Big Investors Waiting to Jump into China Stocks

Gene Linn |

Big Investors Waiting to Jump into China StocksChina stocks are sailing into next week’s May Day holiday with a little wind at their backs. But the big money apparently is still waiting to get on board.

The market has gained back much of Monday’s steep drop. Building on encouraging hints about future monetary policy by the U.S. Federal Reserve Board, Hong Kong’s Hang Seng Index rose 0.8% Thursday to 20,810, and the index of Chinese companies increased 0.9% to 10,912. But turnover remained very thin, reflecting investor caution.

Trading is slow ahead of next week’s holiday when Chinese markets will close Monday and Tuesday and Hong Kong will shut down Tuesday, according to Peter So, managing director and co-head of research at CCB International.

CCB International is the brokerage arm of the giant China Construction Bank (CICHY).

But the market has more upside that downside, So told Equities, because investors think China will soon ease its tight, inflation-fighting credit policy.

”Most funds we talk to are holding cash and are waiting to buy,” he said. “When the market goes down 400 to 500 points they will buy. If the trading range is narrow, they will wait.”

What stocks will funds put their cash in? They are looking at some Chinese banks such as ICBC (FXI), So said, and consumer-oriented manufacturers like snack-maker Want Want (WWNTY).

He said there is some interest in Chinese properties, but only in big-cap players such as China Resources Land (CRBJY). End

DAILY FIX

Hong Kong Blue Chips: +163, +0.8%, to 20,810, 04-26-12, Hang Seng Index

Chinese Stocks in Hong Kong: +99, +0.9%, to 10,912, 04-26-12, HSCE Index

Shanghai Stocks: -0.1% to 2,405, 04-26-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: +2.0, 399.4, 04-25-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong opened higher after the U.S. Federal Reserve Board indicated it was open to using monetary policy to help the struggling U.S. economy. Good first quarter results pushed China Life (LFC) up 1.5% and helped China Unicom (CHU) rise 4%. KGI Research

Quotable: "Market will likely stay flat coupled with low volume." BOCOM International. 4-26-12

Chinese Company to Watch: YURUN FOOD (CYUFF) "Market share will further increase which will increase its bargaining power. Will speed up its acquisition pace." KGI Asia. 4-26-12

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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