Chinese Stocks Get Roughed Up on Yuan News

The yuan's devaluation is taking a toll on Alibaba Group Holding Ltd (NYSE:BABA), Baidu Inc (ADR) (NASDAQ:BIDU), SINA Corp (NASDAQ:SINA), and SouFun Holdings Ltd (NYSE:SFUN)

by Alex Eppstein

Published on Aug 11, 2015 at 10:44 AM
Updated on Jun 24, 2020 at 10:16 AM

China's decision to devalue the yuan is sending shockwaves throughout the stock market. In particular, a number of China-based companies listed on U.S. exchanges are having a rough morning, including Alibaba Group Holding Ltd (NYSE:BABA), Baidu Inc (ADR) (NASDAQ:BIDU), SINA Corp (NASDAQ:SINA), and SouFun Holdings Ltd (NYSE:SFUN). Here's a closer look at the price action and sentiment backdrop surrounding these four stocks.

BABA is down 1.9% at $78.95, taking its year-to-date deficit beyond 24%. The sell-off comes just one day ahead of the company's fiscal first-quarter earnings report, due tomorrow morning. The options market is pricing in a 6.7% single-session move in the aftermath of this event (based on near-term at-the-money straddle data), which is par for the course, based on the firm's three prior turns in the confessional.

Sentiment toward Alibaba Group Holding Ltd is extremely positive among the brokerage crowd. Twenty-one of 22 analysts rate the shares a "buy" or better, and the stock's consensus 12-month price target of $106.19 stands at a 34.5% premium to current levels. Should BABA continue to struggle -- and/or report underwhelming quarterly figures tomorrow -- an unwinding of this optimism could lead to headwinds.

BIDU is also sinking on the yuan news, down 3.8% at $170.17, and off 25% year-to-date -- hurt by a brutal July. Option players have been betting bearishly on the underperformer, too. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity has racked up a 50-day put/call volume ratio of 0.69 -- higher than four-fifths of similar readings from the last year.

Meanwhile, SINA is down 4% at $40.57, but still enjoys a nearly 8.5% lead in 2015. Looking more closely at the charts, the stock is once again testing its 160-day moving average, which has served as support in recent sessions. If option traders get their way, though, the shares will break decisively south from here. SINA Corp's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.16 ranks in the 81st annual percentile, hinting at a pronounced bearish bias. Looking ahead, the company is tentatively scheduled to report earnings within the next few days.

Finally, SFUN is taking it on the chin, dropping 3.4% to trade at $7.19 -- and sliding into negative year-to-date territory. This is hardly what the brokerage crowd expects out of the stock. In fact, 80% of analysts have doled out "strong buy" recommendations on the shares, with not a single "sell" to be found. Should SouFun Holdings Ltd drive deeper into the red, a round of downgrades could exacerbate losses.

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