China Rally Rolls on; Volatility Seen

Gene Linn |

China stocks on Friday hit their highest close for the year for the seventh time in December with more gains in sight.

The Hang Seng Index in Hong Kong edged up 0.2% in thin turnover to 22,667, the seventh year-best finish for the year since the index hit 22,271 on December 6. The index of Chinese companies rose 0.3% to 11,378. For the week, the Hang Seng climbed 0.7% and Chinese companies ended 1.3% higher.

With the Chinese economy recovering and hot money flowing into Hong Kong, the rally will probably continue in 2013, said Ben Kwong, chief operating officer at KGI Asia.

“However, as it is a liquidity driven rally, we expect the market to be volatile throughout the year," he told Equities in an email. "Investors should still keep a close eye on the market fund flow.”

Kwong's targets for 2013 are 23,500 in the first quarter, 24,000 for the first half of the year and 25,000 for all of 2013.

China’s push for urbanization will likely create winners among cement and other basic building materials producers and property developers in second and third-tier cities, he said. The drive will also raise average middle class incomes, benefitting the mass market consumption sector. End

DAILY FIX

Hong Kong Blue Chips: +47, +0.2, to 22,667, 12-28-12, Hang Seng Index

Chinese Stocks in Hong Kong: +30, +0.3, to 11,378, 12-28-12, HSCE Index

Shanghai Stocks: +27, +1.2% to 2,233, 12-28-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: -0.4, 395.7, 12-27-12, Bank of New York Mellon, ADR Index-China - closed by storm

Insight: Hong Kong posted a small gain in quiet trading. With A-shares rising on the Mainland, Chinese brokerages surged: China Everbright Securities (CEVIY) rose more than 10%. KGI Research

Quotable: "HK market could probably maintain its upward momentum." BOCOM International.12-28-12

Chinese Company to Watch: "ChinaGas (HOKCY) - Downstream business will rapidly expand .... Gas supply covers nearly an urban population of 100 million. With over 50,000km high pressure and medium pressure grid and courtyard pipe network...." Phillip Securities. 12-28-12

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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