Big Bank Results to Set Tone for China Stocks

Gene Linn  |

China stocks closed little changed Wednesday, ending two days of substantial losses. Investors now look to corporate results from big Chinese banks to fuel a possible rebound.

After sinking 2.0% the first two days of the week, the Hang Seng Index edged 0.2% lower to 20,857. The index of Chinese companies sank 0.9% to 10,776.

Light turnover and a narrow trading range Wednesday indicated investors are cautious ahead of results announcements from the Agricultural Bank of China (ACGBY) and Minsheng Bang (CMAKY) on Thursday and from China Construction Bank (CICHY) on Friday, according to Conita Hung, head of equities at Delta Financial Asia.

ABC and CCB are two of the four giant state-owned banks in China.

“If results are better than expected, the Hang Seng could rebound to around 21,500,” Hung told Equities.

The index is not likely to rise beyond the recent intra-day high of 21,760, she said. “I don’t expect a major jump until after the end of the first quarter.”

The top picks in the medium-to-long-term, Hung said, are Chinese banks. Their valuations are attractive and they lag behind the rest of the market.

Otherwise, investors need to be selective, Hung said. She likes new energy and new materials companies that have had strong results. Lumena Newmat (0067.HK) is one example, and one choice in the energy sector is China Everbright (SEVIY). End


Hong Kong Blue Chips: -32, -0.2%, to 20,857, 03-21-12, Hang Seng Index

Chinese Stocks in Hong Kong: -95, -0.9%, to 10,776, 03-21-12, HSCE Index

Shanghai Stocks: +0.06% to 2,378, 03-21-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: -7.6, 401.2, 03-21-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong opened higher, but gains were capped at 21,000 by worries over a weak Chinese economy and stocks retreated to end slightly lower. KGI Research

Quotable: "We expect the Hang Seng Index to consolidate within a trading range of 20,500-21,300 in near term and recommend short-term investors to take profit." Guoco Capital. 3-19-12

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Chinese Company to Watch: "Reiterate “Outperform” on the coal sector. We maintain “Buy” rating and TP of HK$35.91 on our top pick Yanzhou Coal (YZC) ." BOCOM International. 3-21-12

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