China stocks’ rally continued to stall Thursday. Things may get going again with Friday’s release of China’s GDP number and other economic figures, some analyst think, but another school of thought is the rally may not restart until February or March.
The Hang Seng Index in Hong Kong edged 0.07% lower to 23,340, and the index of Chinese companies slipped 0.4% to 11,858. After rising 22.9% in 2012, mostly in the last four months of the year, and 2.9% on the first trading day of 2013, the Hang Seng has gone nowhere.
The release of Chinese GDP figure might boost the market by adding confidence China’s economy is rebounding from a long slump. But Peter So, managing director and co-head of research at CCB International, said the upward trend in China’s economy has already been established by recent economic numbers. Increased GDP on Friday won’t excite investors, he told Equities. Only a result that significantly differs from expectations would be likely to move the market.
What will reignite the rally?
“Now the market is focused on earnings to be released in February to confirm the worst is over,” So said. “That and possibly policies to be introduced in March at the National People’s Congress.
“We advise investors to look at earnings.”
The most likely sectors to lead the earnings parade are insurers, banks and brokerages, according to So. CCB International is the brokerage arm of the giant China Construction Bank.
The infrastructure and construction sectors will also be strong, he said, including China Railway Construction (CWYCY) and China State Construction (CCOHY). The latter company will benefit from an increase in public housing in Hong Kong. End
Hong Kong Blue Chips: -17, -0.07%, to 23,340, 1-17-13, Hang Seng Index
Chinese Stocks in Hong Kong: -49, -0.4%, to 11,858, 1-17-13, HSCE Index
Shanghai Stocks: -25, -1.1% to 2,285, 1-17-13, Shanghai Composite Index.
Chinese Stocks in the U.S.: -2.6, 406.1, 1-16-13, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong blue chips opened 115 points higher but lost gains after failing to break resistance at 23,500. Renewable energy stocks fell: Datang Renewable (1798, HK) -6.7%. Investors were relieved Hong Kong’s chief executive did not announce major steps to restrain the local property market in his speech Wednesday. Cheng Kong (CHEUY) climbed 1%. KGI Research
Quotable: “Consensus has a point that stocks are overbought near term, and beg a consolidation before the next leg up. But a consolidation is by no means the end of the rally. And the strong rally since December contrasts with the harsh sell-off in the previous eleven months. Recent market strength in face of bad news such as property tax, especially the resilience at closing after some dramatic intraday sell-off, should be noted. It is plain that there will be dips, but dips should be bought.” BOCOM International. 1-17-13
Chinese Company to Watch: “With the coming of Chinese New Year (February 10), Gaming market is expected to improve with increasing cash flow. Therefore, SJM Holdings (880, HK) can be a beneficiary of this trend.
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For a list of Chinese companies sold in the U.S. and information on each company go to http://www.adrbnymellon.com/dr_country_profile.jsp?country=CN