China Stocks Face Another Up-and-Down Week

Gene Linn  |

The Party’s over for China stocks with positive sentiment connected with China’s milestone 18th Party Congress disappearing at the end of the Congress last week. That is just one of several big developments that will buffet the market this week.

On Monday Hong Kong’s Hang Seng Index climbed 0.5% to 21,262 in thin trading, and the index of Chinese companies rose 0.5% to 10,290. The market ploughed through an up-and-down period last week, driven by news from China and abroad.

On-going political maneuvering about the approaching U.S. fiscal cliff, a special European finance ministers meeting on the Euro debt problem and potential monetary easing by the Bank of Japan will all push stock prices around this week, said Jackson Wong, vice president for sales at Tanrich Securities.

A likely result, Wong told Equities in an email, is that the Hang Seng will bounce around between the 50-day moving average of about 21,000 and the 20-day moving average of 21,600.

Sectors that have already sunk to their 50-day moving average should rebound. “Cement (and) Chinese telecoms have seen this scenario and should be relatively stronger this week,” Wong said.

In addition, he said, Kunlun Energy (KLYCY) has been made a component of the Hang Seng Index, which should benefit the whole natural gas sector. End


Hong Kong Blue Chips: +103, +0.5, to 21,262, 11-19-12, Hang Seng Index

Chinese Stocks in Hong Kong: +48, +0.5%, to 10,290, 11-19-12, HSCE Index

Shanghai Stocks: +2, +0.1% to 2,017, 11-19-12, Shanghai Composite Index.

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Chinese Stocks in the U.S.: +1.6, 368.7, 11-16-12, Bank of New York Mellon, ADR Index-China - closed by storm

Insight: Hong Kong posted a moderate gain in thin trading after U.S. political leaders sounded encouraging notes Friday about negotiations on the approaching fiscal cliff. The market also was relieved Monday when the Shanghai Composite Index rebounded late to close above the critical 2,000 support level. Chinese telecoms led gains in Hong Kong: China Unicom (CHU) +2.6%. KGI Research

Quotable: "The HSI fell for the second straight week, as profit taking continued following the strong market rally in October. Nevertheless, the chance for a technical rebound in the short run is seen remote, as investors find little catalysts but lingering uncertainty such as the European debt crisis, the partisan squabbling over the looming US budget crisis and the new Chinese leadership. Trading volume is expected to stay low next week, ahead of Thanksgiving in the US." BEA Securities. 11-19-12

Chinese Company to Watch: Fertilizer producer Sinofert (SNFRY) "The Company current P/B is only 13.5 times, far lower than the industry average, and PE is fairly low. We predict the Company year-round performance will smoothly reach the predicted goat, and its valuation will gradually be corrected by the market." Phillip Securities. 11-16-12

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