Mixed signals from China pushed Chinese stocks down slightly as the market continued to bob up and down since the end of the New Year rally last week.
Hong Kong’s Hang Seng Index slipped 0.3% to 20,333, and the index of Chinese companies declined 0.4% to 11,268. Turnover fell from Tuesday’s high level.
The main drag on the market was a drop in stocks in Shanghai and Shenzhen. A higher-than expected PMI reading in China supported stock prices.
However, the strong PMI results are a double-edged sword. Their strength indicates the Chinese economy will not suffer a much-feared hard landing. But it also increases the chance China will slow down its credit-loosening policy.
More uncertainty comes from the U.S., where a pickup in economic growth was balanced by a drop in consumer confidence on Tuesday; and in Europe, where negotiations on Greece’s debt are ongoing and new EU fiscal steps raised some skepticism.
BOCOM International, the brokerage arm of China’s Bank of Communications, predicted in its latest market review the Hang Seng will trade between 20,000 and 20,600 in the short term.
The reported stated that “entering the market at this stage presents rather high risks.”
It suggested that investors sell some of their holdings and go for better hedges, such as technology and electricity companies. Among technology plays, Internet company Tencent (TCEHY) rose 2.9% Wednesday. End
Hong Kong Blue Chips: -57, -0.3%, to 20,333, 2-01-12, Hang Seng Index
Chinese Stocks in Hong Kong: -45, -0.4%, to 11,254, 2-01-12, HSCE Index
Shanghai Stocks: -1.1% to 2,268, 02-01-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: +2.0, 398.5, 01-31-12, Bank of New York Mellon, ADR Index-China
Insight: Weakness in Mainland markets depressed Hong Kong prices in early trading. A stronger-than-expected Chinese PMI reading gave the market a lift, but falling A-share prices pushed Hong Kong lower at the close. Shipping companies benefitted from Maersk’s doubling of Asia-to-Europe tariffs: CSCL (2866, HK) +15.1%. KGI Research
Quotable: “We expect market will undergo consolidation in the next few days.” BOCOM International. 2-1-12
Chinese Company to Watch: “Tiangong International (826,HK) has issued a positive profit alert…. Tiangong has been gaining market share thanks to strong policy support and its growing competitiveness.” BOCOM International. 2-1-12
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