China Stocks Extend Big Losses

Gene Linn |

Bank of ChinaFear trumps all in the current market for China stocks. The gateway market of Hong Kong fell sharply again Monday in active, volatile trading despite the presence of conditions for a rebound.

After last week’s 9.2% plunge in the Hang Seng Index the market was oversold, according to CCB International head of research Peter So, and investors have plenty of cash available to sink into stocks.

Ben Kwong, chief operating officer at KGI Asia, noted in his Monday morning report that speculation that China would launch stimulative measures and end-of-the-quarter window dressing should provide short-term support.

However, after opening flat the Hong Kong market plummeted in late morning and again in early afternoon, sinking below 17,000 at one point before bouncing back to close at 17,408, down 1.5%. The index of Chinese stocks tumbled 3.3% to 8,735 as worry over the possibility of a default on Greek debt and of a global recession maintained its grip on the market.

So told Equities he expects more volatility late this week because China starts its week-long National Day holiday on Saturday.
Investors are reluctant to take long positions ahead of the break in trading, he said. In addition, Chinese authorities frequently announce taxation or other policies to support targeted industries, but investors know there will be no such announcements next week. End

DAILY FIX -- Blue Chips Rebound from Sub-17,000

Hong Kong Blue Chips: -261, -1.8%, to 17,408, 09-26-11, Hang Seng Index

Chinese Stocks in Hong Kong: -298, -3.3% to 8,735, 09-26-11, HSCE Index

Shanghai Stocks: -1.6%, 2,393, 09-26-11, Shanghai Composite Index.

Chinese Stocks in the U.S.: +9.1 to 358.8, 09-23-2011, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong opened flat but fell sharply in line with a drop in Asian markets. Blue chips sank below 17,000 in mid-afternoon but rebounded late in active trading. A drop in gold and other commodity prices hurt resources plays. Cement producers and construction companies posted big losses: CNBM (CBUMY) -11.1%. KGI Research

Quotable: "For the coming week, the market will eye ... the vote by the German parliament on the European Financial Stability Facility on Sep 29. Weak tone is likely to persist next week, and the HSI may test 17,000 points." BEA Securities. 9-23-2011

Chinese Company to Watch: PCCW (PCCWY), Hong Kong telecom operator. "PCCW is currently trading at 11.5x 2011 PER, 5.2% dividend yield and 7.1x EV/EBITDA, which we consider is reasonable in view of its defensive nature amid the current uncertain environment." Guoco Capital. 9-23-2011

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

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