The momentum for emerging market stocks in general, and Chinese stocks in particular, has taken a big turn for the worse. There doesn’t seem to be any particular news item to account for this sector-wide correction, but that’s a minor item. It may be that attractive opportunities in financial stocks and infrastructure stocks are just pulling money out of areas like emerging markets that have already enjoyed substantial gains.
No matter what the cause, many of our holdings are tanking, and we need to act decisively to protect our assets.
Here’s the list of sells:
Alibaba (BABA). We sold half of our position last week; sell the rest now.
Momo Inc. (MOMO). The stock has been squirrelly since its earnings report and broke below support today. Sell.
Petrobras (PBR). The stock tried to rally last week, but the drop in both the price of oil and the prospects for future prices took a toll. Sell and hold the cash.
Weibo (WB). We have booked partial profits in WB by selling one-third of our position, but see no reason to risk the rest. We will sell the rest, taking our nearly 100% profit and wait for the market to improve for emerging market stocks. The company just announced that it will release Q3 results on November 21, but we need to play defense here. Sell and hold the cash.
We are also going to sell parts of two other stocks in which we have profits, but hold the remaining portions to see if they can weather the market’s downdraft.
NetEase (NTES). We have already sold one-third of our position to book profits. We will sell another third, which also represents a nice profit, and Hold the last third.
Tencent Holdings (TCEHY). We still have a profit in TCEHY, but high-volume selling days on November 2 and November 11 have changed the picture. We will sell half of our position, booking the profits and Hold the rest.
These sells will leave us with just one stock rated Buy, China Lodging Group (HTHT), which is resisting the market’s trend. We also have Melco Crown Entertainment (MPEL), which is rated Hold. Our heavy cash position will protect us while emerging markets are out of favor and give us plenty to work with when investors come around again.