The market’s reaction to Greece’s approval of an austerity program and the beginning of Hong Kong’s corporate results season will help determine the direction of the market.
“The market will likely continue at the current level for the time being,” Ben Kwong, head of research at KGI Asia, told Equities. “Investors’ risk appetite is relatively high.”
On Monday Hong Kong’s Hang Seng Index gained 0.5% to 20,887, and the index of Chinese companies rose 0.6% to 11,468. Turnover declined.
Greece’s approval of austerity measures, paving the way for a bailout, isn’t a cause for celebration in the market, Kwong said, but won’t dampen sentiment. “Investors believe Europe’s debt problem is not solved for the short term, but it won’t be a disaster either,” he said.
Bank of East Asia kicks of results season on Tuesday. Reports will probably be mixed, Kwong said, with manufacturers hurt by economic weakness and natural resources stocks climbing.
Buying will focus on second and third liners, including raw material plays, according to Kwong. End
Hong Kong Blue Chips: +104, +0.5%, to 21,887, 02-13-12, Hang Seng Index
Chinese Stocks in Hong Kong: +62, +0.6%, to 11,468, 02-13-12, HSCE Index
Shanghai Stocks: -0.01% to 2,352, 02-13-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: -6.7, 406.0, 02-10-12, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong opened 65 points lower after local U.S.-listed stocks dropped Friday but ended up 104 in light turnover, aided by debt-strapped Greece’s agreement to an austerity plan. KGI Research
Quotable: “Market consolidation is expected to continue, as the HSI has rallied as much as 3,000 points since late December on hope for relaxation of monetary tightening on the Mainland. For the coming week, the HSI is seen trading around 20,200 – 20,700.” BEA Securities 2-10-12
Chinese Companies to watch: “BELLE INT’L (BELLY) Major shoe chain store retail shops, benefit from rapid consumption growth in the mainland. Expect net profit to increase at 15-20% annual pace.” KGI, 0213012
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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