China Consumer Plays Weather Downturn

Gene Linn |

Shanghai stock exchangeChina stocks on Wednesday joined the U.S. and Chinese markets in retreat, but Chinese consumer plays may still offer gains.

After Wall Street pulled back sharply from recent highs and the struggling Shanghai market resumed its decline, Hong Kong’s Hang Seng Index sank 1.1% to 19.888. Although the index slipped below 20,000, it is above the support level of 19,700 to 19,800 set by many analysts. The index of Chinese companies fell 1.3% to 9,699.

Very weak turnover in Hong Kong indicated the decline may be a temporary drawback after strong gains in late July and early August.

One sector that has shown some enduring strength in the past few days is the consumer area, said Francis Lun, managing director at Lycean Securities.

“Chinese consumers are spending,” he told Equities. “There’s no recession in China for consumers – it’s an investment downturn.”

Food and beverage maker Tingyi (TCYMY), and sportswear companies like 361 Degrees (1361, HK) gained in the last few trading days after reporting robust profits. Footwear and sportswear giant Belle (BELLY) announced profits rose 12%, in line with expectations. End

DAILY FIX

Hong Kong Blue Chips: -212, -1.1%, to 19,888, 08-22-12, Hang Seng Index

Chinese Stocks in Hong Kong: -127, -1.3%, to 9,699, 08-22-12, HSCE Index

Shanghai Stocks: -11, -0.5% to 2,108, 08-2-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: -4.1, 368.4, 08-21-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong opened down 100 points after Wall Street retreated from recent highs and continued to fall when Shanghai stocks turned lower. Turnover weakened from its already low level. Oil producer CNOOC (CEO) fell 1.7% when it failed to reach profit expectations. China Telecom reported a slight dip in profits, but gained 4.5% when it announced acquisition of a CDMA network from its parent company. KGI Research

Quotable: "Investors now speculate more stimulus plans will roll out in the future, market is waiting for a major movement in terms of policy, we think more interest rate cut is possible before yearend." BOCOM International. 8-22-12

Chinese Company to Watch: "Daphne (DPNEY) remains our preferred stock in the footwear universe due to its more exciting longer-term growth story (24% FY13-14E EPS CAGR vs. 14% of Belle) underpinned by the scope of margin upside as the operational revamp increasingly bears fruit. BOCOM International. 8-22-12

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
GDP.P.C Goodrich Petroleum Corp n/a n/a n/a 0

Comments

Emerging Growth

IGEN Networks Corp.

iGen Networks Corp is engaged in investing in and managing for growth private high-tech companies that offer products and services in the domains of wireless broadband, software as a service,…

Private Markets

WayBetter

The spark hit Jamie when he saw co-workers competing to lose weight. Instead of pizzas and subs, they were eating salads and jogging along the river. Some were sneakily leaving…

Airbnb

Airbnb is a community marketplace for people to list, discover, and book unique accommodations around the world — online or from a mobile phone. Whether an apartment for a night,…