I have invested in several:
Sina did ok - made a modest profit
Guangshen Railroad made 15%
China Fire & Sec Gp lost 10%
AOB American Oriental Bioengineering lost my shirt while I was buying they had more cash on the B/S than the market cap but they were a fraud.
CCSC Country Style Cooking Co They used our money to grow the business over a few yrs while showing modest losses (for accounting purposes) then the founders decided to force a buyback of our shares at a very low price, I lost.
I have not bought a China stock since and plan to stay out of China with my money.
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John - sounds exactly where the risks are and the major profits aren’t.
I got caught in one fraud situation - China Media Express. I lost money on a mining company where there was no fraud but assets licenses were just removed by local government and was underwater when a 2 companies went private below my purchase price. I’m underwater on a couple of smaller earlier investments that are coming around. After that I pretty much stayed clear of small company investments and stuck to major corps.
I made major money via US and HK listed Chinese companies - most notably on:
TAL Education
Ali Baba
Net Ease
Noah
Ping An (via HK)
Tencent (via HK)
C-Trip
Kingdee (via HK)
Sunevision (via HK)
Yangtze Optical Fiber and Cable (via HK)
NetDragon (via HK)
YY
…and when I say I made money I mean minimum of 40% and many multi bagging up to 244% for C-Trip and 539% for TAL - most of which I have held for multi year periods.
I find it interesting when folks say - there are too many good opportunities in the US for me to want to invest in China, (leaving aside that China’s internationalisation and emergence is the secular investment opportunity of a generation), when - and I haven’t checked the numbers but I would think over 90% of all the Fortune 500 companies out there ARE willing to and investing in China from an affiliate operations perspective. Corporate America does not share the view that there is too much opportunity in the US to want to get involved in China and the US companies we are buying into have China involvement so indirectly we are actually buying a slice of China despite the preclusion otherwise.
I get and accept the reluctance however - just for the sake of perspective, it is a minority (in terms of money flow) held view when the corporate world invests there and almost every money manager on the planet operates a China fund of some sort.
Ant
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A pretty big chunk of my gains in Apple are attributable to China.
Baozun has been interesting for me so far. I have a position of shares and have traded some options as well…probably should have sold as of getting to a 400% gain for the Oct $30 calls that I had bought. Also should have cashed out some JD.com gains at about the same time, but market timing is extremely difficult and requires a lot of luck. The MOMO calls that I bought have done terribly, of course, and are basically total losses with its share price decline of the past 6 weeks or so.
That is basically my Chinese exposure to this point. I probably should have bought some Baidu shares about 14 months or so ago, when I considered it (and did buy some Yandex, which I sold earlier this year).
Ant,
I respect your perspective. It’s obvious that you too have spent time in China, and apparently live in Asia. You most likely have more first hand experience than I.
Just want to say that investing in an American company that invests or partners with a Chinese firm is just about mandatory in order to gain access to the Chinese market. Apple sells a ton of iPhones in China, they partner with Chinese distributors (or retailers? I’m not sure which). Anyway, that does not make them a Chinese investment and does not expose one to the same risks as buying stock (ADRs) in a Chinese company.
That money managers operate Chinese oriented funds is a necessary part of doing business. Of course, like every fund manager, they try to pick “safe” investments. I’ve not studied this, so I can’t comment to much extent. But if a customer demands exposure to this emerging market, absolutely I’m going to provide a product to meet that demand rather than lose a customer.
In my post, I never meant to assert or even imply that were not good, reasonably safe Chinese investments. The point I was making is that it is much, much harder to identify them than investing in American companies. And I also noted a string of American companies that have crashed under scandalous conditions.
Over 10 years ago I subscribed to a newsletter from an American analyst of Chinese descent (I refrain from naming him). It was never clear to me if he was ABC or a naturalized citizen. Anyway, he visited China a couple times a year and wrote about investment opportunities from his travels. He sold himself as an insider. Spoke Mandarin and visited with the officers of these companies. I invested in a number of his recommendations with mixed results. At least one of these companies I had money in went down in flames, maybe more, I honestly don’t recall. The point is that I was of a mind that China offered enormous opportunities and I didn’t want to miss out. I thought this guy knows what he’s talking about.
Before my first trip to China, he wrote glowingly of a drugstore chain that was opening hundreds of shops (close to a thousand) in certain cities, Shanghai and Guangzhou among them. When I visited these cities I saw not a single store of this company. This analyst liked to brag about his lavish lifestyle (I think part of this was the Chinese mentality of making wealth conspicuous); first class air travel, five star hotels, sumptuous dining, etc. It suddenly became clear to me. I realized that this guy never set foot in the real China. He traveled in high style. Took limos everywhere, but more specifically from fancy hotels to the fancy meeting rooms of these companies where Chinese executives would tell him of their wonderful plans for growth and expansion. He would be wined and dined in high style. The Chinese are very good at making a very good impression. and in return he wrote of their soon to be successes. He never investigated any of the claims they made to see if any of it was real. Sometimes it was, more often, not so much.
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Alibaba, which I have owned in the past, you own the holding company. Not the underlying assets. Just a wrinkle to be aware of.
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Chinese frauds I have shorted:
CGA
CCME
LIWA
CAST
DEER
CVVT
LGFTY - Longtop Financial was a big one
CAGC
CSKI
BORN [Chinese ethanol, a 2 fer!]
CHBT
and more. Some of the easiest money I ever made was shorting these frauds. Virtually all have been delisted.
And virtually all of them had big 4 Auditors. Many of them bribed a bank manager and faked the cash.
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In a recent Rule Breakers podcast, David Gardner noted that two his biggest gainers were Chinese companies. Bidu and Netease from 2004 and 2006. I believe they were about 2800% and 2000% vs the S&P. Not that is not a typo.
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To follow on the MF recommendations, I think Rule Breakers recommended last month JD.com.
I would appreciate any thought others may have on this one. I was more intrigued when I saw the article where JD will have thousands of drones delivering in order to cut cost and beat the time and hassels of local delivery.
Technically you can’t post subscription picks on the public boards, so in the future just ask about a stock and enough people are subscribers that they will know.
Anyway, you should think of JD as the Amazon of China and Alibaba as the Ebay of China. Alibaba is just an intermediary for two parties wishing to exchange goods money. They have had knock-off and fraud issues in the past, but clearly they are great. JD fulfills orders like Amazon. They have warehouses and shipping, and suppliers. They are growing fast and seem to be taking some market share from BABA. They have better quality control than BABA
That is the short story “Amazon of China”
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