China's Q2 Growth Falls as Expected; Now What?

Gene Linn  |

Ho-hum. After much handwringing by investors and analysts in the run-up to Friday’s second quarter Chinese GDP number, when it arrived in line with expectations there was precious little reaction.

The 7.6% growth was a significant drop from 8.1% in the first quarter, but the market had already discounted that with steep declines earlier in the week. The question is, now which direction does the market take?

Hong Kong’s Hang Seng Index rose a modest 0.4% to 19,093 Friday in extremely thin turnover. The index of Chinese companies gained 0.8% to 9,237.

The Hang Seng ended last week approaching 20,000 but finished this week down 3.6%, barely hanging on to 19,000. The index of Chinese companies sank 4.6% this week.

Some analysts now expect an upturn in the third quarter as China introduces more credit-loosening measures to stimulate the economy and recently launched interest rate cuts and other steps begin to take effect.

But one skeptical analyst, who asked not to be named, told Equities in an email he didn’t expect a large-scale stimulus package. He pointed out the massive spending introduced in 2008 led to a crippling bout of high inflation that proved hard to tame.

His brokerage thinks current supportive policies “will only mitigate the fall.

“We still think there are more downsides in the stock market in 2H (the second half of 2012),” he said. End


Hong Kong Blue Chips: +68, +0.4%, to 19,093, 07-13-12, Hang Seng Index

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Chinese Stocks in Hong Kong: +70, +0.8%, to 9,237, 07-13-12, HSCE Index

Shanghai Stocks: +0.2, +0.01% to 2,186, 07-13-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: -6.2, 356.2, 07-12-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong opened slightly higher after Thursday's big loss, but lacked direction in very weak turnover. China's anxiously expected second-quarter GDP number barely caused a stir when it arrive within expectations at 7.6%. Chinese retailer Belle International (BELLY) surged 4.0% higher on strong same-store-sales-growth. KGI Research

Quotable: "HSI lost major technical supports and tended to be bearish. HK Market opened lower and broke the supports of 20-day MA, 50-day MA and lower bound or uptrend started since 18,850 in early Jun. This drove the market to lose technical supports on daily chart." Core Pacific Yamaichi. 7-13-12

Chinese Company to Watch: Belle International (BELLY) "The SSSG (same store sales growth) of 10.5% for footwear is a clear improvement from that of 2.8% in 1Q12, and is better than market expectation of mid-to-high single digit. Meanwhile, SSSG for sportswear business is also encouraging, turning positive from that of -2.4% in 1Q12 and is above market estimates of low-single digit." Guoco Capital. 7-13-12

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

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