Throughout much of the past year, a variety of financial websites — including this one — noted the sharp disconnect between projected growth rates and the price-to-earnings (P/E) ratios of many Chinese companies. It was easy to find companies growing 20% or even 30% while sporting only single-digit P/E ratios. For some, that disconnect was based on fears that the Chinese economic juggernaut would soon cool. For others, the inability to really know if these Chinese companies were legitimate was the main reason to avoid Chinese stocks. Increasingly, it’s those latter… Read More
Throughout much of the past year, a variety of financial websites — including this one — noted the sharp disconnect between projected growth rates and the price-to-earnings (P/E) ratios of many Chinese companies. It was easy to find companies growing 20% or even 30% while sporting only single-digit P/E ratios. For some, that disconnect was based on fears that the Chinese economic juggernaut would soon cool. For others, the inability to really know if these Chinese companies were legitimate was the main reason to avoid Chinese stocks. Increasingly, it’s those latter concerns that now rule the roost. An increasing number of Chinese companies are in the sights of short sellers, as they allegedly have little or no actual business underlying the seemingly impressive income statement figures. Case in point: China MediaExpress Holdings (Nasdaq: CCME). The company operates a massive advertising network on buses that ply China’s regional highways. Several short-sellers have attacked the company, noting that channel checks showed that many of the company’s claims were vastly overstated or were outright falsehoods. Shares of China MediaExpress have fallen nearly 50% since establishing a 52-week high… Read More