Better Times Ahead for Slumping China Stocks?

Gene Linn |

Better Times Ahead for Slumping China Stocks?China stocks stumbled apprehensively toward Friday’s release of second quarter GDP results, ending little changed in weak turnover Wednesday after recent sharp losses.

Hong Kong’s Hang Seng Index ended 0.1% higher at 19,420, and the index of Chinese companies slipped 0.1% to 9,373.

China’s GDP sank more than expected in the first quarter, falling from 8.9% to 8.1%. Investors expect another drop in the second quarter after a string of discouraging economic numbers.

CCB International (CCBI), the brokerage arm of the giant China Construction Bank, foresees a drop to 7.7%. “If it is 7.7% there won’t be a lot of excitement, although some retail investors might become more cautious,” said Peter So, managing director and head of research at CCBI.

But better times are coming, he told Equities. Within two weeks, he said, there will probably be another in a series of cuts in banks’ required reserve ratio. Added to two recent reductions in interest rates, this will build confidence in stronger economic growth according to So.

Among the likely beneficiaries, he said, are brokerages like CITIC Securities (6030, HK) and insurance companies such as Ping An (PNGAY). End

DAILY FIX

Hong Kong Blue Chips: +24, +0.1%, to 19,420, 07-11-12, Hang Seng Index

Chinese Stocks in Hong Kong: -13, -0.1%, to 9,373, 07-11-12, HSCE Index

Shanghai Stocks: +12, +0.6% to 2,176, 07-11-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: -5.1, 358.0, 07-10-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong opened lower in line with losses on Wall Street, but a rebound in Mainland Chinese markets helped Hong Kong blue chips finish with a small gain. A report of bad loans at CCB (CICHY) hurt the Chinese banking sector. CCB fell 3.0%. However, drug companies rose: Sihuan (XUNHF) +8.4%. KGI Research

Quotable: "We expect the Hang Seng Index to dip below 19,000 this week amid release of weak economic data from China." Guoco Capital. 7-10-12

Chinese Company to Watch: "Reiterate our bullish view on gold price. BUY Zhaojin Mining (1818). We reiterate our bullish view on gold price as we see an increasing chance for major central banks to initiate more monetary loosening measures to boost their deteriorating economies." Guoco Capital. 7-10-12

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

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