It was nice while it lasted. Early in the week the wild ride on international markets calmed down a bit and Hong Kong’s focus shifted to strong Chinese company results and new measures launched by China to boost Hong Kong’s economy.
The blue-chip Hang Seng Index soared 3.3% on Monday and the index of Chinese companies surged 4.7%.
However, as Tanrich Securities investment manager Jackson Wong told Equities, on Wednesday “reality checked in.” The Euro Zone debt crisis heated up again and weak economic data from the U.S. raised the specter of another recession. “(N)ow the focal point shifts back to the U.S. and Europe and Europe debt problem again,” Wong said in an email.
On Friday the Hang Seng tumbled 3.1%, and the index of Chinese companies plunged 4.1%. For the week the blue-chip index slipped 1.1%, 220 points, to 19,400. The Chinese company index fell 1.7%, 176 points, to 10,277.
With the U.S. Dow Jones average apparently in another sharp decline, Wong said, the Hang Seng is likely to test the 18,800 low of a couple weeks ago. If the Dow deteriorates further to about 10,000, the Hang Seng might approach 18,000.
“I do think … 19000 provides very attractive valuations and would suggest clients to start to accumulate (Hong Kong) and china based stocks such as telecoms, insurers, cements, macau plays and retails etc. ,” Wong said. End
DAILY FIX -- Chinese Banks, Resources Lead Sharp Decline
Hong Kong Blue Chips: -616, -3.1%, to 19,400, 08-19-11, Hang Seng Index
Chinese Stocks in Hong Kong: -414, -4.1% to 10,277, 08-19-11, HSCE Index
Shanghai Stocks: -1.0%, 2,534, 08-19-11, Shanghai Composite Index.
Chinese Stocks in the U.S.: -17.8 to 380.2, 08-18-2011, Bank of New York Mellon, ADR Index-China
Insight: The wave of selling from Wall Street swept Hong Kong, with the blue-chip index plunging back below 20,000 in higher turnover. Chinese banks and resources plays help lead the way down. Cement producers continued to drop: Anhui Conch (914) -7.9%. KGI Research
Quotable: "The short-selling turnover (Thursday) shared 14% of total turnover that showed that the selling pressure increased again." Core Pacific Yamaichi. 8-19-2011
Chinese Company to Watch: "China Mobile (941) is trading at 10x FY11 prospective P/E with dividend yield of 4.3%, together with net cash of Rmb300bn, the counter is highly defensive." KGI Asia. 8-19-2011
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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
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