China firmed up its shift toward a consumer-led economy at its annual Central Economic Work Conference that ended Wednesday. The move might help stocks of companies in the consumer sector, but a turnaround in the overall market will be elusive.
On Thursday stocks in Mainland China and Hong Kong both fell for the sixth-straight day as concern that Europe may not solve its debt crisis any time soon drove investors worldwide away from risk and toward the U.S. dollar.
The Hang Seng Index in Hong Kong lost 1.8% to close just above the 18,000 support level at 18,027. Volume increased but was still modest. The index of Chinese companies sank 2.1% to 9,679.
The Shanghai Composite Index fell 2.1% to 2,181, its fourth-straight close at a 33-month low.
China’s economy is buffeted by reduced demand for exports and in direct investment from struggling European countries. “The Work Conference that ended yesterday took steps to boost domestic consumption because of weakness in foreign investment and trade,” Conita Hung, head of equities at Delta Asia Financial, told Equities.
The move away from China’s overwhelming reliance on exports, foreign direct investment and the government’s fixed asset investments will benefit companies in the food industry, she said.
She particularly likes China Resources (CRHKX) which has a wide range of food and beverage products and Mengniu Dairy (CIADY).
However, the overall market likely will not rebound until there is some hope of a solution to the European debt crisis. Investors are also waiting for Chinese interest rate cuts and other credit loosening measures, steps that were not taken at the Work Conference. END
Hong Kong Blue Chips: -328, -1.8%, to 18,027, 12-15-11, Hang Seng Index
Chinese Stocks in Hong Kong: -209, -2.1% to 9,679, 12-15-11, HSCE Index
Shanghai Stocks: -2.1%, 2,181, 12-15-11, Shanghai Composite Index.
Chinese Stocks in the U.S.: -5.6, to 356.1, 12-14-11, Bank of New York Mellon, ADR Index-China
Insight: The Hong Kong market fell as on-going concern over the European debt crisis drove investors away from risk and into U.S. bonds and the U.S. dollar. Investors also fled commodities, which hurt Chinese oil and gold producers.
Quotable: "Since hitting the day’s low at 16,170 in early October, HSI had formed a medium-term uptrend. Currently, the support level of this uptrend is at 18,100 to 18,200. If the uptrend support is broken down, this shall trigger another major sell-off." Core Pacific Yamaichi. 12-15-11
Chinese Company to Watch: "Orient Overseas International (OROVY) is the world’s leading container shipper. After dropping by a maximum of 59% from the top in April, share price has stabilized since August." Guoco Capital. 12-15-11
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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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