China 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
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
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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