Stock Market Predictions

Deadline nears for many U.S-listed Chinese stocks

Stock Market Predictions

Many of those names were included on lists issued by brokerages that prevented their clients from borrowing money to buy those stocks on margin. A rise in short activity indicates more people see the stocks falling amid a flurry of accounting scandals that have damaged the sector.

Some of these companies, if they are foreign issuers, would be required to file a 20-F report with the Securities and Exchange Commission by the end of June if their fiscal year ended December 31. Others that are considered U.S. companies have already delayed certain filings.

Short-sellers, who borrow stocks in anticipation they can sell them and then buy them back at a lower price, have been champing at the bit waiting for bad news from those that have not filed reports. They got some on Wednesday with one company, China-Biotics Inc (CHBT.O), after it said it would not file its annual report on time, citing "serious issues" raised by its auditors.

"If there are any China names where there is any sense that there is stuff out there on them or there are concerns ... getting a 10-K signed on these names is not easy," said Roddy Boyd, editor of thefinancialinvestigator.com in Wilmington, North Carolina, a website that focuses on Chinese companies.

The 20-F form is a foreign issuer's version of a 10-K, which much be filed within six months of the end of the company's fiscal year.

Trading in shares of China-Biotics, the latest in a string of Chinese companies to disclose accounting issues in recent months, was halted after tumbling on Wednesday and has not traded since.

Bets against Chinese names have grown recently, with average short interest in about 80 Chinese companies traded on U.S. exchanges rising to 3.99 percent on January 3, the first trading day of the year, and climbing to 5.92 percent as of June 13, according to data provided by Data Explorers.

"At this point, if a company is borderline on the sniff test, investors will try to leverage into it by shorting the position as it goes as low as possible, if not to zero," said Joseph Greco, managing director at Meridian Equity Partners in New York.

AutoChina International Ltd (AUTC.O), a Shijiazhuang-based commercial vehicle financing company with a market cap of more than $540 million, is among the companies that have not filed the 20-F form, due June 30.

Interest in shorting AutoChina has risen recently, with more than 85 percent of shares available to be borrowed out on loan, according to Data Explorers, compared with 57.6 percent on May 23 and less than 5 percent in early March. The stock is down 30 percent since a recent high reached on March 10.

Jason Wang, the company's chief financial officer, said he was aware the deadline was approaching but directed all further queries to the company's investor relations contact, who was out of the country and did not immediately return a request for a comment.

Concord Medical Services Holdings Limited (CCM.N) and eLong Inc (LONG.O) are also among the companies with market capitalizations above $100 million that have yet to file. Both are foreign issuers, so should be filing form 20-F by the end of June. Concord's investor relations representative confirmed the deadline but eLong was not immediately available to comment.

Investors have been more guarded over China since Sino-Forest Corp (TRE.TO) was recently accused of fraud by short-selling research firm Muddy Waters in a report that sparked a drop of more than 80 percent in the company's shares even as it denied the charges.

Those high-profile allegations followed a number of similar charges against other Chinese names, which have led to delistings and steep stock drops.

On Thursday, shares of electric motor maker Harbin Electric (HRBN.O) more than halved after Citron Research raised concerns about a go-private offer from Harbin CEO Tianfu Yang. Harbin said the short-seller's report was "factually inaccurate," and the stock climbed 22 percent to $8.50 on Friday.

As a result of the growing controversies, Interactive Brokers Group (IBKR.O) joined other brokers in barring its clients from buying more than 160 Chinese securities on margin, citing risk concerns.

The SEC followed by issuing a bulletin of risk against investing in reverse merger companies, a category that includes many of the firms that have yet to file with the regulator.

While shares of many foreign companies traded on U.S. exchanges rose on Friday after France and Germany said they reached an outline agreement to aid debt-burdened Greece, Chinese stocks suffered another day of losses.

The BNY Mellon index of leading American Depositary Receipts (ADRs) .BKADR rose 0.7 percent, while the Asian index .BKAS fell 0.2 percent and the China index .BKCN dropped 0.3 percent.

"Many traders are looking for a compounding effect given the downturn in the broader market," Meridian Equity's Greco said.

(Additional reporting by Clare Baldwin and David Gaffen)

RIM swoons on grim results, shareholders fret

Stock Market Predictions

The BlackBerry maker's shares plummeted below $28, hitting the lowest level in almost five years, after the company missed some of its own limp forecasts and reported a drop in profit.

It was RIM's sharpest one-day decline since September 2008 in trading volumes among its heaviest ever. The shares are down more than 60 percent since February, wiping billions off its market value.

Even more worrying, some of the company's largest shareholders are showing signs of bailing out.

One of RIM's biggest investors, Jarisloswky Fraser, has already cut its stake in half, according to Bloomberg.

Another gave RIM six months to get its house in order.

"I think in the next six months we'll have a much better idea of where we stand," said the head of a fund with a major stake. "They've laid out a business strategy and we're measuring their ability to execute."

LOWER TARGETS

At least 14 analysts lowered their price targets for RIM, most of them highlighting what appears to be a once-dynamic product development pipeline that's running dry.

RIM admitted delays in revamping an aging smartphone lineup and slashed what most analysts viewed as an unattainable full year earnings outlook. It also said it planned to cut an unspecified number of jobs.

"Bottom line, we believe RIM has no short-term fixes to improve product portfolio, brand perception, to reinvigorate share gains, revenue growth and profitability," Citi's Jim Suva wrote in a note to clients.

RIM's difficulties bear a striking resemblance to recent troubles at Finland's Nokia, another struggling national technology champion blindsided by the roaring success of Apple's iPhone and handset makers using Google's Android software.

Some analysts drew comparisons between RIM and Nortel Networks, the once-mighty Canadian equipment maker that went into bankruptcy and is selling its final assets.

RIM's co-chief executives both sounded contrite on a conference call with analysts. But analysts said neither appeared to fully comprehend the challenges that lay ahead.

"The company is facing its greatest challenge, maybe in its history, and each CEO continues to believe there is unprecedented interest in their products," Deutsche Bank's Brian Modoff wrote as he cut his price target to $20 from $45.

JP Morgan downgraded to "neutral" from "overweight".

"Until we see some evidence that product development is on track and visibility is returning we would advise investors to find other places to invest," its analyst Rod Hall said.

RIM's delay launching a touchscreen version of the Bold model and at least one other device, now due by late August, threatens its hard-won relationships with North American and European carriers, which expected the phones in July.

"We are concerned that RIM may have given them overly optimistic launch timetables, which may end up alienating" them, said Tero Kuittinen, an analyst from MKM Partners.

Cellular-enabled versions of RIM's PlayBook tablet, which would give carriers a reason to push the iPad competitor, aren't expected until autumn, from a prior summer timeframe.

LEADERSHIP QUESTIONS

The dim results and outlook also fanned questions about RIM's co-chief executives.

Deutsche's Modoff was disappointed that neither Mike Lazaridis nor Jim Balsillie described the planned job cuts as a reorganization -- which he would view as a positive.

Both brushed off criticism of RIM's dual chief structure with what seemed "more of a staged piece of theater than a serious answer to a serious strategic question," Modoff said.

RIM has cut staff before, in a 2002 move still known around its Waterloo, Ontario, headquarters as the "10 percent purge." That followed a dip in revenue and spiraling costs as it started selling its early BlackBerry phones via carriers.

But it's been all growth since then, with RIM now boasting more than 17,000 employees, up from 14,000 a year ago.

BRIGHT SPOTS

There were bright spots in the first quarter results, including 500,000 PlayBooks shipped. International revenue grew 67 percent partly on the back of RIM's BlackBerry Messenger instant messaging service. But that appeal may not be enough.

"The concern is the sustainability of that low-end market that is working for them now. I'm not sure over the long haul if that texting arbitrage is going to keep them afloat," said Matthew Robison from Wunderlich Securities, who suggested RIM may retract into a niche space serving corporations.

RIM's U.S.-listed shares closed down $7.58 at $27.75. The shares fell $7.13 to C$27.24 on the Toronto Stock Exchange.

(Additional reporting by Soham Chatterjee and Tenzin Pema in Bangalore; Editing by Frank McGurty and Janet Guttsman)

Orsus says website has errors, can't explain share move

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Orsus's stock has seen an unprecedented spike in volatility and trading action after Interactive Brokers listed the stock more than a week ago as being one of 160 Chinese securities with "elevated risk concerns."

The moves, which at one point after the Interactive Broker rule drove up the stock more than 300 percent within a week on some of its highest-ever volume, prompted Global Markets to try to contact the company at both its Beijing headquarters and New York offices, attempts that were unsuccessful.

The website of Beijing-based Orsus-Xelent (ORS.A) listed phone numbers that were disconnected and addresses that belonged to other businesses, including Orsus's former investor relations firm in New York.

Li Yinsheng, the personal secretary to Orsus Chief Executive Liu Guoji, noted that the contact information given on the website "has some mistakes," adding that the errors had been corrected.

However, the information hadn't been changed as of Friday afternoon, and the site listed a different chief executive, Xavier Xin Wang, on its management page.

Li gave a new Beijing address for the company, on a different floor in the same building listed on the website, and the new address was verified by Global Markets.

The company, however, could not comment on the dramatic gyrations in its shares, which were down 24.6 percent to $3.18 on Friday, again on heavy volume. While the stock has dropped for each of the past three sessions, it remains up about 120 percent from a recent low of $1.25.

"We've gotten calls about the price, but we don't have any idea why the price is so unusual," said Orsus Chief Financial Officer Chen Hua. "But I don't pay attention to the trading volume or the stock price."

Commenting on the inaccuracies of the website, Hua said he didn't know too many details about the company because he hadn't been there that long -- in his current position for a little more than a year.

(Editing by Chizu Nomiyama)

Samsung, other Asian tech shares tumble on earnings worries

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Investors, who had expected Japan's earthquake three months ago to lift prices of memory chips and flat screens, dumped shares of tech firms in South Korea, Taiwan and Japan.

The tech sector serves as the bellwether for global consumer demand and its outlook has been soured by the debt crisis in Europe and sluggish U.S. job and housing markets.

"The tech momentum appears to be dead," said Cha Kyung-jin, a fund manger at Golden Bridge Asset Management, which owns Samsung shares. "Expectations have been lowered on the global economy and tech earnings in the second half."

Shares in Samsung Electronics, the world's biggest technology firm by revenue, slid 3.4 percent in its biggest daily decline in three months.

Hynix Semiconductor, the world's No.2 memory chipmaker, skidded 6.1 percent, and LG Display, which vies for the world's top flat-screen maker title with Samsung, tumbled 6.8 percent, amid lowered earnings expectations.

In Japan, Elpida Memory lost 2.8 percent and Taiwan's Nanya Technology dropped 7 percent, while AU Optronics and Chimei Innolux lost 5.1 percent and 4.1 percent, respectively.

"There are concerns that tech firms may see little earnings recovery in the second half after posting poor second-quarter earnings. There is traditionally high demand in the second half, but seasonality may be weak this year because of macroeconomic difficulties," said Park Jong-min, a fund manager at ING Investment Management.

"Businesses are reluctant to build up inventory because of macroeconomic uncertainties and as they have already piled up components after the March 11 quake on fears of a parts shortage," he said. ING owns shares of Samsung and Hynix.

The regional MSCI technology index lost 1.8 percent on Friday. The U.S. Philadelphia Semiconductor Index shed 1.1 percent on Thursday, and has fallen 16.5 percent in four months.

LOWERED EARNINGS OUTLOOK

Global PC shipments, which in recent years grew by double digits annually barring 2009 and serve as a key growth driver of the memory chip industry, are set to grow by only 5 percent this year as consumers opt for popular tablets and smartphones.

Samsung, which is set to update the market with its second-quarter earnings estimates in the first week of July, declined to comment on the current quarter's results.

"Second-quarter is a typically weak season but the market condition was slightly worse than usual because tightness that many people had expected after the quake didn't really happen due to weak demand," said a senior executive at a major Korean electronics firm. The official declined to be named because he was not authorized to speak to the media.

Analysts' expectations for a recovery in the loss-making flat screen businesses of Samsung and LG Display have now been pushed back from the second quarter as TV sales remain weak.

Samsung' second-quarter operating profit is forecast to be around 4 trillion won ($3.66 billion), Thomson Global Markets I/B/E/S data showed, compared to 5 trillion won a year ago.

Earnings expectations were being downgraded further.

"We recently lowered our second-quarter operating profit forecast on Samsung Electronics to 3.6 trillion won," said Jin Seong-hye, an analyst at Hyundai Securities.

Hynix is seen posting a 553 billion won operating profit for the quarter ending in June, according to Thomson Global Markets I/B/E/S, compared with a 1 trillion won operating profit a year earlier.

"I cut my consensus forecast (for Hynix's second-quarter earnings) to 420 billion won, but I am also hearing talk in the market of 360 billion won," said James Song, an analyst at HI Investment & Securities.

(Editing by Jonathan Hopfner and Muralikumar Anantharaman)

Harbin Electric refutes Citron Research's allegations

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A Citron Research report had raised concerns about a $750 million go-private offer by Harbin CEO Tianfu Yang.

The CEO and the company reserve the right to bring legal actions against Citron Research for these erroneous allegations, Harbin said in a statement.

Harbin could not be immediately reached for comment.

Harbin's shares were up 17 percent in pre-market trade on Friday. They closed at $6.9 on Thursday on Nasdaq.

(Reporting by Divya Sharma in Bangalore; Editing by Don Sebastian)

PetroChina shares jump on NDRC gas rise rumors

Stock Market Predictions

PetroChina (601857.SS), the country's largest oil and gas producer, has nearly half of its reserves in natural gas.

Analysts said the market was speculating that the National Development and Reform Commission may announce another domestic natural gas price hike, a move made more imminent by the collapse of talks between Russia and China to resolve an elusive 30-year gas supply deal on Friday.

"A much needed natural gas price hike would help PetroChina minimize the economic loss of importing expensive overseas gas," said Gordon Kwan, an analyst at Mirae Asset Securities in Hong Kong.

Merrill Lynch upgraded the Hong Kong listed stock to buy from neutral on Thursday, saying that PetroChina's parent CNPC may inject its oil assets in Sudan into the listed company.

Other analysts were more dubious on the Sudan asset injection happening in the near term given ongoing disputes between the country's Muslim North and Christian South over profit sharing.

PetroChina's shares were up 3.4 percent by 0715 GMT, strongly outperforming the benchmark Hang Seng Index's .HSI 0.9 percent drop.

(Reporting by Farah Master; Editing by Jonathan Hopfner)

Celestica shares hit 2-year low as major customer RIM cuts

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Contract electronics maker Celestica's 21 percent sales in the March quarter came from BlackBerry maker RIM.

"In light of RIM's relatively large contribution to Celestica's overall revenue base, we believe RIM's near-term challenges could remain a headwind for Celestica's valuation," Paradigm Capital analyst Gabriel Leung wrote in a note.

Leung slashed his target price on Celestica shares to $12 from $14.

Citigroup analyst Jim Suva lowered his rating on Celestica to "sell" from "hold" and reduced his target price on the stock to $8 from $12.

Facing intense pressure from Apple (AAPL.O) and Google (GOOG.O) in the smartphone market, RIM on Thursday warned that its latest models would not hit U.S. stores until well into the valuable back-to-school shopping season.

RIM admitted delays in revamping an aging smartphone lineup and slashed what most analysts viewed as an unattainable full-year earnings outlook. It also said it planned to cut an unspecified number of jobs.

Toronto-based Celestica's shares were down 73 Canadian cents at C$7.80 in late-morning trading on the Toronto Stock Exchange. They touched a low of C$7.74 earlier in the day.

(Reporting by Arnika Thakur in Bangalore; Editing by Maju Samuel)

Fund View: Sprott says buy oil stocks, dump natgas and uranium

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Oil prices are trending higher on fundamentals and not on geopolitical upheavals alone, reckons Eric Nuttall, the lead portfolio manager of Canada's Sprott Energy Funds -- a $169 million natural resources-focused equity fund.

"Emerging economy demand (for oil) growth is outpacing the demand destruction that we are seeing in developed economies, namely United States," Nuttall told Global Markets in an interview.

His top 10 picks include Legacy Oil and Gas (LEG.TO), Westfire Energy Ltd (WFE.TO) and Bankers Petroleum Ltd (BNK.TO). By the end of 2010, his fund topped the wider Toronto Stock Exchange's S&P/TSX composite index .GSPTSE by more than 17 percent.

The fund is overseen by Toronto-based Sprott Asset Management, which is headed by Bay Street contrarian investor and Canadian investment guru Eric Sprott.

"In Canada we have more listed oil and gas companies than any other country in the world, so we have a tremendous amount of opportunity," said Nuttall, who joined the fund in 2003.

The average price of oil is likely to be in the range of $95-$100 a barrel this year, he said, adding that demand would strengthen in the second half as global economy gradually brightens.

Oil is currently trading at around $94 a barrel, while natural gas prices have slumped to trade just over $4 per million British thermal units (mmBtu) from its 2008 levels of $13 per mmBtu, and may fall further.

The fund manager said stubbornly low natural gas prices had not bottomed yet and the over supply condition would not cool any time soon.

"Looking until 2015, we are in a sub $5-ish world until North America becomes an exporter of natural gas ... the record price five years down the line should have been $7 per mmcf for a company to earn a decent rate of return," said Nuttall.

FUKUSHIMA WOES

Several countries were forced to cap or delay their nuclear energy aspirations after the meltdown at the Fukushima Daiichi plant in northeastern Japan, prompting strident anti-nuclear protests around the world.

"For uranium, I think the outlook is awful. We have many countries effectively deciding to shut down all of their nuclear reactors," said Nuttall, who is underweight on uranium stocks.

Countries like Germany and Italy are set to completely ban or lessen their dependence on nuclear energy, while developing countries are delaying their expansion plans under immense public pressure.

World's No. 2 uranium producer Cameco Corp's (CCO.TO) shares have lost over a third in value since Japan was hit by an earthquake and tsunami, while Uranium One Inc's (UUU.TO) market value has more than halved since then.

Although Nuttall questioned the feasibility of finding an alternative to nuclear energy for some of the countries, he asserted uranium would remain weak this year.

(Reporting by Aftab Ahmed in Bangalore; Editing by Saumyadeb Chakrabarty)

Profitless Pandora pricks the tech bubble

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The difference this time -- one that cost some investors money but provided a measure of relief to anyone worried about an overheated IPO market -- is that shares of Pandora Media Inc quickly went south.

Two days after Pandora's stock debuted, it had handed back all its gains and was down nearly 20 percent from its IPO price of $16. While Pandora raised $235 million in its offering, any of the investors that bought shares at the IPO price or higher are now suffering losses -- a tough lesson in jumping into the dicey IPO market.

And Silicon Valley seems just fine with that. Not due to Schadenfreude within the venture capital and start-up worlds, although surely some exists, but rather because it demonstrated sanity in the markets.

"Pandora showed that if you're still trying to figure out your business model and you go public, then the market is going to call you out on it," said Bruce Taragin, managing director of Blumberg Capital. "I'm pleased there's no irrational fervor in the marketplace."

Pandora, an online music service, is not alone. Its rise and fall just happened at a stunning speed.

Shares of LinkedIn Corp and China's Renren Inc, social networks that debuted in May, also reversed course after strong debuts. It just took them a bit longer. Today, LinkedIn is still above its IPO price but is down 45 percent from its highs, while Renren has lost half of its value since its IPO.

For the Chinese Internet companies there has been a double dose of bad sentiment to deal with. A series of accounting scandals at Chinese companies listed in North America has led to a loss of confidence in the sector generally.

Josef Schuster, founder of Chicago-based IPO research and investment house IPOX Schuster LLC, said the pullback from Pandora and others is "a healing process" that should help the technology IPO market in the months to come.

NO PROFIT? STAY HOME

Indeed, the road ahead looks quite crowded for technology start-ups that want to go public. But for now it may be too early for judgment since only a clutch have made their public debut.

"Right now it's just a handful of companies," said Eric Hippeau, a partner at Lerer Ventures. "It's not the best way to indicate where the market is going."

That should change in the coming months. Groupon has filed for an IPO, while Zynga and Twitter could also announce IPO plans. Facebook would be the most anticipated, considering it has 500 million users and this year could produce what one researcher estimated would be $4 billion in ad revenue.

"For the market as a whole it's actually going to be quite good," Schuster said of the Pandora debut. "You will see Groupon being much cheaper, you will see Zynga being much cheaper. I think it's going to have a big influence on the Facebook valuation as well."

The trouble with Groupon and many others lining up for IPOs is that they aren't turning profits. Groupon posted an operating loss of $117 million in the first three months of the year. In its IPO filing, Chief Executive Andrew Mason said the company does not value itself in a conventional manner and suggests other ways of looking at how much Groupon is worth.

Pandora, for its part, has never turned an annual profit.

"What we thought before when you couldn't do an IPO is still true: If you are losing money, don't go public," said Todd Dagres, general partner at Spark Capital.

The question is whether Pandora will serve as a cautionary tale for super-hyped start-ups and those investors willing to overlook doubtful business plans to get a piece of the action.

"Everybody wants to invest in Facebook but they can't," said Dagres, citing a "halo effect" surrounding social and new media. "Other companies are riding that wave that are not leaders in the category and don't have long-term advantages. The reason is because there is a premium for growth."

Perhaps the rush to sell shares to the public and raise money is sensible, considering how much uncertainty surrounds the housing markets, employment and fears about debt troubles at home and abroad.

"Now is a great time to raise money, A lot of times smart entrepreneurs are raising perhaps a little bit more than they think they need because they recognize that it may not last forever," said Paul Buchheit, a partner at start-up accelerator Y Combinator and former Google engineer.

"I'm not worried about a tech bubble. I'm worried that the entire economy may be a bubble," he added.

Others, of course, say the IPO market is on solid footing and that much of what happened with Pandora is a pricing issue that will be sorted out with public offerings over the coming three to six months.

"I don't feel we're in a bubble, I feel that strongly," said Sandy Miller, general partner at Institutional Venture Partners, an investor in Twitter and Zynga. "We're in the early stages of an IPO market, which I think will be sustainable for some period of time."

In a sign of how much market sentiment has shifted in only a few months it is worth recalling the complaints from one executive that Morgan Stanley had underpriced his company's offering.

Li Guoqing, the chief executive of E-Commerce China Dangdang in January ranted publicly on a Chinese Twitter-equivalent that he thought Morgan Stanley had priced the shares of his company too low.

"I regret not giving the share offer to Goldman Sachs," Dangdang's Li wrote on the Weibo microblogging site. "I'm openly criticizing investment banks, including Morgan Stanley."

Dangdang's shares, which shot up 87 percent on their first day of trading are now at $11.50 -- which puts them 28 percent below the IPO price that Li complained about.

(Additional reporting by Alexei Oreskovic and Sarah McBride in San Francisco, Liana B. Baker in New York; writing by Paul Thomasch; editing by Gary Hill, Martin Howell)

Bankrate closes up 2.3 percent in market debut

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After spending the early part of the day in negative territory, Bankrate shares closed at $15.34, or 2.3 percent above their $15 IPO price in their first day of trading on the New York Stock Exchange.

North Palm Beach, Florida-based Bankrate collects and publishes rates and other financial data in areas including mortgages, car loans, banking fees and retirement savings. It began as a newsletter in 1976 and moved to the Web in 1996.

The company, whose main sources of revenue are advertising and lead generation, distributes its content to websites and print publications including CNBC, Bloomberg, The Wall Street Journal and The New York Times.

In the three months ended March 31, Bankrate's common stockholders lost $4.2 million on revenue of $99.1 million.

Bankrate was taken private for $571 million in 2009 by Ben Holding S.a.r.l, an entity owned by funds affiliated with private equity firm Apax Partners.

Based on its Friday close Bankrate now has a market value of around $1.53 billion, meaning that Ben Holding and Apax have more than doubled the value of their investment in about two years.

Ben Holding still owns just over 70 percent of the company.

"The company's trajectory is very good," said Bankrate Chief Executive Tom Evans, but added: "We are thinking about what the value of the company is over time, not how it trades on the first day."

On Thursday, in an IPO led by Goldman Sachs & Co (GS.N) and Bank of America Merrill Lynch (BAC.N), Bankrate and its owners sold 20 million shares at $15 each, raising $300 million.

(Reporting by Clare Baldwin and Jennifer Saba; Editing by John Wallace, Gerald E. McCormick and Steve Orlofsky)