China stocks on Wednesday ended a mini two-day consolidation by climbing to the best close of the year for the sixth time since December 5. But one expert cautions not to expect major increases before the end of the year.
The Hang Seng Index in Hong Kong rose 0.6% to 22,623 in moderate turnover, inching above last Friday’s previous year-high by 17 points. The index of Chinese companies increased 0.8% to 11,388.
Multiple year-best closes show the inflow of hot money and optimism about the Chinese economic recovery are still strong forces behind the current rally. However, any further rises in 2012 will be modest, according to Francis Lun, managing director at Lyncean Securities.
For one thing, he told Equities, there’s not much time left – only two weeks, and the Hong Kong market will be closed next Tuesday and Wednesday for the Christmas holiday.
He added: “I think 23,000 is an impossible target, mainly because we up quite a bit already, about 1,000 points just in this month.”
One sector that has a good chance for more gains is the oil and gas service sector, mainly because of good prospects for shale gas production, Lun said. BOCOM International noted in a research report Wednesday that “unconventional gas” is a big focus for the Chinese government, which has launched a subsidy for shale gas. End
Hong Kong Blue Chips: +129, +0.6%, to 22,623, 12-19-12, Hang Seng Index
Chinese Stocks in Hong Kong: +89, +0.8%, to 11,388, 12-19-12, HSCE Index
Shanghai Stocks: -0.2, -0.01% to 2,162, 12-19-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: +4.6, 394.3, 12-18-12, Bank of New York Mellon, ADR Index-China – closed by storm
Insight: Hong Kong blue chips ended a shallow two-day decline as injections of Hong Kong dollars into the economy by monetary authorities reflected the inflow of hot money. KGI Research
Quotable: “We believe the stock market will enter into a consolidation phase in near term although we remain bullish on H shares for the first quarter of 2013.” Guoco Capital. 12-19-12
Chinese Company to Watch: “Among the consumption plays in Hong Kong, we believe Belle (BELLY — shoes, sportswear) is in a better position than its peers to enjoy the recovery of China’s domestic consumption, thanks to 1) its integrated supply chain which allows Belle to act fast on changes in consumer demand; 2) wide variety of roduct range which fully covers the mid-to-premium segment; 3) healthier inventory level and 4) superior cost control.” Guoco Capital. 12-19-12
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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