China stocks ended a drama-filled August with a bang, and apparently the current rally could spill into September. However, this week’s upswing probably won’t move very far into next month and has only put a dent in August’s big losses.
In the first three days of this week the Hang Seng Index jumped 4.9% to 20,535, and the index of Chinese company stocks soared 6.2% to 10,943. Still for the month the Hang Seng lost 8.5%, and Chinese companies sank 11.6%.
This week’s rally still has some momentum, according to Ben Kwong, chief operating officer at KGI Asia. The focus is on companies announcing results. For example Chinese oil producer CNOOC (CEO) bounced higher the last couple days after announcing a big jump in interim profits.
CNOOC and other Chinese resources companies stand to gain from a weakening U.S. dollar, Kwong told Equities in an email. “Oversold Chinese banking and insurance counters also offer bargain hunting values,” he said.
The key to this week’s gains, and the slump in the dollar, has been speculation the U.S. Federal Reserve Board will announce further monetary easing to revive the U.S. economic recovery.
However, the main culprits of August’s sharp stocks declines are still around. Europe’s debt crisis is still unresolved, and the U.S. economic recovery remains anemic at best.
Kwong noted: “As investors' sentiment remain(s) cautious, further upside will be limited." End
DAILY FIX -- U.S. Fed News Lifts Hong Kong
Hong Kong Blue Chips: +331, +1.6%, to 20,535, 08-31-11, Hang Seng Index
Chinese Stocks in Hong Kong: +196, +1.8% to 10,943, 08-31-11, HSCE Index
Shanghai Stocks: +0.03%, 2,567, 08-31-11, Shanghai Composite Index.
Chinese Stocks in the U.S.: +5.4 to 403.6, 08-30-2011, Bank of New York Mellon, ADR Index-China
Insight: News the U.S. Federal Reserve Board is considering further measures to boost the sagging U.S. economy helped Hong Kong sustain its month-ending rally. But Hong Kong blue chips still lost 8.5% in August. Chinese oil producer CNOOC (CEO) rose 3.5% on Wednesday. Investors continued to buy Macau gambling plays: SJM (SJMHF) +5.9%. KGI Research
Quotable: "We think the rebound will continue and the upper limit is kept at 20,800." BOCOM International. 8-30-2011
Chinese Company to Watch: "CITIC Bank (CHBJF) – In 1H11, net profit attributable to equity owners of the parent company rose 40.6% YoY, beating our forecast by 16.3%." BOCOM International. 8-30-2011
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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
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