The Hang Seng Index fell 0.4% to 23,730 after closing at the best level in 21 months on Wednesday. Turnover also dropped, indicating a lack of momentum and a slowing of activity before the holiday. The index of Chinese companies slipped 0.3% to 12,131.
Wednesday’s surge was due to the settlement of futures contracts, said Castor Pang, head of research at Core Pacific Yamaichi.
“Now we’re back at normal trading,” he told Equities. “Turnover was up just a little on Wednesday, which showed investors are cautious. They aren’t likely to make a major move before the New Year.”
Some warning signs exist that may cause the market to drift lower before the holiday, Pang said. One is that the inflow of foreign funds into Hong Kong is dwindling, and the other is the possibility the rally in the Shanghai Composite Index is stalling out below 2,400. The index edged up 0.1% Thursday to 2,385.
Pang sees the Hang Seng trading between 23,200 and 23,800 before the holiday February 10.
A couple sectors that he said might fare well in the lackluster market are building materials and power-generating companies, which now lag the market. Pang likes China Resources Power (CRPJY). A Hong Kong-based subsidiary of the conglomerate China Resources, CR Power features more nimble decision-making than the bigger state-owned firms that dominate the power sector. End
Hong Kong Blue Chips: -93, -0.4%, to 23,730, 1-31-13, Hang Seng Index
Chinese Stocks in Hong Kong: -42, -0.3%, to 12,131, 1-31-13, HSCE Index
Shanghai Stocks: +3, +0.1% to 2,385, 1-31-13, Shanghai Composite Index.
Chinese Stocks in the U.S.: -1.6, 401.8, 1-30-13, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong blue chips sank 155 points in early trading, but pared their losses after finding support at the 10-day moving average. Profit warnings hurt Maanshan Iron (MAANY), down 8%, and Angang Steel (ANGGY), off 5%. KGI Research
Quotable: “Weakening of HK$ may indicate funds are leaving.” BOCOM International. 1-31-13
Chinese Company to Watch: CHAOWEI POWER (951, HK) “Mainland battery leader, FY13 prospective P/E of 5.8x. Share price fell to placement level which will (provide) support.” KGI Asia. 1-31-13
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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