China Stocks End Week Little Changed after Rally Derailed

Gene Linn  |

China stocks survived discouraging news about the Chinese property sector on Wednesday to end the week little changed.

Hong Kong’s Hang Seng Index lost 0.2% Friday to close at 21,318, up 1.1% for the week. The index of Chinese companies shed 0.2% Friday to 11,216, down 0.4% for the week.

The Hang Seng was happily adding to a four-day rally on Wednesday, adding 300 points in the morning, when Chinese Premier Wen Jiabao announced China would continue to squeeze credit in the property sector.

The 300-point gain disappeared in a flash and the index finished slightly lower. However, strong economic news from the U.S. helped allow China stocks to stay in their recent range.

“Despite the sharp retreat of China market on Wednesday, the strength seen on US stock and other emerging market might provide some lift to the Hong Kong market in the near term,” said Ben Kwong, chief operating officer at KGI Asia.

Other positives include the prospect of a cut in Chinese banks’ required reserve ratio, he said, and declining worry about fund raising by the banks. “We think Chinese banks may see some rebound,” Kwong told Equities in an email.

Next week, investors will look for a sign of a retreat from the current strong rally in the U.S., according to Kwong.

And they will continue to speculate on companies that will release results in the next two weeks. Heavyweight conglomerate Hutchison (HUWHY) is attracting buyers ahead of its results announcement on March 29. End

DAILY FIX

Hong Kong Blue Chips: -36, -0.2%, to 21,318, 03-16-12, Hang Seng Index

Chinese Stocks in Hong Kong: -24, -0.2%, to 11,216, 03-16-12, HSCE Index

Shanghai Stocks: +1.3% to 2,405, 03-16-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: +1.6, 412.1, 03-15-12, Bank of New York Mellon, ADR Index-China

Insight: With a lack of fresh incentives, Hong Kong stocks ended the day little changed in weakening turnover. Funds flowed into the Macau gaming sector, but GCL Poly Energy (GCLPY) dropped 4.8% on disappointing results. KGI Research

Quotable: "Short-selling pressure moved from China banking stocks to China property stocks. It indicated that investors were pessimistic about China’s property stocks." Core Pacific Yamaichi. 2-16-2012

Chinese Company to Watch: "We continue to view China Mobile (CHL) as a one of the most defensive stocks in the HK market with current 2012 dividend yield of 4.1%. Nevertheless, its 3G disadvantage would mean sluggish earnings growth in the coming 1-2 years." Guoco Capital. 3-16-12

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

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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