In the previous week’s The Edge Singapore (Issue 998, Aug 23), we wrote about buying Hong-Kong listed Chinese education services provider New Oriental Education & Technology Group for our Top 10 global portfolio. To recap, we bought this stock because it was heavily hit by strict government regulations. As such, the company lost almost 90% of its market capitalisation from its February highs and we saw this as a buying opportunity.

Based on our estimations and reported analyst consensus, the potential impact to earnings is not as dire as the actual drop in price. Hence, this implies that the market likely overreacted to the impact and the stock is trading at a bargain. This is a high-risk stock given its fundamentals are expected to be negatively impacted but we are focused on the potential mispricing of the stock.

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