China Stocks Bobbing Up and Down in Uncertainty

Gene Linn |

hong kong china stocksChina stocks in Hong Kong rose early Tuesday and fell later in the day. Investors should get used to the up-and-down motion, according to Castor Pang, head of research at Core Pacific Yamaichi.

“Hong Kong in the short term will be yo-yoing,” he told Equities. “It will go up when it (the blue-chip index) hits 21,800 or below on bargain-hunting for a short period. Because investors know the situation is still volatile, they will sell at about 22,500.”

Volatility is likely to continue because it’s still uncertain when China’s inflation will come down and when China will ease up on its tight monetary policy. European debt and the struggling U.S. economy  are other areas of uncertainty, but Chinese inflation is the 800-pound gorilla in the stock exchange.

That was evident Tuesday when big U.S. gains due to increased optimism of a European debt solution ran into a flat performance by A shares in China. At the end of the day, blue chips and the index of Chinese stocks in Hong Kong were almost unchanged. It wasn’t the first time recently that Hong Kong has shrugged off large rises on Wall Street.

While volatility reigns, Pang said oil stocks like PetroChina would be a prime target of buyers during periods of bargain-hunting. “Even though oil prices are pressured …, Chinese demand is still high,” he said.  End

DAILY FIX --  Weak A Shares Scuttle Gains

Hong Kong Blue Chips: +20, +0.1%, to 22,062, 06-28-11, Hang Seng Index

Chinese Stocks in Hong Kong: +8, +0.1% to 12,487, 06-28-11, HSCE Index

Shanghai Stocks: +0.04%, 2,759, 06-28-11, Shanghai Composite Index.

Chinese Stocks in the U.S.: +5.3 to 425.9, 06-27-11, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong blue chips rose 165 points early following a big rise on Wall Street. But Hong Kong lost almost all of the gain due to weakness in A shares on Chinese markets. Turnover, already weak lately, slumped even more. Chinese cement producers ran into profit-taking: CNBM (3323) -2.5%. KGI Research

Quotable: "We believe that market may have a correction in short term. However, we don’t expect that HSI will break 21,500 even the market may trigger technical correction. We believe that HSI will trade at the range between 21,600 to 22,500 this week with the average daily turnover of HK$70bn." Core Pacific Yamaichi. 6-27-2011

Chinese Company to Watch: CHINA AGRI (00606). "Aggressive(ly) expanding its oil and rice capacity, which will help to boost its long term profitability." KGI Asia. 6-27-2011

Brokerages and analysts cited 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

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