Mid-cap China stocks have historically been quite volatile during and after the earnings season. More often than not, these stocks have been driven by
market sentiment that overrides underlying fundamentals .
Here we preview some of the more prominent China stocks that are due to report earnings and that we believe present opportunistic trading ideas for investors.
Our picks include
Chinese Internet stocks , which despite a reasonable outlook, have witnessed selling pressure this month.
(NTES - Get Report),
(LONG - Get Report) and
(GSOL - Get Report) are expected to report earnings over the next two days. The stocks are currently trading at $32.15, $11.50, and $6.88, and were down 3.31%, 3.36%, and 5.23%, respectively on Monday.
China's Former Richest Man Goes to Slammer (Forbes)
There have been concerns over new regulations impacting online gaming firms in China. This, coupled with high investor expectations on new content releases, has led to a sharp correction in stock prices. However, we note that NetEase.com has one of the highest operating margins in the industry and the rumored partnership with
could help the company export its games to the U.S. and Europe.
Another Internet stock
went into a tailspin for apparently no fundamental reasons during and following its earnings announcement earlier this month. Subsequently, the stock recovered after
upgraded the stock to a buy and added it to its Conviction Buy list with a $31 price target.
China's advertising major
Focus Media Holding
, which reports on May 20, was down 5.29% to $15.74 on Monday. Following the recent sharp correction, we reckon the stock is undervalued. Advertising revenue is witnessing a revival across the world in conjunction with the economic recovery.
recently issued an update on the stock maintaining its buy rating with a $19.36 price target.
(SINA - Get Report)
, the largest online portal in China, announced above consensus earnings Monday and issued an upbeat outlook. The company's shares were up 3.3% in after-market trades.
In the pharmaceutical space,
is due to report earnings Tuesday. After having corrected significantly over the past three months, the stock gained over the past couple of days following news reports of a potential sale of its over-the-counter drug division, which accounts for 10% of revenue. Chief Scientific Officer Peng Wang told
the company had hired
as a financial advisor. The company is also seen as an attractive takeover target for global pharmaceutical giants, although Chief Financial Officer Frank Zhao denied the possibility of a total sellout, the
reports. The stock closed at $8.06, up 0.62% on Monday.