Big Central Banks Rescue China Stocks, for Now

Gene Linn |

China stocksHope central banks in Europe and the U.S. would pump more money into the global economy rescued China stocks from a dismal week.

Hong Kong’s Hang Seng Index plunged below the 19,000 support level early in the week, but stabilized in mid-week on the prospect of monetary easing by the U.S. Federal Reserve Board.

Then the index surged 2.0% Friday when the president of the European Central Bank vowed to support the Euro.

For the week the Hang Sang regained the 19,000 level but fell 1.9% to 19,275 in thin turnover. The index of Chinese companies sank 1.8% to 9,399.

Now investors will be eager to see if the central banks come up with strong measures to match high hopes.

“So for the upcoming meeting held on Wednesday (by the Fed) and Thursday (by the ECB), we have to see whether there are sufficient measures to be launched to satisfy the market expectation,” said Ben Kwong, chief operating officer at KGI Asia. “Hence, market would be quite volatile in the later part of  next week.”

On the China front, he told Equities in an email, corporate results set for next week will probably be weak due to falling economic growth in China in the first half of this year. But Kwong said the market has basically discounted bad news from the results.

Companies that surprise investors with good results will outperform. “So we need to keep a close eye on individual company earnings and look for buying  targets,” Kwong said. End

DAILY FIX

Hong Kong Blue Chips: +382, +2.0%, to 19,275, 07-27-12, Hang Seng Index

Chinese Stocks in Hong Kong: +188, +2.0%, to 9,399, 07-27-12, HSCE Index

Shanghai Stocks: +3, +0.1% to 2,129, 07-27-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: +6.4, 364.0, 07-26-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong rebounded from recent losses after the European Central Bank promised to support the Euro, a pledge that might push more cash into the world economy. Commodity prices rose, helping Chinese oil and gold producers. Oil company CNOOC (CEO) gained 2.8%. KGI Research

Quotable: "Given a rally in U.S. and European stock markets, we expect the Hang Seng Index to open higher today. However, market outlook remains uncertain in near term amid a slowdown in China’s economy." Guoco Capital. 7-27-12

Chinese Company to Watch: "We expect Sunny (Optical, HK 2382) to have positive 1H12 result and beat the Management's guidance of 25% FY12F revenue yoy growth." Core Pacific Yamaichi. 7-27-12

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

Companies

Symbol Name Price Change % Volume
T.TNT.UN True North Commercial Real Estate Investment Trust 6.04 -0.11 -1.79 107,481

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