China Stocks Buck Headwinds

Gene Linn |

hong kong china stocksFitful follow-through buying continued today for Chinese investors and local stocks in Hong Kong after short-covering helped turn sizable losses into modest gains Wednesday, all in anemic turnover.

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

DAILY FIX

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

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
EXAR Exar Corporation 9.78 0.11 1.14 3,601

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