China stocks enjoyed a rare day of stability Tuesday, as the Hong Kong’s Hang Seng Index ended virtually unchanged at 19,678 in very weak turnover. But investors braced for more news on European debt and China’s economy, and for more volatility.
A cleared picture on a new coalition government in debt-strapped Greece helped bring stability to the market Tuesday, according to Jackson Wong, vice president of equity sales at Tanrich Securities. But he said a breakout on the upside is unlikely in the short term, partly because rising Italian bond yields signal potential trouble with Italian debt.
“We are trading in a larger range between 19,000-21,000 until the Europe situation gets clearer (whether good or bad),” Wong told equities in an email.
The market looks to get out of its Tuesday doldrums in a hurry. Investors in Hong Kong were waiting for news from the European finance ministers’ meeting Tuesday night and from release of Chinese inflation numbers and other economic statistics Wednesday.
In the meantime, according to Wong, China stocks are relatively strong due to hopes Chinese inflation is coming under control at the same time the economy is still strong.
Natural resources plays are rising, he said, including gold producer Zijin Mining (ZUMY) and PetroChina (PTR). Cyclicals like building materials company CNBM (CBUMY) are also seeing a good run. “Financials had a good run and now are consolidating,” Wong said. End
Hong Kong Blue Chips: +0.6, +0.0%, to 19,678, 11-08-11, Hang Seng Index
Chinese Stocks in Hong Kong: +39, +0.4% to 10,686, 11-08-11, HSCE Index
Shanghai Stocks: -0.2%, 2,504 11-08-11, Shanghai Composite Index.
Chinese Stocks in the U.S.: +3.8, to 396.3, 11-7-11, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong blue chips opened 171 points higher, but lost ground in slow turnover as investors retreated to wait for news from the European finance ministers' meeting and from the release of Chinese economic statistics. Oil plays rose. Sinopec (SNP) gained 2.0%. KGI Research
Quotable: "As investors became more cautious on the market outlook, HK market became see-sawing. When HSI traded near 20,000, the steam for breaking resistance had gone and it closed near the day’s low to form a “dark candle” yesterday. The “dark candle” is technically bearish." Core Pacific Yamaichi. 11-08-11
Chinese Company to Watch: Regent Manner (1997 in Hong Kong) "We currently maintain our forecast unchanged. We still like RMIH on its high dividend yield, ROE, competitive advantages and strong market position." BOCOM International. 11-8-11
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