Should You Buy Village Roadshow Ltd At This Share Price?

Despite gloom, China bottoms

The All Ordinaries was down on the first trading day of 2016. However, strong stocks were able to withstand today’s downward pressure.

Much of the pressure came from a weaker Chinese manufacturing sector. The Shanghai Composite saw a bloody drop by almost 4% at 1pm local time. Being an Australian Chinese, I can tell you it’s not a good start to the year for Chinese investors.

Talking about superstition, this year is going to be the Year of Monkey for China. Traditionally, people prefer to have children in the Year of Monkey. Couple that with an end of the infamous ‘One-Child’ policy, we are going to see a lot of birth and infant-related products do well.

In the years to come, infant and child-related products from Australia will get a big boost in demand from China.

As far as the Chinese economy is concerned, I generally see a bottom. The most important indicators such as the property index, retail sales and producer price index are beginning to stabilise.

Manufacturing is still lagging, but that sector-slowdown is expected to last longer.

Another important factor is energy price. With a potential bottom in energy price, this provides a floor for deflation.

Overcapacity in secondary industries continues to be an issue. However, with increasing demand (property index now back into positive growth, to lead real industry demand), a stronger consumer sector and fiscal/monetary supports, we are beginning to see a light in the tunnel.

VRL regains short-term strength

I had Village Roadshow Ltd [ASX:VRL] on my actively-traded portfolio a few weeks ago. I sold it and now I am buying it back.

The stock is restarting to produce some strength in its momentum. Although it is not one of the top-performers and I may not keep it for very long, there could be some trading opportunities in the short term.

Today was an example, while the market pulled back, VRL managed to generate a relatively strong gain for the day.

Ken Wangdong

Emerging Market Analyst, New Frontier Investor

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