Monday’s wide swing in China stock prices gave a taste of the volatility that seems to be in store this week in the face of major uncertainties.
The Hang Seng Index in Hong Kong climbed more than 300 points in early trading Monday following gains in the U.S. Friday on optimism European leaders were addressing the region’s debt problem. But a drop in Mainland Chinese markets in reaction to slowing economic growth in China turned the Hang Seng around.
It ended down 11 points at 18,576 in very weak turnover. The index of Chinese companies edged down seven points to 10,059.
News from Europe’s struggle with debt and the Chinese economy will continue to move China stock prices this week, according to Jackson Wong, vice president of equity sales at Tanrich Securities.
European countries aim to get a handle on the debt problem by setting up a fiscal union, Wong told Equities in an email. “…(W)hether they can eventually achieve that aim is still uncertain as the situation changes all the time,” he said.
Investors are also worried about sagging Chinese economic growth and look for signs the government will ease its tight credit policies. “If China does not indicate how they will go about loosening in order to ‘revive’ the growth, it’s hard for the markets to break out upside since there are still plenty of uncertainties,” Wong said.
Another source of uncertainty is the direction of the U.S. economy. Wong said the U.S. would release important data this week that will show if its economy is improving.
Amid the uncertainties, he said no one sector stands out because “everything is moving around the news and rumors with high-end retailers and Macau plays … more responsive to the news. Banks are financial on the other hands look more stable and safer bets.” End
Hong Kong Blue Chips: -11, -0.06%, to 18,576, 12-12-11, Hang Seng Index
Chinese Stocks in Hong Kong: -7, -0.07% to 10,059, 12-12-11, HSCE Index
Shanghai Stocks: -1.0%, 2,292, 12-12-11, Shanghai Composite Index.
Chinese Stocks in the U.S.: +4.6, to 375.4, 12-9-11, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong blue chips surged more than 300 points higher in morning trading following gains on Wall Street on Friday, but lost all of that when China markets fell. The drop in Chinese A shares hurt insurers and securities firms listed in Hong Kong: China Life (LFC) -1.7%. KGI Research
Quotable: “Looking ahead, investors will keep an eye on any positive news after the European Summit, the China’s annual Central Economic Work Conference that is expected to be launched next week for clues on changes in the Chinese government’s monetary policy stance as well as China’s M1 and M2 growth rate in November. The HSI may test 18,000 with its resistance level at 19,400.” BEA Securities. 12-9-11
Chinese Company to Watch: Angang Steel (ANGGY) “We maintain ‘Market perform’ on the steel sector but reiterate “Buy” on Angang Steel, an industry leader with undemanding valuation.” BOCOM International. 12-12-11
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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