The year of 2009 is a banner year for Chinese small caps. According to VIX index, the Chinese small caps grows 187% as a whole.
A rise in value comes with a potentially large tax bill. So many Chinese small cap investors are selling low performers at a loss to offset the capital gains. This phenomena is called tax selling. Not surprisingly, tax selling usually happens at the year end.
I had explored the ideas of tax selling and made some successful trades last week.
TBV was trading as low as $2.4 last Wednesday week. The company was beaten up due to a bad 3rd qtr report in mid-November. It turned out that TBV's customers built in excess inventories due to TBV's increasing marketing efforts to promote their products, so in 3rd quarter 2009 the sales dropped. The stock got punished big time, resulting in an over-sold situation. I got in near the bottom last Wednesday, and the stock closed at 3.02 today, a gain of 25% in two trading days.
Similar things happened to FUQI. FUQI's share drop to $16s last week from a high of $32 in summer. It came back strongly last Thursday, trading as high as $19.5 intraday.
I bought some Jan 17.5 options for gain of over 100% in two trading days.
CHIO: Really low PE, got in at $0.65 a few days ago, currently trades at $0.75
Unsuccessful trades:
- FEED - Got into FEED per a recommendation from a technical chart reader. Got in at $4.5 two weeks ago, and out at $4.3 last week. I got into the stock too early.
- I also placed bid to UTA, another high flying stock with trouble lately. My bid, in the low $8s, was not successful. The stock closed at $11.09 today.
Following is a list of Chinese small caps that had difficult time lately, judging from their retreats from recent highs. Some in the list are down for good reason, but some are simply depressed at the end of year due to tax selling. The trick is to find those to get a nice bounce in January, when the rushing of selling ends.
LOSS FROM HIGH SINCE 20081231
CYXI -94% 20090210
RPC -87% 20090112
TBYH -76% 20090612
CHCG -75% 20090507
SUWG -70% 20090129
CHIO -67% 20090629
CMM -64% 20090622
CAEI -61% 20090805
NOEC -60% 20090526
GU -57% 20090505
NWD -54% 20090102
TBV -53% 20090924
ADY -51% 20090611
CDII -51% 20090612
CCGY -50% 20091015
ORS -50% 20091014
SUTR -50% 20090610
PFGY -48% 20090116
SRRY -47% 20091008
MHJ -47% 20090610
FEED -44% 20090610
SGAS -42% 20091022
FUQI -42% 20090915
GSI -40% 20090505
FFHL -40% 20090420
CPSL -39% 20090505
CHLN -39% 20090723
CRTP -39% 20091013
PSOF -38% 20090918
CHNG -38% 20090605
KONG -37% 20091020
SGTI -37% 20090109
UTA -37% 20090805
HQS -36% 20090512
BEST -35% 20090917
CTFO -35% 20091012
Thanks Researcher95 of ECSC for the list.