A Study Of Valuation Methods Of China-concept Stocks

China-concept stocks refer to a set of stock of companies whose assets orearnings have significant activities in Mainland China while listed in stockexchanges outside Mainland China. US-listed China-concept stocks (N-shares)include leading enterprises in new economies of China. N-shares stocks aredifferent from A-shares stocks in terms of valuation methods due to theirconnections to the US security market where they are being traded and theaccounting principles they apply. Though valuation of A-shares is discussedextensively in the literature of China, discussion of N-share valuation is notcommon. This paper aims at providing reference to investors of N-shares in Chinaand serving as a basis for researchers and analysts of emerging economies ofChina.A valuation framework for N-share is proposed in this paper based ontheoretical and empirical studies. The valuation framework takes into considerationof cost of debt and cost of equity. The paper also discusses the methods of forecastof future cash flows. Regarding the estimation of cost of equity, this paper includesthe factor of country specific risk and forms a valuation model based onFama-French3-Factor Model. The valuation framework is applied in detail in acase study regarding YY Inc., an N-share stock. The final chapter makes a reviewof the whole paper.