China stocks continued to drift lower after their surge higher in the first three weeks of October, but another stretch of gains may be likely before the end of the year.
Hong Kong’s Hang Seng Index slipped 0.4% to 21,429 in meager turnover that reflected weak selling pressure. The index of Chinese companies, which led the October rally, fell 0.8% to 10,458.
The correction that started last week may be short-lived.
“We expect better (Chinese) economic data from the fourth quarter more stimulative policy from new Chinese leaders will mean the remaining two months of the year will get gradually better,” said Steven Leung, director of institutional sales at UOB Kay Hian.
On the political front, Leung and other observers expect new Chinese leaders who will be installed at the November 8 Party Congress to stimulate the economy with monetary or fiscal policy or both.
As for the U.S. election, he told Equities it doesn’t make much difference who wins, but Obama might help the market more because he may have better relations with China.
The prospective year-end rally would be led partly by cement and steel companies that will benefit from new infrastructure projects, according to Leung. And banks look attractive because of gains from profitable interest margins. Leung especially likes the big banks like ICBC (FXI). End
DAILY FIX
Hong Kong Blue Chips: -82, -0.4, to 21,429, 10-30-12, Hang Seng Index
Chinese Stocks in Hong Kong: -88, -0.8%, to 10,458, 10-30-12, HSCE Index
Shanghai Stocks: +3, +0.2% to 2,062, 10-30-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: -4.4, 386.8, 10-26-12, Bank of New York Mellon, ADR Index-China – closed by storm
Insight: Hong Kong blue chips opened 38 points higher but drifted lower in thin trading that reflected weak selling pressure. Fosum Pharma (2196, HK) ended its first day of trading 8% below its IPO price. KGI Research
Quotable: “So, after the retreat last Friday, HSI could return to a healthier situation. Particularly, China banking sector will announce the 3Q results. This may help to ease the uncertainties and bearish issues in China. A more optimistic China market may help HK market to regain the weekly peak on Friday.” Core Pacific Yamaichi. 10-30-12
Chinese Company to Watch: Zhaojin Mining (ZHAOY) “Looking forward, we are still bullish on gold price amid the effect of open-ended QE3 and the zero-interest rate environment in U.S. till mid-2015 which will inevitably attract funds to flee to gold assets as a hedge of inflation as well as to seek safe haven. As such, we continue to believe Zhaojin will outperform the market due to its high sensitivity to gold price movement.” Guoco Capital. 10-30-12
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
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