80% of all Asian stocks posted negative returns, with a median loss of 8.1%."

I'll follow that up by saying I found MANY, MANY chinese stocks that were down 40%-60%. I have noticed quite a few chinese small cap stocks that were posting 100% - 200% growth rates (some organic growth....others through acquisition) slowing their growth rates to 10%-30%. As consolidation in their economy & overall economy are slowing many investors are growing wary of chinese small cap stocks.

I still think there are a TON of good stocks to be found and then traded from time to time. Some should be held for the long-term. I'll be posting a listing of some of interesting finds I have come across in the next few weeks.

Dan Ross
http://www.betterbizbooks.com/

Things changing in Macau?? WHOA!

Gaming stocks got pounded today, based on the article below, on news that mainland Chinese will only be able to visit the place twice a year vs. currently allowed to visit the island about 6 times or so per year.

http://biz.yahoo.com/rb/080819/casino_stocks.html?.v=1

This clearly has put a ceiling on the expectations surrounding gaming stocks. MGM Mirage (MGM), Las Vegas Sands (Venetian Owners: LVS) & Wynn Resorts (WYNN) got hammered today. Oh, and that really puts a dent on me going into Melco (MPEL), which I mentioned a few days ago. I think I'll be holding off on investing until all the analysts take their EPS estimates down and downward pressure in the shares slow down.

Dan Ross
http://www.betterbizbooks.com/