China Retail, Agriculture, New Energy Sectors Looking for Boost

China stocks continued to follow global counterparts lower as the European debt crisis festers. Slumping markets in Mainland China also weighed on China plays in Hong Kong on Tuesday.

But an economic summit held by Chinese leaders early this week may boost some sectors.

On Tuesday Hong Kong’s Hang Seng Index followed U.S. markets down after credit rating agency Moody’s panned Europe’s latest proposal to address its runaway debt and Chinese A-shares fell to a 33-month low.

The Hang Seng sank 0.7% to 18,447 on weak volume, and the index of Chinese companies fell 1.0% to 9,957.

Hopes that China’s on-going economic summit will spark a rebound are muted, according to Ben Kwong, chief operating officer at KGI Asia. Chinese authorities probably will not announce new loose credit policies because they worry about re-igniting inflation.

Instead, new measures are likely to be more focused. “The recent consensus is that China will adopt a more aggressive fiscal policy like tax cut [and] subsidy on selective sectors to maintain the economy growth,” Kwong told Equities in an email.
“Hence, we think mainland domestic plays would be better. It includes retail sector (especially those daily necessities).” Kwong also thinks the agriculture and clean energy sectors will get a boost and said those policy-friendly areas may outperform this week. Overall, he sees major support for the Hang Seng at 18,000. End

DAILY FIX

Hong Kong Blue Chips: -128, -0.7%, to 18,447, 12-13-11, Hang Seng Index

Chinese Stocks in Hong Kong: -102, -1.0% to 9,957, 12-13-11, HSCE Index

Shanghai Stocks: -1.9%, 2,249, 12-13-11, Shanghai Composite Index.

Chinese Stocks in the U.S.: -10.1, to 366.3, 12-12-11, Bank of New York Mellon, ADR Index-China

Insight: China stocks in Hong Kong fell in line with global markets after Moody’s credit rating agency panned Europe’s latest effort to address its debt crisis. Slumping Mainland markets also dragged Hong Kong lower. However, news that Enn Energy (XNGSY) and Sinopec (SHI) would acquire China Gas (CGHOF), pushed China Gas shares up 20.4%. KGI Research

Quotable: “The three-day annual Central Economic Workshop commenced yesterday. We believe the meeting will make more announcements regarding policy loosening, and Hong Kong market will be stimulated.” Haitong Securities.

Chinese Company to Watch: Shanghai Electric (SIELY) “We continue to like the company’s diversified business portfolio and long-term potential in the renewable energy segment, and maintain our target price of $3.90 with a Buy recommendation.” Haitong Securities. 12-13-12

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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