The Hang Seng Index shot up 2.9% to 23,312. The Index jumped 22.9% last year and had hit numerous year-best closes in December, but seemed firmly stuck below 23,000 – until Wednesday. The index of Chinese companies surged even more, rising 4.0% to 11,898.
The trigger for the New Year cheer was last-minute action by Congress that relieved worries about an impending fiscal crisis in the U.S. by restoring massive tax cuts and postponing action on spending cuts. These moves freed investors to concentrate on the bright picture in China and Hong Kong.
“”Obviously sentiment is quite positive,” said Steven Leung, director of institutional sales at UOB Kay Hian. “The issue of U.S. spending cuts has been delayed by two months, and the market is looking at Chinese economic growth and the very high flow of funds into Hong Kong.”
Fund managers are re-allocating money to developing markets, including Hong Kong and China, Leung told Equities. And he said money will move from fixed assets to equities in the first quarter.
The asset re-allocation will help financial stocks, according to Leung, especially the big Chinese banks like ICBC (FXI) and CCB (CICHY). In the medium term smaller banks like China Merchants (CIHKY) will benefit. In addition, China’s new leaders and the National People’s Congress will launch new policies in the coming months that will boost stocks in sectors such as properties and infrastructure. End
Hong Kong Blue Chips: +655, +2.9%, to 23,312, 1-2-13, Hang Seng Index
Chinese Stocks in Hong Kong: +462, +4.0%, to 11,898, 1-2-13, HSCE Index
Shanghai Stocks: +36, +1.6% to 2,269, 12-31-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: -0.4, 395.3, 12-31-12, Bank of New York Mellon, ADR Index-China - closed by storm
Insight: Action by the U.S. Congress to avoid plunging over a fiscal cliff combined with bullish sentiment for China plays propelled Hong Kong blue chips above the 23,000 level in heavy trading. Chinese insurers surged, buoyed by news they would be allowed to open mutual funds: China Life (LFC) +6.7%. Basic materials producers also rose sharply: aluminum maker Chalco (ACH) +6.2%. KGI Research
Quotable: "Lower-than-expected Manufacturing PMI Indicates Pace Of Economic Recovery Will Remain Mild.... Meanwhile, the NDRC mentioned recently that economic growth would be the top priority in 2013, and the government would put more efforts into infrastructural improvements, including railways, highways, affordable housing, development in the central and western regions, water conservancy, culture and health care projects." UOB Kay Hian. 1-2-13
Chinese Company to Watch: "Top Spring International (3688, HK) - Small promising Property company.... Through diversified land acquisition channel and high-end product positioning, the Company gross margin was higher than the average of its peers.
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