China Stocks End Dismal August with A Rally

Gene Linn |

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

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

Companies

Symbol Name Price Change % Volume
CEO CNOOC Limited 132.58 1.15 0.87 105,207
POW.PR.E:CA Power Corporation of Canada Participating Preferre 30.00 0.00 0.00 0

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