China Stocks Could Be Oversold

Gene Linn  |

China stocks in Hong Kong have mostly moved day-to-day on news from the U.S., Europe and China. That news this week has been bad. Add background worry about another interest rate hike in China and throw in local efforts to cool off the property market, and you’ve got substantial losses this week.

The blue-chip Hang Seng Index fell through its 250-day moving average late in the week. The next resistance level is the year-low of 22,123, according to KGI Research. For the week, blue chips sank 2.3%, 530 points, to 22,420. The index of Chinese companies dropped 2.9%, 370 points, to 12,381.

Uncertainty reigns in the market now, Howard Gorges, vice chairman at South China Brokerage, told Equities. It’s unclear how economic problems in China, the U.S. and Europe will play out. The outcome of the “Jasmine Revolution” in the oil-rich Middle East and North Africa still hangs in the balance. That makes it easy for traders to push stock prices around, according to Gorges.

“It’s all very short-term stuff,” he said of the market movements this week. “Traders look for any news each day that will tip the balance one way or the other.” This week most of the news has been in the form of discouraging economic statistics from the U.S.

The market has become somewhat oversold, Gorges said. Any good news next week might touch off at least a short-term rally.  End


Hong Kong Blue Chips: -189, -0.8%, to 22,420, 06-10-11, Hang Seng Index

Chinese Stocks in Hong Kong: -92, -0.7% to 12,381, 06-10-11, HSCE Index

Shanghai Stocks: +0.07%, 2,705, 06-10-11, Shanghai Composite Index.

Chinese Stocks in the U.S.: +4.4 to 426.5, 06-09-11, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong opened higher on gains in the U.S. and Europe but fell in later trading. Local properties and apparel stocks were big losers. KGI Research

Quotable: "We reiterate that current valuation of the Hang Seng Index is attractive to long term investors." Guoco Capital. 6-9-10.

Chinese Company to Watch: "I.T Limited will benefit from strong domestic demand and booming tourism industry in Hong Kong....Looking forward, the company plans to expand the total retail sales area in China by 30% in FY12 and introduce more brands to the Mainland China market with a strong focus on the growth of in-house brands." Guoco Capital. 6-9-10

Brokerages and analysts cited 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

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