China Stocks End Bad Year with a Whimper

Gene Linn |

China Currency RMBInvestors mostly took the day off on the last trading day of an awful year for China stocks and face daunting uncertainties at the start of 2012.

Hong Kong’s Hang Seng Index edged 0.2% higher in puny turnover Friday. It ended the holiday-shortened week, ahead of another day off next Monday, down 1.0%, 195 points, to 18,434. That is a plunge of 20.0% from the end of 2010.

The index of Chinese companies slipped 0.08% Friday and fell 1.9% for the week to finish at 9,936.

The main factor in 2011’s big drop was the European debt crisis, and it will still hang over the market moving into the new year. Investors will remain cautious in January due to concern about substantial European bond issuing pressure in February and April, according to Ben Kwong, chief operating officer at KGI Asia.

Weakness in China’s A-share market will also make investors cautious, he said.

“Hence, the benchmark will continue its narrow range trading at 18,000-18,800 in the coming few days,” Kwong told Equities in an email.

One potential bright spot is the expected cut in Chinese banks’ reserve requirements in January. It would mark the second step in China’s move to scale back tight credit policies launched in the first half of 2011.

“(I)t will provide a boost to mainland banks share price especially those big names like CCB (CICHY) and ICBC (FXI),” Kwong said. He expects Mainland consumption plays to be the focus of investors in 2012. End

DAILY FIX

Hong Kong Blue Chips: +36, +0.2%, to 18,434, 12-30-11, Hang Seng Index

Chinese Stocks in Hong Kong: -8, -0.08% to 9,936, 12-30-11, HSCE Index

Shanghai Stocks: +1.2%, 2,199, 12-30-11, Shanghai Composite Index.

Chinese Stocks in the U.S.: +2.8, to 359.5, 12-29-11, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong stocks remained flat in minimal turnover despite rises in U.S. and Mainland Chinese markets. The gain in Chinese A-shares boosted brokerages and insurance companies: CITIC Securities (6030.HK) +3.1%. KGI Asia

Quotable: "The HK market may follow to go higher today but low volume carries little significance." BOCOM International. 12-30-11

Chinese Company to Watch: "Focusing on high-end offices in Beijing and Shanghai. SOHO China (F-6EF, 0410 HK)is a niche market player focusing on high-end office development only in Shanghai and Beijing where office space demand are the strongest in the mainland." Haitong Securities. 12-30-11

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 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

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