China Stocks, Disappointed by Europe, Turn to Mainland for Hope

Gene Linn |

China Stocks RMBChina stocks recovered Friday from the global market’s post-partum blues following the failure of central banks in Europe and the U.S. to come up with expected stimulus programs. Attention turned to the prospect of helpful developments in China.

After falling 236 points early, Hong Kong’s Hang Seng Index rebounded to close 24 points, 0.1%, lower at 19,666 in very thin trading. The index of Chinese companies slipped 0.1% to 9,661.

Hwever the indexes held on to most of the gains from early in the week when investors thought, mistakenly, the European Central Bank and the U.S. Federal Reserve would significantly loosen monetary policies.

For the week, the Hang Seng rose 2.0%, and the index of Chinese companies climbed 2.8%.

Now the market is looking forward to another drop in Chinese inflation next week, according to Ben Kwong, chief operating officer at KGI Asia.

“It is likely (for) the CPI to drop further in June which will allow China to adopt more easing policy like cuts in RRR (banks’ required reserve ratio),” he told Equities in an email.

Buying interest will focus on stocks in areas targeted for support by the Chinese government, Kwong said. Mainland banks and infrastructure companies like cement producers should benefit, he said. End

DAILY FIX

Hong Kong Blue Chips: -24, -0.1%, to 19,666, 08-03-12, Hang Seng Index

Chinese Stocks in Hong Kong: -6, -0.1%, to 9,661, 08-03-12, HSCE Index

Shanghai Stocks: +22, +1.0% to 2,133, 08-03-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: -1.2, 368.9, 08-02-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong blue chips tumbled 236 points in early trading after the European Central Bank failed to take widely expected decisive action to support the Euro, but a rebound on Mainland markets help Hong Kong erase most losses. Yurun Food (CYUFF) surged 11.4% higher. KGI Research

Quotable: "We expect the Hang Seng Index to range trade between 18,000 and 20,000 in August but the risk is on the downside. However, we recommend investors to accumulate Chinese banks as we think that short-term trading opportunities for the sector may have emerged ahead of the report season. Our top picks are ICBC (1398) and CCB (939)." Guoco Capital. 8-3-12

Chinese Company to Watch: First Tractor (FIRRY) "The group is market leader which will benefit from government supporting and subsidizes policies on agricultural sector.... (W)ill issue 150mn A shares at Rmb5.4 each to fund the future development projects.... The current price implies 9x P/E, valuation is fair, investors would consider accumulating for long term." KGI Asia. 8-3-12

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

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
GE27E General Electric Co 1.875% Nt Eur 2027 n/a n/a n/a 0

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