China Stocks Cool Off After Friday Rally

Gene Linn  |

It looks like last Friday’s big rally was a false start. After posting losses for five weeks and hitting a year-low early last week, a sudden surge in optimism about China’s inflation problem pushed China stocks in Hong Kong sharply higher in heavy trading at the end of the week.

Just about everyone has been expecting a major, sustained rise in China stocks when inflation was under control, and it seemed on Friday that maybe the real rally had started.

But on Monday Hong Kong’s blue-chip Hang Seng Index, which contains, numerous Chinese heavyweights, fell and the index of Chinese companies posted a modest gain in light turnover.

The surge Friday came because Chinese Premier Wen Jiabao proclaimed that inflation would soon be under control, according to Benny Wong, head of research at BOCOM International. But he told Equities that China stocks remain volatile.

“They could go higher, but maybe not by very much in the next few weeks,” he said. “The market is looking for stability in the U.S. economy and other good news.”

Meanwhile there’s not much downside because of the attractive valuations on the Hong Kong market, according to Wong. But he said it might be July or August before investors get the good news they are waiting for, perhaps on lower Chinese inflation or a stabilization of the global economy.  End

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DAILY FIX --  Back to Volatile Trading, Weak Turnover

Hong Kong Blue Chips: -130, -0.6%, to 22,042, 06-27-11, Hang Seng Index

Chinese Stocks in Hong Kong: +42, +0.3% to 12,479, 06-27-11, HSCE Index

Shanghai Stocks: +0.4%, 2,758, 06-27-11, Shanghai Composite Index.

Chinese Stocks in the U.S.: +2.1 to 420.6, 06-24-11, Bank of New York Mellon, ADR Index-China

Insight: After losses on U.S. markets Friday, Hong Kong blue chips struggled to maintain the 22,000 level. Gains in A shares in China helped cut early losses in volatile trading and weak turnover. KGI Research

Quotable: "Looking ahead, given easing concerns over the spread of Europe’s debt crisis and the unlikelihood for the Beijing government to have interest rate hike by the end of June, the HSI is expected to test its nearest resistant mark of 22,500 in the near term." BEA Securities. 6-24-2011

Chinese Company to Watch: COSCO Pacific (1199) "We are optimistic that COSCOP’s integrated container-related businesses can recover in tandem with the pick up in global trade activity." Haitong Securities. 6-24-2011

Brokerages and analysts cited have disclaimers on their websites emphasizing their statements are for information only. They do not endorse my blog, and I don't endorse them.

For a list of Chinese companies sold in the U.S. and information on each company go to

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