10 Chinese Stocks That Mostly Bounced Back

What a difference a week can make.

Last Monday I took a look at 10 Chinese growth stocks that suffered double-digit percentage declines during the prior week. Nearly all of them bounced back in a major way last week.

U.S. investors probably didn't notice the turn in sentiment for China's equities. The Dow and Nasdaq Composite closed slightly lower on the week. However, thing were heating up in the world's most populous nation.

China's Shanghai Composite Index soared 4.3% on Friday -- accounting for half of this month's 8.6% ascent -- as HSBC's preliminary manufacturing purchasing managers' index rose to a 14-month high. It was a surprising blast of hearty economic news, and Friday's pop was the index's biggest single-day gain in more than three years.

Let's take a closer look at the 10 stocks that tanked the prior week.

Source: Barron's.

The average stock gained 11.8% on the week. Real estate agency E-House boosted that average -- soaring 40% after the board's unusual move to authorize the sale of stock to company executives and use those funds to repurchase shares -- but six of the 10 names did manage to post double-digit percentage pops.

E-House's move may seem like a zero-sum game, but it's actually a show of insider confidence and it whittles down the public float.

There wasn't a lot of inspirational company-specific news to fuel the rally, though Morgan Stanley initiated coverage of leading video streaming website Youku with a bullish overweight rating and a $21.10 price target.

The only stock that bucked the trend was online gaming pioneer NetEase.com, though its mere 0.6% dip can't really be classified as a failure.

The news that China's economy is bouncing back should encourage investors in all of these stocks.

What does an uptick in manufacturing mean for leading social networking website operator Renren? Well, it means that advertisers will want to pay more to reach site users who may now have more discretionary income than investors originally thought. It's easy to see how this benefits Dangdang, a fast-growing though profitless online retailer.

"Many of these stocks are priced at historic low multiples," I concluded last week. "There's an opportunity there, but investors may have to learn to trust Chinese equities before the inevitable rally begins."

Well, the rally just began.

Betting on China
There's plenty of growth still to be had if you buy the right Chinese growth stocks.

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The article 10 Chinese Stocks That Mostly Bounced Back originally appeared on Fool.com.

Longtime Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend New Oriental Education, 51job, and NetEase.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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