The Hang Seng Index in Hong Kong slipped 0.4% to 19,799 in very weak turnover, and the index of Chinese companies tumbled 1.4% to 9,545.
A steep decline in Mainland Chinese markets contributed to Monday’s drop, but the overriding factor is that investors are getting tired of waiting for central banks in Europe, the U.S. and China to loosen monetary policies.
The Hang Seng launched a powerful rally on July 25 on a wave of hope the U.S. Federal Reserve and other major central banks were on the verge of opening the cash spigot to prop up struggling economies. But that wave crested at 20,292 by mid-August, and the market is in the doldrums. Investors are starting to take profits while waiting for sentiment to turn bullish again, said Jackson Wong, vice president of sales at Tanrich Securities.
He told Equities in an email that the “support line at 19,700 should hold initially, due to the important news are coming from the end of the week.” One closely watched event due on August 30 is the report of interim profits by one of China’s “Big Four” banks, ICBC (FXI). One of the other major banks, CCB (CICHY), delivered solid profits Monday, which should support the whole banking sector, Wong said.
“The main focus is still on the Fed, and China’s long-awaited stimulus policies” he said. “But sure, investors are getting wary.” End
Hong Kong Blue Chips: -81, -0.4%, to 19,799, 08-27-12, Hang Seng Index
Chinese Stocks in Hong Kong: -130, -1.4%, to 9,545, 08-27-12, HSCE Index
Shanghai Stocks: -36, -1.4% to 2,056, 08-27-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: -1.4, 366.6, 08-24-12, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong opened higher following Wall Street’s rise on Friday but headed south as Shanghai’s A-shares plunged to a new low for the year. Giant bank CCB (CICHY) reported better-than-expected results but still slumped 0.8%. Chinese insurers fell 2% to 4%. KGI Research
Quotable: “It will be the peak of the reporting season next week. Major PRC banks, infrastructure, port and shipping, base metal producers, airlines, etc., are scheduled to release their first-half results, which will give the market a clearer picture of the latest corporate earnings outlook in light of softening economic growth in China.” BEA Securities. 8-24-12
Chinese Company to Watch: Belle International (BELLY) BUY (Maintained). “Belle’s resilient margins demonstrate its leading market position and flexible cost structure.” UOB Kay Hian Holding. 8-24-12
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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