27 September, 2007

Markets Rise Modestly Thursday on Subdued Volume while China Stocks Soar

North American market were higher across the board Thursday as Investors were buying cautiously towards the end of the quarter. Many however sat on the sidelines as trading volume was lower across the board than in previous weeks. The Dow, Nasdaq and S&P all saw gains today of about .3%. In Canadian Markets the TSX was up almost triple digits which translated to about .7% in the green.

Google (GOOG) went in front of the Government today to defend its decision to buy DoubleClick. A group of challengers led by Microsoft (MSFT) had complained that this deal would give Google too much power over Internet Advertising. Google's dominance in search ads, coupled with DoubleClick's reporting and distribution services would give Google too much control according to Microsoft. Yes, I understand the irony of Microsoft complaining about Anti-Trust issues hot on the heels of its appeal loss in Europe for the very same infractions. Talk about the Pot calling the Kettle black! Google seems confident enough that the deal would be allowed to go through as it points out that Microsoft had also been in the bidding for DoubleClick and lost, having to settle for competitor aQuantive.

In the airline sector a large order was placed by British Airways (BAIRY). The company leveraged heavy competition between Boeing (BA) and Airbus and took orders from both airplane makers. The Airline placed an order for 12 Airbus A380 planes and 24 Boeing 787s with an option to buy even more planes should needs arise. British Airways climbed almost 5% on the news while Boeing was only slightly higher.

The other continuing big stock growth story is China. Many Chinese based companies have done extremely well this week and the run was capped off today with even more substantial gains. China Eastern Airlines (CEA) was up 15%, China Telecom (CHA) was up 15% and 18% on the week and China BAK Battery (CBAK) was up 19% and has doubled in the last 5 days. Another Chinese mobile/Internet play KongZhong (KONG) was really flying today as the stock jumped 72% rebounding from year-lows recently.

While its tempting to jump in and try to ride more momentum here, caution is the name of the game. With these type of gains an cool, calm and collected investor would sit back and see whether the now inflated prices can be sustained going forward to a quick trade. While I would particularly be cautious about the Airline industry, China Telecom is a great play on the expanding mobile world and KongZhong was beaten down from the $10s to the high $3s before rebounding now to $8.50 on inklings of hope and raised estimates. Due to government control and very strict laws the Chinese business world is one not fully understood by a majority of casual investors and as such I don't recommend jumping in blind hoping to catch a wave.

Disclosure: Author is long GOOG and holds no position in any other companies mentioned

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