Beaten-up Properties May Shine in Weak China Market

Gene Linn |

Beaten-down and risky looking Chinese properties promise good short-term growth, but overall China stocks struggled to post a tepid rebound Tuesday after Monday’s big loss. As the market heads into a funk for the second month, one hope for a turnaround lies in action from China’s National People’s Congress (NPC) in the next couple weeks.

Hong Kong’s Hang Seng Index saw early gains erode in slightly decreased turnover before ending 0.1% higher at 22,560. H shares, the index of Chinese companies, rose 0.6% to 11,170.

One possible engine for market growth, strong corporate profits, sputtered Tuesday when giant HSBC (HBC) announced weaker-than expected results and slipped 0.5%.

Positive news expected from the NPC probably won’t be dramatic – no interest rate cuts or massive investments in the economy. Instead many analysts hope the Congress will make reforms to strengthen the economy long-term and add substantial investments in certain sectors.

The main signal for a resumption of the strong rally from last September through January might be the one suggested by Tanrich Securities vice president Jackson Wong – that investors’ gain confidence the market has reached a solid bottom for future growth.

Dickie Wong, executive director of research at Kingston Securites, told Equities the Hang Seng will trade in a narrow 22,400-to-22,800 range the next two days. But he said properties, big losers recently, could rebound about 5%. (See “Companies to Watch” below for more on property companies.) End

DAILY FIX

Hong Kong Blue Chips: +23, +0.1%, to 22,560, 3-5-13, Hang Seng Index

Chinese Stocks in Hong Kong: +65, +0.6%, to 11,170, 3-5-13, HSCE Index

Shanghai Stocks: +53, +2.3%, to 2,326, 3-5-13, Shanghai Composite Index.

Chinese Stocks in the U.S.: -4.6, 375.3, 3-4-13, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong opened higher after Monday's sharp decline but most gains eroded as market giant HSBC (HBC) reported weaker-than-expected earnings. However, electrical power companies attracted buying: Huaneng (HNP) +7.5%. KGI Research

Quotable: "We expect that HSI will maintain seesawing for the coming week. The short-term resistance will be 23,400. If it can break that resistance, it may go back to the current peak of 23,944 in Feb. However, if it cannot break the resistance near 23,400 and continues to pull back, it will fall back to the initial target of 22,084 under the correction." Core Pacific Yamaichi. 3-4-13

Chinese Company to Watch: "Policy risk has been fully discounted in share prices – BUY Chinese property developers.... Top picks will be leading players with excellent earnings record and strong execution capability such as China Overseas Land (CAOVY), China Resources Land (CRBJY) and Longfor Properties (LGFRY)." Guoco Capital. 3-5-13

Brokerages and analysts cited here 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 http://www.adrbnymellon.com/dr_country_profile.jsp?country=CN

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
PWE Penn West Petroleum Ltd 1.85 0.00 0.00 7,095,896

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