China Stocks Continue Balancing Act

Gene Linn |

China Stocks Continue Balancing ActChina stocks appear set to continue a balancing act next week, weighed down by poor corporate results but buoyed by hope big central banks will ease monetary policies.

On Friday the Hang Seng Index in Hong Kong continued its up-and-down movement, sinking 0.8% to 20,116. For the week the Index finished just 0.3% lower. The index of Chinese companies fell 0.9% Friday to 9,831, off 0.7% for the week.

The Hang Seng had soared more than 7% between July 25 and August 10 on expectations central banks would stimulate struggling regional economies, but discouraging profit announcements began to emerge this week to help halt the rally.

The tug of war between corporate results and hopes for monetary easing will go on, said Ben Kwong, chief operating officer at KGI Asia. “We expect the local market to continue its consolidation around 20,000 next week,” he told Equities in an email.

In addition to the two main driving forces in the market, he said, investors will keep their eyes on upcoming results from major Chinese banks, insurers and oil producers. They will also eagerly await news from the U.S. Federal Reserve Board’s annual meeting at the end of August to see if the Fed launches easing measures.

Although the investors would welcome monetary easing, Kwong said, they think it would lead to inflation. Rising prices are generally good for commodity producers, and he said that sector should outperform. End

DAILY FIX

Hong Kong Blue Chips: +153, +0.8%, to 20,116, 08-17-12, Hang Seng Index

Chinese Stocks in Hong Kong: +89, +0.9%, to 9,831, 08-17-12, HSCE Index

Shanghai Stocks: +3, +0.1% to 2,115, 08-17-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: +1.8, 383.4, 08-16-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong blue chips opened 99 points higher due to hints German leader Angela Merkel would support further easing by the European Central Bank. Gains expanded late in the day in thin turnover. China Mobile (CHL) continued to drop after announcing results at the lower end of expectations, sinking 3.8%. KGI Research

Quotable: "We expect the Hang Seng Index to move between 19,800 and 20,300 in near term due to disappointing corporate earnings." Guoco Capital. 8-17-12

Chinese Company to Watch: Shenhua Energy (CSUAY) "We believe CSE has the best growth potential and relatively stable profitability among PRC coal miners due to its self-operating logistic system." Core Pacific Yamaichi. 8-16-12

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

Companies

Symbol Name Price Change % Volume
NTP Nam Tai Electronics Inc. 7.15 -0.25 -3.38 121,829

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