2015 has been a nightmare year for Chinese stocks, and some of the biggest, most popular bets with U.S. investors happen to be some worst stocks so far this year.
Since its peak, the Shanghai Composite has plunged almost 40%. Hong Kong’s Hang Seng Index peaked at the end of April and has lost 25% since then.
This is what a crash looks like.
Tumbling prices for Chinese stocks only fuel global anxiety over the country’s economy. By official figures, the Chinese economy is slowing down and a faster-than-expected pace. Investors are terrified that the Chinese economy is even worse than the official figures success. The government’s recent devaluation of the yuan certainly only served to fuel that concern.
Against that backdrop, Chinese stocks are cratering across every sector. From energy to e-commerce, a number of once-bright plays trading on major U.S. exchanges have plummeted.
Take a look at the worst-performing Chinese stocks with a market cap of at least $2 billion trading on a major U.S. exchange:
Worst Chinese Stocks: PetroChina (PTR)
YTD Performance: -34%
Interestingly, China’s demand for crude oil has hardly declined even though its economy is losing steam. Unfortunately for investors in PetroChina (PTR), robust demand can’t keep the oil major off the worst stocks list.
The rout in oil prices caused PTR’s first-half revenue to drop 30%. The bottom line was hit even harder — falling 64% — because of reduced profitability in exploration and production.
PetroChina is China’s largest oil company, but its diversification provides only thin armor against the turmoil in the energy markets.
Like oil stocks here at home, the outlook for PTR stock is bleak heading into year-end.
Worst Chinese Stocks: Melco Crown Entertainment (MPEL)
YTD Performance: -34%
As a casino stock focused on China, Melco Crown Entertainment (MPEL) once looked like a can’t-miss winner. But then everything started going against it.
Slower economic growth would have been enough a blow, but then, the stock market crashed too. Worst of all for MPEL, authorities began cracking down on corruption across China, which scared the high rollers away.
MPEL has lost almost half its market cap so far this year, and has plenty more room for losses. Analysts keep cutting their revenue forecasts for Macau, and “sell” calls for MPEL are mounting.
The only bright spot? News out of China that the government plans to “support Macau’s economy in all aspects.” But it’s hard to determine how real this potential tailwind is.
Worst Chinese Stocks: Baidu (BIDU)
YTD Performance: -35%
But even if that’s true, how long can it last?
The economic situation has to catch up to Baidu eventually, the thinking goes, and so investors are bailing out in waves. Like other Chinese Internet giants, BIDU is using the rout in its share price to buy back stock, but that’s been ineffectual at stopping the slide.
Baidu is understandably frustrated by what it perceives as the market’s myopia, and might just give up on it. Indeed, BIDU is thinking about ditching its U.S. listing entirely.
Worst Chinese Stocks: Alibaba (BABA)
YTD Performance: -38%
Alibaba (BABA) recently marked its one-year anniversary as a publicly traded company, but no one felt much like celebrating. China’s answer to Amazon (AMZN), eBay (EBAY) and PayPal (PYPL) is now well below its IPO price of $68, and the trend is only down.
BABA has more problems than just the Chinese economy. Government regulators allege that the e-commerce giant is complicit in the sale of counterfeit goods. And then there was this devastating analysis by Barron’s.
Alibaba insists that the economic slowdown isn’t hurting business, but that’s hard to believe, and even if it’s true, how long can it last?
Worst Chinese Stocks: Yanzhou Coal Mining (YZC)
YTD Performance: -41%
The entire Chinese coal industry is getting hammered by a drop in demand. Even if the economy weren’t slowing down, companies like Yanzhou Coal Mining (YZC) would still have to deal with the increase in long-distance distribution of electricity generated by other means.
There’s no way around it: Demand for coal is dwindling, supplies are mounting and that’s killing prices.
Analysts don’t see coal prices bottoming out anytime soon, and coal companies are responding by reducing expenses. That’s great … except that the price of coal is falling faster than they are able to cut costs.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
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