China stocks drifted lower Tuesday after the recent big rally, but with lots of money coming in the pipeline from the U.S. and European central banks there could be more gains in coming weeks.
The Hang Seng Index in Hong Kong slipped 0.3% to 20,602 in reduced turnover, and the index of Chinese companies fell 1.0% to 9,684.
Excitement faded a bit after the U.S. Federal Reserve and the European Central Bank announced in the last two weeks they would launch huge bond buy-back schemes to boost struggling economies. The Hang Seng shot up 7.9% from September 5 to 17.
Steven Leung, director of institutional sales at UOB Kay Hian, said stocks are not finished rising. “The Fed and the UCB are pumping a lot of liquidity into the market,” he told Equities. “Even though the Chinese market is not doing well, Hong Kong has room to go.”
In China, the Shanghai Composite Index has stumbled to a series of three-year lows in recent weeks; Chinese economic statistics and company results have been disappointing. The sour notes from China did not stop the recent runup but have restrained it a bit.
Leung, however, thinks the Chinese economy will begin to turn around in the 4th quarter, combining with increasing global liquidity to fuel further gains.
He thinks infrastructure plays, railways, cement stocks, coal and gold will be among the winners. He particularly likes cement maker CNBM (CBUMY), and coal producer China Shenhua (CSUAY). Zhaojin Mining (ZHAOY) is attractive, he said, because in the past it has had the most direct relation between share price and the price of gold. End
DAILY FIX
Hong Kong Blue Chips: -56, -0.3%, to 20,602, 09-18-12, Hang Seng Index
Chinese Stocks in Hong Kong: -97, -1.0, to 9,684, 09-18-12, HSCE Index
Shanghai Stocks: -19, -0.9% to 2,060, 09-18-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: 4.7, 375.7, 09-17-12, Bank of New York Mellon, ADR Index-China
Insight: With no new market clues and a weak showing in Mainland stocks, Hong Kong drifted lower in reduced turnover. Gold stocks gave up some of their recent large gains. Dongfeng Motors (DNFGY), which has ties to Japanese producers, sank 5.1% amid increasing ill will toward Japan’s interests in China. KGI Research
Quotable: “We expect that HSI will move towards the level of 21,000 and turn to be more cautious afterwards.” Core Pacific Yamaichi. 09-17-12
Chinese Company to Watch: “Due to beyond-expectation interim results and mainland shale gas exploration tendering effect, Anton Oilfield Services (ATONY) rose across our HKD1.85 target price. We raise Anton Oilfield Services 12-month target price to HKD2.2, equivalent to 11.8-time P/E ratio in 2013. We grant Anton Oilfield Services “accumulate” rating.” Phillip Securities. 9-17-12
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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
