Cliff? What cliff? Where investors in U.S. stocks see a scary fiscal drop-off and political gridlock looming, institutions investing in China stocks can expect a continued economic rebound and invigorated political leadership.

The Hang Seng Index in Hong Kong re-opened Thursday after a two-day Christmas break with a 0.4% rise to 22,620, and the index of Chinese companies climbed 0.7% to 11,348. Rebounding Chinese economic growth and easy money policies overseas have helped drive the Hang Seng 18.2% higher since September 5.

Trading was quiet Thursday with the year-end holiday season winding down, but one analyst sees continued gains in 2013.

“Institutional investors are re-allocating resources because they see the Chinese economy has bottomed out,” said Steven Leung, director of institutional sales at UOB Kay Hian. And new Communist Party leader Xi Jinping is due to be named president at the National People’s Congress in March, he said, raising hopes for more vigorous leadership.

“Stocks should continue to rise in the first quarter of 2013,” Leung said. “I think 10% to 15% should be easy.”

That is not to say Chinese and other markets won’t suffer if U.S. political fighting over the fiscal cliff and the need to raise the debt ceiling gets particularly ugly, as debt ceiling talks did in 2011.

But if the focus for China stocks remains on the Chinese economic and political situation, Leung told Equities that institutions will likely jump aboard big-cap names to move the indexes higher.

Among his favorites are banking giants ICBC (FXI) and CCB (CICHY), property firm China Overseas Land (688, HK) and Angang Steel (ANGGY). End

DAILY FIX

Hong Kong Blue Chips: +79, +0.4, to 22,620, 12-27-12, Hang Seng Index

Chinese Stocks in Hong Kong: +78, +0.7, to 11,348, 12-27-12, HSCE Index

Shanghai Stocks: -13, -0.6% to 2,206, 12-27-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: +5.4, 396.1, 12-20-12, Bank of New York Mellon, ADR Index-China – closed by storm

Insight: Hong Kong re-opened after a two-day Christmas break with modest gains in light turnover as recent rises on Mainland markets overcame U.S. uncertainties about the approaching fiscal cliff. Medium-sized Chinese banks rose: Minsheng (CMAKY) +2.8%. KGI Research

Quotable: “We believe the stock market will enter into a consolidation phase in near-term although we remain bullish on H shares for the first quarter of 2013.” Guoco Capital. 12-27-12

Chinese Company to Watch: “Trading BUY China Coal (CCOZY) as NDRC removed coal price ceiling…. The price cap removal provided a decent backdrop for coal price recovery in 2013. In general, analysts expect coal demand will increase 5% yoy while coal supply will climb only 3% yoy in 2013.” Guoco Capital. 12-27-12

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