Boom went the dynamite. China stocks shot higher Friday after the U.S. Federal Reserve launched an eagerly anticipated round of monetary easing, the so-called QE3. Chinese commodity producers, exporters and properties will continue to rise sharply in the coming months, according to one analyst.
Hong Kong’s Hang Seng Index surged 2.9% to 20,630 in greatly expanded turnover after the Fed announced it would add massive amounts of money to the U.S. economy through bond purchases. The index of Chinese companies jumped 3.7%. Big gains Friday allowed both indexes to rise 4.2% for the week. Easier European policies are also boosting the market. Last Friday the Hang Seng leaped 3.1% on news of an ECB bond-buying plan.
“It’s not just QE3 that helped the market,” said Peter So, managing director and co-head of research at CCB International. “The Fed also raised its GDP growth forecasts for 2013 and 2014, which shows the economy has more momentum.”
CCB International is the brokerage arm of China Construction Bank, one of China’s “big four” banks.
The boost to the U.S. economy creates three themes for China stocks, he said.
One is for commodity producers as the flood of new money pushes commodity prices higher. So likes gold stocks such as Zhaojin Mining (ZHAOY).
Exporters will also gain. “Exports from emerging markets are low now, but will expand next year,” according to So. Electronic components maker AAC Technologies (AACAY), TV producer TCL Multimedia (1070, HK) and Johnson Electric (JELCY) are among his favorites. Port operators such as China Merchants Holding (CMHHY) will also shine.
The third theme involves properties. So reasoned that QE3 will lead to a rise in currently low inflation rates, which will push investors into assets like properties. In addition the Hong Kong companies, he likes Chinese property giant Shimao (SHMAY). End
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