China Stocks Bounce Back

Gene Linn |

Shanghai Stock MarketChina stocks bounced back from Monday and Tuesday’s bungee cord dive, but investors should expect further stomach-churning ups and downs, according to Castor Pang, Core Pacific Yamaichi head of research.

Hong Kong’s blue chip Hang Seng Index, with its sizeable component of large Chinese companies, plunged nearly 5% Monday and Tuesday, largely on fears Europe’s debt crisis was spreading to Italy. But Pang told Equities the drop was “overdone” because investors were “too pessimistic about European debt.”

Another factor helping Wednesday’s rebound was the release of better-than-expected Chinese second quarter GDP figures. China’s economic growth expanded 9.5% in the second three months of 2011, down modestly from 9.7% in the first quarter, allaying fears of a hard landing by the Chinese economy.

At the end of trading Wednesday the Hang Seng rose 1.2% and the index of Chinese Companies jumped 2.2%.

But investors shouldn’t get too comfortable, Pang said. China will probably introduce further credit-tightening measures, extending volatility in Chinese stocks. “Investors should look for stocks to see-saw in the third quarter,” he said. Like most other analysts, Pang expects a solid rally in the fourth quarter.

Meanwhile, he said, defensive utility stocks are a good bet. Pang likes Cheung Kong Infrastructure Holdings (1038 in Hong Kong). It has limited exposure in China. But it has utilities in Hong Kong, the U.K. and Australia as well as China, lessening the risks of a downturn in any one area.  End

DAILY FIX --  Chinese Properties Continue to Shine

Hong Kong Blue Chips: -379, -1.7%, to 22,347, 07-13-11, Hang Seng Index

Chinese Stocks in Hong Kong: -259, -2.0% to 12,497, 07-13-11, HSCE Index

Shanghai Stocks: +1.5%, 2,795, 07-13-11, Shanghai Composite Index.

Chinese Stocks in the U.S.: +7.3 to 435.2, 07-13-11, 10:14 am ET Bank of New York Mellon, ADR Index-China

Insight: Hong Kong stocks rebounded from sharp losses as fears concerning European debt eased and China reported stronger-than-expected second quarter GDP growth. Chinese properties continued to rise: China Overseas (0688) +5.7%. KGI Research

Quotable: "Concerns over European debt crisis shall be contained; Rebound expected after heavy correction." BOCOM International. 7-12-2011

Chinese Companies to Watch: Chinese properties. "We expect market sentiment to improve slightly in July, but are unlikely to see a strong recovery until the peak season in September and October.... Our top picks for July are Country Garden and KWG Property." CCB International. 7-12-2011

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

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

Companies

Symbol Name Price Change % Volume
BANF BancFirst Corporation 71.61 0.26 0.36 25,862

Comments

Emerging Growth

Bee Vectoring Technologies International

Bee Vectoring Technologies International Inc, formerly Unique Resources Corp is an technology/agricultural industry company. It develops and owns bee vectoring technology that is designed to utilize bees as natural delivery…

Private Markets

Santo Diablo Mezcal

Santo Diablo Mezcal has been created to capitalize on a boom sector of the beverage market currently full of many small unmemorable products by producing one sexy, household, easily recognizable…

Wealthfront

Wealthfront is an automated investment service that serves as an alternative to traditional financial advisory services. The company manages a diversified, continually rebalanced portfolio of index funds on their clients’…