The cautious and limited moves reflect what Howard Gorges, vice chairman of South China Brokerage, calls a “professionals’ market.” Traders and fund managers are putting money in Chinese stocks after the market falls, then taking profits when stocks rise a bit, without real conviction any rally or correction will last.
Big foreign investors are cautious, Gorges told Equities. They like the prospects for Chinese currency, RMB, appreciation but for the short term they are not positive about Hong Kong and China.
Investors should get used to subdued trading of Chinese stocks in Hong Kong, according to Gorges. He said problems holding up the market – such as Chinese inflation, European debt and slow U.S. growth – will not disappear overnight.
“There are plenty of headwinds,” he said, “and it’s going to take time for them to go away.” End
Hong Kong Blue Chips: +154, +0.7%, to 22,901, 05-26-11, Heng Seng Index
Chinese Stocks in Hong Kong: +62, +0.5% to 12,757, 05-26-11, HSCE Index
Chinese Stocks in the U.S.: +3.2 to 426.6, 05-25-11, Bank of New York Mellon, ADR Index-China
Insight: Gains in Chinese resources plays helped drive Hong Kong higher in weak turnover. Higher commodity prices boosted oil company CNOOC (883) up 2.9%, and gold producers such as Zhaojin (1818) rose 3-4%. KGI Research
Quotable: "Extremely low market turnover suggests the benchmark index is very close to the bottom." Guoco Capital. 5-25-2011
Chinese Company to Watch: Fufeng (546:HK), producer of xanthan gum and MSG. "Robust sales volume growth indicated an expansion in market share." Guoco Capital. 5-25-2011
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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
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