Focus finally shifted back to China for China stocks in Hong Kong on Monday, at least temporarily. Along with other global markets, Hong Kong had been shaken like a rag doll by global economic and debt problems in the last few weeks, ending up more than 10% lower in extreme volatility.
But moderately encouraging economic news from the U.S. late last week lent some stability to global markets, setting the stage for what will be a big week for China stocks in Hong Kong.
With good news foreseen in the next four days, the index of Chinese companies jumped 4.7% higher Monday, and the blue-chip Hang Seng Index rose 3.3% to 20,260.
The biggest event will be the visit by Chinese Vice Premier Li Keqiang to Hong Kong from Tuesday through Thursday. It is widely expected, or hoped, that Li will announce new measures by the central government to improve economic growth in Hong Kong. These expectations pushed Bank of China (HK) (2388 in Hong Kong) up 5.1% on Monday, according to KGI Research. With strong Mainland connections, BOC (HK) gains from liberalization of RMB use in Hong Kong, and Li might reveal further measures.
This week will also see numerous big China plays release interim earnings figures in Hong Kong. Insurer PICC (2328) soared 10.4% Monday after announcing earnings that exceeded predictions. Other major Chinese companies releasing results this week include Ping An Insurance (02138) on Wednesday and banking giant CCB (0939) on Friday. (Check this column tomorrow for comments on prospects for Chinese stocks from an analyst at CCB’s brokerage arm, CCB International.)
However, the current good feelings could turn out to be irrational exuberance because the global debt and economic problems could flare back up at any time. Reduced turnover in Hong Kong on Monday seemed to reflect some investor caution.
BOCOM International stated in its daily market report Monday: “While the panic sentiment has been contained, concerns over global economic slowdown remain…. A solid rebound above 20000pts is rather difficult in the short term given the strong upward resistance.” End
DAILY FIX -- Blue Chips Back Above 20,000
Hong Kong Blue Chips: +640, +3.3%, to 20,260, 08-15-11, Hang Seng Index
Chinese Stocks in Hong Kong: +492, +4.7% to 10,944, 08-15-11, HSCE Index
Shanghai Stocks: +1.3%, 2,627, 08-15-11, Shanghai Composite Index.
Chinese Stocks in the U.S.: +0.8 to 395.8, 08-12-2011, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong opened sharply higher as turmoil in global markets seemed to subside temporarily and Hong Kong expected Chinese Vice Premier Li Keqiang would announce steps to improve the local economy in his visit this week. A rise on Mainland markets helped Hong Kong extend gains in the afternoon, with blue chips rising back above 20,000. KGI Research
Quotable: "The local bourse is expected to trade lower next week, as there is no quick fix for the global debt crisis. The Hang Seng Index may see some support near 18,868 – the low during the market sell-off on Tuesday. However, it should not be regarded as a concrete bottom, as extreme volatility in the global stock market is expected to continue in the next few weeks." BEA Securities. 8-12-2011
Chinese Company to Watch: China Gold International Resources Corp. "As the overseas flagship vehicle of China National Gold Group, we expect the Company to become a leading gold and by-product non-ferrous metal mining company by operating existing mines, updating and discovering new resources through exploration properties and selectively acquiring additional high quality assets." CFSG. 8-12-2011
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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
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