The Hang Seng Index in Hong Kong fell 1.9% to 19,428 Monday, and the index of Chinese companies tumbled 2.4% to 9,447 in reduced turnover.
China’s inflation rate sank to 2.2%, the lowest in 29 months. This apparently signaled success in China’s year-and-a-half-long effort to quell stubbornly high inflation and opened the door to credit easing that investors have been anxiously waiting for.
But the news had little effect because China has already got into the “easing mode” in the face of falling economic growth, according to Jackson Wong, vice president of sales at Tanrich Securities.
Similarly, last week’s easing by major central banks failed to lift the market as usual as investors took it as evidence the global economy was sinking.
Poor job figures from the U.S. on Friday and failure of the European Central Bank to coordinate EU summit results heightened worry over the economy.
European finance ministers are working on details of the fight against the region’s debt crisis. “If the details can be agreed upon, that should stabilize the overall market,” Wong told Equities in an email.
Meanwhile the market should consolidate, with the Hang Seng testing 19,300, he said.
On Friday GDP and trade figures will give a clearer picture of the health of the Chinese economy, and there could be some good news from the current meeting of European finance ministers.
If the consolidation ends late this week, Wong recommends buying Chinese properties, insurance companies, infrastructure plays and airlines. End
Hong Kong Blue Chips: -373, -1.9%, to 19,428, 07-09-12, Hang Seng Index
Chinese Stocks in Hong Kong: -232, -2.4%, to 9,447, 07-09-12, HSCE Index
Shanghai Stocks: -52, -2.4% to 2,171, 07-09-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: -5.2, 367.5, 07-06-12, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong opened lower after the U.S. announced weak job numbers on Friday and continued to drop due to rising concern about the slowing global economy. A fall in Chinese inflation announced Monday failed to ease concerns. The prospect of lower world economic growth hurt shipping companies. China COSCO (CICOY) plunged more than 5%. KGI Research
Quotable: "The closely watched Q2 GDP data for the PRC will be released next Friday (13th July), which is likely to disappoint the market given the recent aggressive move (cut interest rates for a second time in less than a month) by the PBOC to spur growth. The blue-chip index would see strong resistance near the 20,000 level." BEA Securities. 7-6-12
Chinese Company to Watch: "Contracted sales of (property developer) China Resourcs Land (CRBJY) in 1H2012 increased sharply, exceeding market forecast." Phillip Securities. 7-9-12
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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
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