China Stocks Buoyed by Good German, French GDP Numbers

Gene Linn |

China stocks resumed their recent rally Tuesday, buoyed by better-than-expected GDP numbers from Germany and France.

The Hang Seng Index in Hong Kong rose 1.0% to 20,282 in higher turnover, and the index of Chinese companies climbed 1.0% to 9,915.

Although growth in the big European economies encouraged the market, it may not be enough to trigger strong new gains. It seems that what investors really want is another round of monetary stimulus policies from Europe, the U.S. and China, and that will be more likely if there is bad economic news.

“Long-term investors will be more aggressive if there is a change in government (monetary) policy,” said Steven Leung, director of institutional sales at UOB Kay Hian Holdings, “Now they are still cautious and have high cash holdings.”

Once the big boys get on board, Leung told Equities, they will chase big Chinese banks and raw material producers. He likes giant bank ICBC (FXI) because of its attractive valuation, and Angang Steel (ANGGY) because the price of steel will probably rise in the second half of 2012 and demand may rise because of restocking. End

DAILY FIX

Hong Kong Blue Chips: +210, +1.0%, to 20,292, 08-14-12, Hang Seng Index

Chinese Stocks in Hong Kong: +101, +1.0%, to 9,915, 08-14-12, HSCE Index

Shanghai Stocks: +6, +0.3% to 2,143, 08-14-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: +1.2, 383.7, 08-13-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong opened higher and continued to rise due to encouraging GDP numbers from Germany and France. China Mobile (CHL), which announces results Thursday, gained 2.2%. KGI Research

Quotable: "We believe further upside for the Hang Seng Index is limited with a technical resistance at 20,500." Guoco Capital. 8-14-12

Chinese Company to Watch: Oil rig-maker Honghua (196, HK) "We believe Honghua will deliver strong earnings growth this year, mainly driven by the robust growth of new drilling order. The stock is now trading at 6.8x 2013 PE, with re-rating potential." Tanrich Securities. 8-14-12

Brokerages and analysts cited here 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

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