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SEC Action Hammers Chinese Stocks

ByNicholas Santiago
Published 12/04/2012, 01:55 PM
Updated 07/09/2023, 06:31 AM
GOOGL
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SINA
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BIDU
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NWSA
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U.S. listed Chinese stocks were hammered today as the Securities and Exchange Commission began to crack down on Chinese affiliates of the top four accounting firm in the United States. These accounting firms are Deloitte, Ernst & Young, KPMG, PwC and BDO. The SEC says these accounting firms are required to produce auditing documents of foreign companies if they are listed on U.S. exchanges. Large cap Chinese firms like Baidu.com, Inc. (ADR) (BIDU), SINA Corp. (SINA) and Sohu.com Inc. (SOHU) are all taking a beating on this news.

This news for the most part is punishing the large cap Chinese stocks unjustly. It's somewhat assuming that there are accounting irregularities that would come to light when these papers get filed. While this has been the case with small reverse merger Chinese ADR's, to assuming billion Dollar Chinese companies are cooking the books may be a stretch.

Baidu.com At Low
BIDU is trading at $90.12, -5.78 (-6.03%). It's low today was a new 52-week low at $89.16. Forward earnings for 2013 have BIDU making $6.02 in profits. If this is the case, the P/E will be around 15, lower than Google Inc. (GOOG). With the Chinese market at their disposal, growth should be higher than Google in the near term.

Lastly, BIDU's daily chart has major technical support at $88.00. Should that fail to hold, $82.00 and $77.00 are the next two levels.

With these large Chinese companies trading on U.S. indexes, it all comes down to facts. Is there accounting up to par? If it is, this is a fantastic buying opportunity in the near term. SINA, BIDU, SOHU are all trading at cheap levels with a Chinese economy receiving stimulus from their government.
BAIDU Inc.

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